SORL AUTO PARTS, INC.
NASDAQ: SORL
Roth China Comes to Vegas Conference
November 2008
SAFE HARBOR STATEMENT
This presentation contains "forward-looking statements" within the meaning of the
“safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such
statements involve known and unknown risks, uncertainties and other factors that
could cause the actual results of the Company to differ materially from the results
expressed or implied by such statements, including changes from anticipated levels of
sales, future national or regional economic and competitive conditions, changes in
relationships with customers, access to capital, difficulties in developing and marketing
new products, marketing existing products, customer acceptance of existing and new
products, and other factors. Accordingly, although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, there can be
no assurance that such expectations will prove to be correct. The Company has no
obligation to update the forward-looking information contained in this presentation.
BUSINESS DESCRIPTION
Market Position
 Established in 1987; over 20 years of history
 The largest air brake system supplier for commercial vehicles in China
 Rapid growth
Main Business
 Air brake system used in commercial vehicles larger than 3 tons
 Penetrating Bus and Agricultural Vehicle Market Since 2007
Facilities
 Total floor area of over 700,000 square feet
 Located in Ruian (China’s biggest region for automotive parts production)
 Enjoy the benefits of logistics, outsourcing and professional labor force
 World Class Manufacture Facilities
Sales Network
 OEM: Sales to top 50 domestic OEM customers
 Aftermarket: 28 authorized distributors and over 800 sub-distributors
 Exports: 3 distributors in UAE, Australia, USA;
exports to over 81 countries and regions worldwide
CAPITAL MARKETS SUMMARY
Ticker Symbol
NASDAQGM: SORL
Recent Price (as of 10/31/08)
$2.72
Shares Outstanding
18.3 Million
Market Cap
$49.7 Million
Legal Counsel
Morris, Manning & Martin, LLP
Auditor
Rotenberg & Co., LLP
Revenue (ttm, as of 09/30/08)
$138.3 million
Net Income (ttm, as of 09/30/08)
$13.0 million
Book Value (mrq)
$88.6 million
INVESTMENT HIGHLIGHTS
High Growth Market
•Commercial vehicle market has grown at a CAGR of 14% since 2002
•Chinese is the second vehicle market at present, will be No 1 in 2010
•Market Driver (GDP of China; Fundamental Structure; Logistic;
Development of highway， government policy etc.)
•Our niche market
Proven Record of
Organic Growth
 Sales: $47 million in 2004 to $116 million in 2007; 35% CAGR
 Net income: $4.8 million in 2004 to $10.7 million in 2007; 31% CAGR
 TTM revenue (as of September 30, 2008): 138 million
 TTM net income (as of September 30, 2008): 13.0 million
Leading Market
Position in China
 51 OEMs customers in China
 Nationwide network of 28 distributors and 800 sub-distributors
 Unmatched in China
World-Class
Manufacturing Ability
 ISO/TS16949 Quality Management System
 OHSAS18001 System
 ISO14001 Environmental Management System;
 Lean manufacturing implemented
INVESTMENT HIGHLIGHTS
Product Development
and R&D Advantage
 Moving from components to systems (enhances margins)
 Electronics initiative is expected to further distance SORL from competitors
Competitive Value
(Domestic)
 Brand recognition
 Scale and scope efficiency
 Sophisticated management
 Competitive quality
 Strong R&D capabilities
Competitive Value
(Abroad)
 Low-cost supply network
 Local cost structure
 Cheap labor force
 China-based R&D efforts, closer to the end market
 Sales network
Management Team
 Experienced Management Team
PRODUCTS
Air Brakes
 Use compressed air to provide the force used for service and park brakes
 Found in all large commercial vehicles
40 categories sold by SORL
 Over 1000 specifications
 Key components include Spring Brake Chamber,
Clutch Servo, Air Dryer, Relay Valves, and
Hand Brake Valves
Focus on air brake systems vs components
 Eg, air preparation units vs. air dryers
 Higher margins
 Required technical ability serves as barrier to entry
ADVANCED R&D CAPABILITIES
SORL currently owns 12 patents
 6 pending patent application in China
 3 additional in US
68 technical staff, including 43 engineers or senior engineers
Partnerships for new automobile technology research:
 Leading Universities
 Research groups of OEM customers
 Helping to further product development and management
Budget expanded to develop new products that will generate future
global growth and increase profit margins:
 SORL is closing the gap with foreign suppliers by constantly improving products
 SORL launched electronic part development program two years ago
MARKETS AND CUSTOMERS
Sales channels include Chinese OEMs, the aftermarket in China, and
exports to the aftermarket in 81 countries around the world.
