China Automotive Systems (CAAS -0.73%), a leading supplier of automotive steering systems and components for both traditional and electric vehicles, released its second-quarter earnings on August 13, 2025, reporting results for the quarter ended June 30. The most notable result was an 11.1% increase in GAAP revenue to $176.2 million in Q2 2025, propelled by rapid growth in advanced product lines and further international expansion, particularly in Brazil and North America. Gross margin (GAAP) narrowed to 17.3%, down from 18.5% in Q2 2024, as higher tariffs and a greater share of lower-margin products weighed on profitability. While there were no analyst estimates for comparison, management responded to strong sales momentum by raising full-year revenue guidance to $720.0 million for fiscal year 2025, up from $700.0 million. Overall, the period reflected robust sales execution but also pointed to persistent margin pressures and a modest uptick in net income growth.
| Metric | Q2 2025 | Q2 2024 | Y/Y Change |
|---|---|---|---|
| Revenue | $176.2 million | $158.6 million | 11.1% |
| Gross Profit | $30.5 million | $29.3 million | 4.1 % |
| Income from Operations | $13.0 million | $10.8 million | 20.4 % |
| Net Income Attributable to Parent | $7.6 million | $7.1 million | 7.0 % |
| EPS, Diluted | $0.25 | $0.24 | 4.2 % |
Business Overview and Recent Focus
China Automotive Systems specializes in manufacturing and supplying steering systems, with a diverse product portfolio that covers both electric and hydraulic steering solutions for passenger and commercial vehicles. The company serves major original equipment manufacturers (OEMs) in China and abroad.
Recently, China Automotive Systems has focused on broadening its technology base and expanding internationally. Its push into electric power steering technology is central to its strategy, meeting the increasing demand for advanced steering solutions in the global shift toward electric and intelligent vehicles. Continuous investment in research and development aims to sustain its competitive position, especially as it secures more contracts with global automakers.
Quarterly Performance and Notable Developments
Net sales (GAAP) climbed 11.1% in Q2 2025, driven by standout gains in electric power steering products. Sales for this category rose 31.1%, reaching $72.9 million and making up 41.4% of total net sales. This marks a sizable increase in the share of electric steering revenue, which rose from 35.1% in Q2 2024 to 41.4% of total net sales. Sales in the traditional steering product line largely held steady, indicating ongoing demand from markets focused on conventional vehicles.
The company's commercial vehicle steering segment also saw strong momentum. Sales from subsidiaries targeting commercial customers, like the Jiulong Commercial Vehicle Steering Systems group, increased 25.6% year-over-year. This expansion in commercial products is part of China Automotive Systems' effort to reach different segments of the automotive industry in both domestic and export markets.
International growth stood out as a key theme. In particular, sales in Brazil rose 49.4% to $17.9 million. North American sales advanced 11.8% to $30.0 million (GAAP), benefiting from stronger demand with a significant OEM customer. The period also saw the company secure a large new order for its R-EPS (rack electric power steering) product line from a European automaker, expected to generate over $100 million in annual sales starting in 2027 (management guidance as of August 2025).
Despite higher sales, the company reported that gross profit margin fell to 17.3%, as higher tariffs and a shift toward lower-margin products impacted profitability. Operating income advanced at a faster rate than sales, up 20.2%. Net income attributable to parent shareholders grew 6.8% year-over-year (GAAP), though it did not match revenue or operating income growth.
Financial Health and Segment Trends
Research and development expenses remained flat at $8.1 million (GAAP) in Q2 2025, making up 4.6% of net sales. This continued investment aligns with management's stated goal to maintain R&D spending at about 5% of revenue for FY2025.—a level needed to sustain high-tech status within China and benefit from related tax incentives. The company continues to develop products like the intelligent electro-hydraulic circulating ball power steering (iRCB), which enables assisted driving features.
Balance sheet strength was another area of note. Cash, cash equivalents, and short-term investments totaled $135.3 million as of the end of Q2 2025. Net cash provided by operating activities (GAAP) for the first six months of 2025 was $49.1 million, compared with $10.5 million in the first half of 2024. Capital expenditures rose in support of new production lines and technology upgrades, with $18.5 million spent during the first half of 2025. Companywide working capital also rose.
While tariffs and product mix weighed on margins this period, management has stated it proactively shipped inventory to North American customers in advance to manage trade-related risks. The shift to new product lines like R-EPS and iRCB is expected to support the company’s global positioning, even as it pressures margin in the near term. The company maintains longstanding relationships with leading automakers both domestically and overseas, and serving a customer base that includes China FAW, Dongfeng, BYD, Beiqi Foton, Chery, Stellantis, and Ford.
Outlook and What to Watch Next
After recording two consecutive quarters of strong sales, management raised its full-year FY2025 revenue guidance to $720.0 million, up from $700.0 million in the previous quarter. The improved outlook reflects the company's confidence in continued sales expansion for electric and intelligent steering systems, as well as additional contract wins in global markets. Operating margins and gross margin performance will remain important areas to monitor, especially as tariffs and product mix continue to shape the bottom line.
Looking ahead, investors will want to watch for how international business continues to develop, especially in new regions like Europe where the company is ramping up for major product launches. Management has not provided any specific earnings or margin outlook beyond the revenue target. Progress in advancing new steering technologies and securing OEM contracts will be important for maintaining growth. Monitoring the impact of further changes in global trade policy, as well as the ongoing pace of adoption of electric and assisted driving vehicles, will add crucial context for the company’s next stages.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
