SORL Auto Parts, Inc. NASDAQ: SORL

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SORL Auto Parts, Inc.NASDAQ SORL

• Investor Presentation
• Roth Capital OC conference
• Feb 2007

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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.
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Corporate Profile

• Leading manufacturer of commercial vehicle air
  brake valves in China
• Spin-off from Ruili Group which was established
  in 1987
• Revenue 47M in 04 64M in 05 79M LTM
  ending Sept 06. Strong export 12M in 04, 23M
  in 05, 31M LTM in Sept 06
• Based in Wenzhou City, Zhejiang Province
• the Hub of auto parts in China
• 1295 employees

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Production

• 15 Production lines in 270,000 square feet of
  production space
• State-of-the-art testing facilities
• Advanced equipment from US, Korea and Taiwan
• ISO/TS16949 Quality Management System, OHSAS18001
  System, and ISO14001 Environmental Management
  System

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Major Products

• 40 categories of air brake valves in 800
  specifications mainly for heavy vehicles
• All products export-ready and global systems
  certified
• Aggressive focus on new product RD in
  cooperation with leading automotive engineering
  institutes
• State-of-the-art testing and production
  facilities with advanced equipment from US, Korea
  and Taiwan

Parking BrakeValves
Foot Brake Valves
Clutch Servos
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Research Development

• 4 patents, 8 pending patent applications, other
  proprietary technologies
• 44 technical staff, including 32 engineers or
  senior engineers
• Partnerships with leading automotive engineering
  institutes
• Beijing Jiaotong University
• Tsinghua University E-Tech Technology Co., Ltd
• Zhejiang University
• Huazhong University of Science and Technology

Four-circuitProtection Valves
Spring BrakeChambers
Air Dryers
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Balanced Revenue Sources
2005 Rev OEM 21M Aftermarket Replacement
20M Export 23M
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Strategic Long Term Relationships

• Local OEMs dominate the market with 90 share
• Chinese made heavy duty trucks are more durable
  and less expensive comparing with imported trucks
• Imports have a poor after market and low
  maintenance and repair skill at local garages
• Strong relationships with all of the largest
  manufacturers in China
• OEM currently has 39 customers in China
• Aftermarket large, national, well-established
  distribution network
• International / Exports growing quickly with
  Tata, Indias largest automobile company (5.5
  billion in revenue), as a leading customer in
  India

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Customers OEM
SORL is the leading supplier to the dominant
truck manufacturers in China
Auto Makers FAW Qingdao FAW Jiefang Changchun Dongfeng Motors Liuzhou Special Auto China Natl Heavy Duty Truck Group
Heavy Duty Trucks Output (unit) 55,970 55,970 71,797 14,000 45,000
Market Share in China 23.7 23.7 30 5.9 19
Valves Supplied by SORL 40 22 18 50 5
Two largest customers, FAW and Dongfeng,
accounted for 54 of the Chinese total heavy duty
truck sales in 2005
FAW Qingdao and FAW Jiefang Changchun are the
only two heavy truck makers within FAW family
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Customers OEM
SORLs customers continue to dominate
TOP 10 heavy truck maker (000 units)
Big 5 takes 84 China Market
Rank Group Heavy truck
1 DaimlerChrysler 244
2 Volvo Group 170
3 Paccar 125
4 IVECO Group 76
5 Dongfeng Motor 68
6 Navistar 62
7 FAW Group 56
8 MAN Group 54
9 Scania 53
10 Tata Group 50
Source JD Power 2005 , UBS equity research, CAICA
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Customers Aftermarket

• 12.2mm in revenue in 04 to 20.2mm in 05
• 26 of revenue in 2004 to 32 of revenue in 2005
• 27 authorized distributors and over 800
  sub-distributors

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Customers Aftermarket
Success factors to win in the intensified
aftermarket competition
Established Nationwide Sales Network Close Relationship with Big OEM Manufacturers Performance-Cost Competitiveness Warranty and Reliability Timely Delivery Efficient Customer Services
Other Small Manufacturers No No Low Low Poor Poor
SORL Auto Parts Yes Yes High High Good Good
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Customers International

• 12.6M in revenue in 04 to 23.4M in 05
• 27 of revenue in 2004 to 36 of revenue in 2005
• Mostly replacement but beginning to explore OEM
  opportunities (TATA Motors)
• 3 authorized sales centers (Australia, UAE, and
  USA)