(million
USD)
2005
2006
2007
CAGR
China OEM
20.6
27.1
41.2
41.4%
China After
Market
20.2
23.9
31.1
24.1%
Export
23.4
33.9
43.4
36.2%
Total
64.2
84.9
115.8
34.3%
MARKETS: CHINESE OEMS
51 OEM customers in China, including all major truck manufacturers
SORL is the leading supplier to the dominant truck manufacturers in China
Auto Makers
FAW
Dongfeng
China Nat’l Heavy Duty
Truck Group
Shaanqi
Beiqi Foton
Market Share in
China
24.8%
21.6%
20.1%
12.6%
12.2%
% Valves Supplied
by SORL
40%
19%
6%
22%
31%
The big 5 continue to dominate the market, accounting for 91% of Chinese total heavy duty truck output in Q1 2008.
Major customers are all increasing their business with SORL
(million USD)
Y2005
Y2006
Y2007
CAGR
FAW Jiefang
3.49
5.62
8.77
35.9%
FAW Qingdao
2.88
4.73
5.48
23.9%
Dongfeng Axle
2.06
3.69
5.02
35.2%
Beiqi Foton Zhucheng
0.41
2.23
3.42
103.1%
Boiqi Foton Aumen
1.58
1.71
3.09
25.0%
Anhui Hualing
0.90
0.96
2.54
41.2%
FAW Shandong
0.65
1.20
1.80
40.4%
MARKETS: CHINESE AFTERMARKET
Leading Distribution Network Throughout China
Nationwide:
28 distributors and over 800 subdistributors, covering 7 regions nationwide
Aftermarket/OEM Synergy:
OEM business feeds aftermarket business
as owners generally prefer to replace
original parts with the same brand
Competition:
No other company in China, including
foreign competitors, has an aftermarket
distribution network comparable to SORL’s
Barrier to Entry:
Serves as a barrier to entry and an asset
which can be leveraged to support
additional parts that may be developed or
acquired
MARKETS: EXPORT AFTERMARKET
Cost advantage vs. foreign brands presents significant export
opportunity
Exports to 81 countries in 2007; will continue to add dealerships
overseas
2005
2006
2007
CAGR
U.S
3.3
5.7
8.8
39%
Europe
3.6
7.4
8.0
30%
Asia
9.8
10.5
14.7
15%
India
0.10
0.23
0.57
76%
(million USD)
Strategic goal of acquiring distributors in the US:
 Accelerate growth
 Replicate distribution advantage already established in China
MANUFACTURING
Certifications:
ISO/TS16949 Quality Management System,
OHSAS18001 System, and ISO14001
Environmental Management System
Lean manufacturing:
Reorganized production lines from traditional
straight-line layout to U-shape track, shortening
total cycle time and enabling quick adjustments to
production. Other lean practices continue to be
implemented.
