China Automotive Systems' Q2 2025: Unpacking Contradictions in R&D Spending, EV Focus, and Tax Strategies

R&D expenditure and focus, EV product focus and R&D spending, tax rate and tax adjustment, inventory management and strategy, and R&D spending on electric vehicles are the key contradictions discussed in China Automotive Systems' latest 2025Q2 earnings call.



Sales Growth and Market Share Expansion:
- China Automotive Systems reported a 11.1% year-over-year increase in sales to $176.2 million in Q2 2025, with 27.5% of total sales coming from North and South America.
- The growth was driven by increased sales to Stellantis in North America and Brazil, as well as higher sales of electric power steering systems.

Electric Power Steering System Demand:
- Total sales of electric power steering systems (EPS) increased by 31.1% year-over-year to $72.9 million.
- This growth was due to a shift in sales mix towards higher technology products and increased demand from the Henglong KYB subsidiary.

Increased Gross Profit and Controlled Expenses:
- Gross profit grew by 4.2% year-over-year to $30.5 million, with operating expenses declining by $2.2 million in Q2 2025.
- The controlled expenses were due to effective management of research and development, general and administrative, and selling expenses.

Government Incentives and Market Stimulation:
- The Chinese government implemented incentives such as tax subsidies and lower interest rate financing, supporting the purchase of automotive vehicles.
- These incentives contributed to a 11.4% year-over-year increase in total vehicle unit sales in the first half of 2025.