Greetings. Welcome to the China Automotive Systems First Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host Kevin Theiss. You may begin.

Thank you everyone for joining us today. Welcome to China Automotive Systems' 2023 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, 2022 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 time controlled our business operations and financial condition may be materially and have reflected as a result of a deteriorating market outlook for automobile sales to slow down the regional national and international 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 impact on the overall business environment cause uncertainties in the regions where we conduct business, so our business to suffer in ways that we cannot predict and materially and 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 processes within any of our production facilities could continue to result in delays in the…

Certainly. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Your first question for today is coming from William Gregozeski at Greenridge Global.

Hi. I have a couple of questions. The Hubei and Henglong revenue was up quite a bit from the fourth quarter. Is that related to that Alfa Romeo, vehicle or just additional shipments from kind of a tough fourth quarter and where do you see that segment for the year trending?

[Foreign Language] So, Hubei and Henglong's, first quarter revenue increased by a little over 5% and the dollar amount increased by $1.7 million. The main driver for that increase is still in the North America business. Alfa Romeo is in the -- is being booked into different division [indiscernible] division's revenue. So to answer your question, it's still North America business.

Okay. And is the -- do you guys think the revenue for Hubei and Henglong is going to stay up above $30 million per quarter for the remainder of the year?

[Foreign Language] Okay. It's going to be above -- it's going to be in the range of $30 million to $35 million in the quarter every quarter fluctuate within that range this year.

Okay. Great. And then, on the gross margin side, are you guys still expecting that to be higher for 2023 than all of 2022?

[Foreign Language] In the first quarter of 2023, our gross margin was 15.2%, which is a very significant increase from Tier one 2022 of 10.8% first line. The main factor attributable to three segments of our business. One is the Hubei and Henglong; the second is Brazil, our business, allow business. And the last piece is the Henglong KYB. Now, the first two line of business helped drove the gross margin appreciation is also because it's the growth the ForEx change. The stronger dollar helped -- definitely helpful with our gross margin expansion. And in terms of KYB -- Henglong's KYB business is mainly due to the volume increase. Also, our high-end product has increased, which is helping the margin expansion. And lastly, the overall volume increase helped us to better economy of scale. That also is beneficial to our gross margin. So, overall yes, 2023 the gross margin will be better than 2022. With this pace, we believe, it's going to be continuing to the strong. Overall 2023 is going to be a better year on the gross margin than 2022.

Okay. All right. And then last question was, you previously mentioned about 6% to 6.5% of revenue for R&D on a quarterly basis and it was quite a bit lower than that in the first quarter. Is that still a good range, or is that more of an annual range? How should we look at that?

The first quarter is -- you're right. Your observation is correct. Our R&D expense accounted for the total revenue is lower. There are some onetime events. There's also some of the activity related to the lower module fees. But overall, going forward, we believe the R&D expenses are going to be account between, 5% to 5.5% of the total revenue.

Okay. Great. Thank you.

[Operator Instructions] We have reached the end of the question-and-answer session, and I will now turn the call over to Kevin for closing remarks.

We thank you for your participation in today's conference call. Please be safe and we look forward to speaking with you again in the future.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.