Good day ladies and gentlemen, and welcome to the China Automotive Systems Third Quarter 2021 Earnings Conference Call. At this time all participants have been placed on a listen-only mode and the floor will be opened for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Mr. Kevin Theiss. Sir, the floor is yours.

Thank you, everyone, for joining us today. Welcome to China Automotive Systems 2021 third quarter conference call. Joining us today are Mr. Jie Li, Chief Financial Officer of China Automotive Systems. He will be available to answer questions later in the conference call with the assistance of translation. Before we begin, I'll remind all listeners that throughout this call, we may make statements that may contain forward-looking statements. Forward-looking statements represent the company's estimates and assumptions only as of the date of this call. As a result, the company's actual results could differ materially from those contained in these forward-looking statements due to a number of factors, including those described under the heading Risk Factors in the company's Form 10-K annual report for the year ended December 31, 2020, as filed with the Securities and Exchange Commission and in other documents filed by the company from time-to-time with the Securities and Exchange Commission. If the outbreak of COVID-19 is not effectively and timely controlled, our business operations and financial condition may be materially and adversely affected as a result of the deteriorating market outlook for automobile sales, the slowdown in regional economic growth, weakened liquidity and financial condition of our customers or other factors that we cannot foresee. Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment, cause uncertainty in the regions where we conduct business, cause our business to suffer in ways that we cannot predict and materially adversely impact our business financial condition and results of operations. A prolonged disruption or any further unseen delay in our operations of the manufacturing, delivery and assembly processes within any of our production facilities could continue to result in delays in the shipment of products to our customers, increased costs…

[Operator Instructions] Your first question for today is coming from William Gregozeski. Please announce your affiliation then pose your question.

Hi guys, can you explain on the on the chip shortage which segments were most impacted by that?

Yes, the chip shortage is definitely a widespread phenomenon throughout the auto industry in China. The impact we see are two-folds one, is to the OEM side. We do see the OEM automakers are experiencing production decline especially in the quarter because of chips shortage. And our supplier side like us our main product our all products use semiconductor chips, our electric power steering EPS product and these product - and we are less impacted for a particular reason we have a very unique sourcing capability. We have a few different channels and we work with those suppliers very closely. So - and we're able to mitigate the impact that's why you see our EPS sales during this difficult time especially the semiconductor sector going through such a change and our EPS sales has increased significantly.

Okay which operating segment though was there, I mean is it shipments to the U.S. or what was most impacted or was it just spread pretty evenly for you guys?

Okay mostly in China our U.S. customers are relatively smaller volume in terms of these type of product.

Okay, all right. On the KYB JV looks like the gross margins went above 10% in the quarter can we expect to see that continue to increase?

Okay, this joint venture yes, we are seeing the improvement in the gross margin category and we anticipate it will continue to improve mainly these kinds of expectations mainly driven by two factors one is as you see we are increasing productions, the utilization rate is climbing and as we know, the scalability, the economy of scale will help to lower per unit cost and then in turn will increase our gross margin. On the other hand, the technology content also has been increased for - in that particular joint venture. And so, in terms of product offerings, when we first started we only providing a CVPs product. Now we have expanded DP-EPS product, DP-EPS product and our EPS product. So, we have a wide range of product now to meet our customer demand and a lot of those new product, newer products are more - have more technologies and that also give us a better margin contribution as well.

Okay, all right. Are you guys able to provide any kind of expected mix for you know where you expect to end the year between traditional and EPS this year and are you expect to end it next year?

Say it again what was the question EPS mix.

Yes, the mix between traditional and EPS what you expect that mix to be at the end of 2021 and the end of 2022?

So, the EPS sells as of end of third quarter the first nine months sales accounted for 27.2% of total sales. We are anticipating this will increase to 30% by 2022. Hydraulic will take - still takes about 70% of the steering product sales.

Okay, all right. And last question do you have any significant CapEx plans coming up?

Okay, we don't see a huge increase on CapEx. We will increase some of the production capacity for EPS product. We will continue to put some money into the maintenance CapEx. So together we're seeing about $50 million CapEx for 2022.

Okay, all right. Thanks guys.

Thank you

[Operator Instructions] There are no questions in queue.

We like to thank everyone for participating today, be safe and look forward to speaking with you again.

Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.