Increased Efficiency:
Output per person has increased 30% last years
Quality Audit:
Never failed a quality audit by a supplier, which is
crucial in developing OEM business
COMPETITION: DOMESTIC
SORL has a leadership position that will be difficult to challenge
 Auto parts is a highly fragmented market with many smaller players
 Chinese OEM requirements relative to quality, delivery, inventory, and
technical support are not easy to meet
 SORL’s aftermarket distribution network is difficult to duplicate
 In terms of manufacturing, quality, distribution, product development,
and technical support, it will be difficult for others to catch up with SORL
Nationwide
Sales
Network
Close
Relationship
with Big
OEMs
PerformanceCost Ratio
Warranty
and
Reliability
Timely
Delivery
Efficient
Customer
Services
Other Small
Suppliers
No
No
Low
Low
Poor
Poor
SORL Auto
Parts
Yes
Yes
High
High
Good
Good
COMPETITION: FOREIGN
Foreign companies have limited themselves to the high end of the
market in China
 Do not have an aftermarket distribution network like SORL
 Have not been able to develop the technical support levels that SORL has
As a result, foreign companies are losing market share in China as
SORL’s quality improves
 Foreign share of air brakes estimated to be 10%, down from 25% 2 years ago
Overseas, SORL’s cost advantage and constantly improving quality will
drive future export growth
STRATEGIC VISION
Global Leader
We aim to be a leading global supplier of air brake
valves and related products
Capacity Expansion
Expand production capacity to meet the growing
demand in China market and support the future
international expansion plan
New Products
Develop scalable product technologies and capacities,
focusing on electronics and controls; establish position
as a integrated system provider in China
New Sectors
Accelerate growth into public transportation segment
Overseas Acquisition
Enhance export potential by acquiring US distributors or
parts makers
MANAGEMENT TEAM
Xiaoping Zhang, Chairman and CEO
Xiaofeng Zhang, COO
• Co-founder of Ruili Group
• Co-founder of Ruili Group – General
Manager
• President of the Ruian Auto Parts
Association in Wenzhou, Zhejiang
Province
• Vice President of China Federation of
Industry and Commerce Auto & Motorbike
Parts Chamber of Commerce
Zongyun Zhou, CFO
• Certified Public Accountant in China
• Chief Financial Officer of Shanghai Huhao
Auto Parts Manufacturing Company
Limited, a joint venture between the Ruili
Group and Shanghai Auto Group, 2002 2004
• Spearheads SORL’s sales and marketing
effort
FINANCIAL HIGHLIGHTS
 Steady Revenue Growth
($, millions)
 Improved Profitability
SUMMARY INCOME STATEMENT
($MM)
12/31/2005
12/31/2006
12/31/2007
Q307
Q308
Revenue
64.2
84.9
115.8
29.7
33.0
Gross Profit
14.3
19.3
27.0
6.6
8.4
Operating Profit
5.5
9.9
12.0
2.7
2.9
Net Income
4.9
7.7
10.7
2.1
2.3
Revenue Growth
37.1%
32.3%
36.4%
39.5%
11%
Net Income Growth
3.0%
55.5%
39.6%
19.6
10.9%
Gross Margin
22.3%
22.7%
23.3%
22.3%
25.5%
Operating Margin
8.6%
11.6%
10.4%
9.0%
8.8%
Net Margin
7.7%
9.1%
9.3%
7.1%
7.1%
SUMMARY BALANCE SHEET
Sep. 30, 2008
Dec. 31, 2007
Dec. 31, 2006
(In '000 $USD )
Cash and cash equivalents
5,951
4,340
11,138
Accounts receivable
36,211
30,586
26,751
Inventory
20,832
8,220
4,529
76,149
58,169
54,370
24,220
21,795
16,312
115,153
93,974
70,880
5,094
5,305
4,621
Total Current Liabilities
16,789
13,453
7,175
Total Liabilities
16,789
13,453
7,175
Total Shareholders' Equity
88,550
72,497
57,369
115,153
93,974
70,880
Total Current Assets
Property, plant and equipment, net
Total Assets
Accounts payable
Total Liabilities and Shareholders’ Equity
SORL AUTO PARTS, INC.
NASDAQ: SORL
Ben Chen
Senior Manager, Investor Relation
Phone:
+86 (577) 6581 7720
Fax:
+86 (577) 6581 7733
Email:
ben@sorl.com.cn
Web:
www.sorl.cn