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Customers International
Top 7 export customers continue to show
confidence in SORL product quality
Country UAE South Africa Canada Taiwan South Africa Spain USA
YoY Increase 92 77 93 385 140 165 10
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Significant Growth Opportunity

• Chinese Auto Parts Export
• Chinas worldwide auto parts sales totaled 55
  billion in 2004 and are expected to reach 187.5
  billion by 2010, with exports from China expected
  to grow at an annual growth rate of 50
• Truck market Infrastructure and regulation in
  favor of continuous growth
• Truck prices are less sensitive than passenger
  vehicles and hence depend more on macroeconomic
  changes such as environmental and public policy
• Domestic brands have over 50 price advantage
  over imported heavy trucks
• Highway expansion increased by 38 during
  2006-2010 The Ministry of Construction plans to
  complete its massive network of arterial national
  highways by 2008 prior to Beijing Olympics
• Trucks increasing role in solving logistic
  bottleneck in China
• Jan-Oct 06, China exported 128,000 trucks, 788M,
  50 YoY rev growth China exported 21,800 buses,
  427M, 150 YoY rev growth

Source Citigroup Equity Research, CAAM, Frost
Sullivan Research - Sept 05, Feb, 06, Credit
Suisse Research, Jan 06, mgmt estimate
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Attractive Export Opportunity
China Auto Parts Annual Exports Imports
China commercial vehicle Annual Exports
USD Billion

• 05 Export Markets by Revenue
• Syria
• Algeria
• Belgium
• Iran
• Sudan
• Russia
• Vietnam
• Kazakhstan
• Ukraine
• Saudi Arabia
• Cuba

• The current global market for commercial vehicle
  air brake valves is over 5 billion
• Growth of aftermarket air brake valves market is
  approximately 15
• Global purchasing trend is moving to China
• SORLs exports in 2006 were 40 of total revenue
  (as of September 30), 36 in 2005, 27 in 2004,
  and 18 in 2003

Source China Automotive Industry Information
Network, Asimco Technologies, CAAM, Wall Street
Journal August 2006
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Growth Strategy

• OEM
• Enhance brand recognition and develop
  relationships with other truck manufacturers
• Export
• Strengthen presence overseas by establishing
  relationships with additional authorized
  distributors
• Penetrate the aftermarket segment to gain name
  and quality recognition and then enter the
  International OEM market
• MA and JV
• Over 1,400 auto parts companies located in the
  Wenzhou area can become potential MA targets or
  JV partners
• RD
• Invest in next generation valve technology
• Continue partnerships with leading automotive
  engineering institutes
• Cost Control
• Reduce material and energy consumption strict
  waste measurement
• Maintain high standard quality control

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Significant Revenue and Profit Growth

• 39 CAGR of sales during 2003-2005
• 107 CAGR of net income during 2003-2005

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Significant Revenue and Profit Growth
Ended September 30, 2006.
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Strong Balance Sheet
(US, in thousands) Sept 30, 2006 Dec 31, 2005
Cash 1,191 961
Receivables 31,741 26,828
Inventories 2,298 2,513
Total Assets 46,702 39,301
Total Debt 10,874 16,027
Total Current Liabilities 21,688 21,580
Minority Interest 2,419 1,736
Stockholders Equity 22,614 15,984

• December 1st 2006, SORL completed a follow-on
  public offering and raised 32.7M.

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Management Team
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Investment Highlights

• Market Potential
• China is the worlds 2nd largest auto market and
  3rd largest in auto production
• Export potential Current global market for
  commercial vehicle air brake valves is over 5bn
• Opportunities for product line expansion and
  complementary acquisitions
• Industry Leadership
• SORL holds a leading market position in the
  following products segments in China
• OEM air brake valve segment
• Replacement air brake segment
• Solid Operating History
• Strong financials 37 overall revenue increase
  year over year
• Successful expansion of export sales by 83 from
  2004 to 2005 (12.6mm to 23.4mm) with
  high-quality products that meet global ISO
  certifications
• Sales to top seven international customers grew
  an average of 92 in 2005
• Strong brand equity SORL is one of the top 10
  most recognized brand names in the automotive
  parts industry in China

Source CAAM, Management estimate
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SORL Auto Parts, Inc.NASDAQ SORL