Good morning, ladies and gentlemen, and welcome to China Automotive Systems First Quarter 2022 Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Kevin Theiss. Kevin, over to you.

Thank you, everyone, for joining us today. Welcome to China Automotive Systems' 2022 first 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 will 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, 2021, 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 entirely controlled, our business operations and financial condition may be materially adversely affected as a result of the deteriorating market outlook for automobile sales. The slowdown in regional and national 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 unforeseen delay in our operations of the manufacturing, delivery and assembly process within any of our production facilities could continue to result in delays in the shipment of products to our…

[Operator Instructions] Thank you. Your first question is coming from William Gregozeski, Greenridge Global. William, please ask your question.

Hi. A couple of questions. First, with regards to the lockdowns in China, how much of an impact is that having? You saw some of that in the first quarter. How much is that having right now in the current quarter?

[Foreign Language]

Okay. So the pandemic core-related lockdown really the impact to our business is really in a second half of March. So it doesn't fully reflected in our - it doesn't have much significant impact to our first quarter number. ‘ The lockdown impact did come in, in the month of April in a very significant way. If you look at the entire auto industry in China, the sales of passenger vehicle in the month of April was down 40% compared with the April last year. So - and for that reason, we have adjusted downward our annual guidance just to reflect the impact from COVID lockdown in particular the month of April.

Okay. Great. With regards to the gross margin, it looks like the international sales all had gross margins under 10%. Is that all shipping related? Or what's the reason for that? And how do you guys get that back up to more normal levels?

[Foreign Language]

So the gross margin overall was impacted in the first quarter, our overall gross margin, and that's including domestic and international business was affected by three factors. The first is our business in the domestic commercial vehicle sector. We are one of the major players in our commercial vehicle steering market. The overall weak property market or real estate market does have an impact to the truck sales, in particular, the heavy-duty trucks. We do sell a lot of product to the heavy-duty truck producers and weaker sales affected our overall margin for the commercial vehicle side of business. On the passenger vehicle business, just as you mentioned, the international business accounts for a sizable of our overall revenue. The higher shipping costs due to the inflated oil price does affected our costs. And last factor was the foreign exchange. In the first quarter, RMB actually against U.S. dollars as being stronger, which affected our - because we were reporting in U.S. dollars. So that's affecting our large

[Foreign Language]

Yes. As you also noticed, the RMB has been - since that has depreciated against U.S. dollars, so especially the month of April and May. So we are hopeful the next few quarters, our margin will improve, especially with the help us a stronger dollar and weaker R&D.

Okay. All right. Can you talk about what the R&D spending is going towards now? And how much you expect to spend on that in 2022 and 2023?

Okay. [Foreign Language] Okay. So in terms of R&D, Q1, we booked about US$8.1 million. We expect about $30 million in R&D for fiscal year 2020. And most of the R&D expenses going to the development of electric power steering, what we call EPS product. We now have a slew of EPS or the other intelligent steering systems, including REPS, GPS, IRC, ERCB and some of the Level 3 functions we embed into our software and systems, as well as steering systems are really featured the functions for autonomous driving and for the future of the - the artificial intelligence for the vehicles. So these are the area we will continue to invest. And that being said, we expect the R&D expenses will be slightly higher from 2022 next year. So we're going higher - a little bit higher than this year's lease spending.

Okay. Great. And then last question is, when do you guys expect to do any share repurchases?

Okay. [Foreign Language] Yes. So as we just finished the reporting, then we will be qualified to the purchase. So we have to line up with our brokers. It would take probably 10 days to get ready, and then we start we'll stop buying.

Okay, great. Thank you, guys.

Thank you.

Okay. [Operator Instructions] There appears to be no more questions in the queue. I'm going to hand back over to Kevin.

Yes. We thank you for your participation in today's conference call. We wish you to be safe, and we look forward to speaking with you again. Thank you.

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