SORL Auto Parts Reports 2006 Second Quarter Results

            - Demonstrated strong growth across all divisions,
                       export hit historical high -



ZHEJIANG, China, Aug. 11 /Xinhua-PRNewswire/ -- SORL Auto Parts, Inc. (NASDAQ:SORL), a leading manufacturer and distributor of commercial vehicle air brake valves as well as other auto parts in China, today announced its financial results for the second quarter of 2006.

  Second Quarter Financial Highlights
   * Revenue increased to $20.1 million, reflecting a 35% year-over-year
     growth;
   * Export revenue increased to $8.9 million, reflecting a 75%
     year-over-year growth;
   * Operating income increased to $3.2 million, reflecting a 81%
     year-over-year growth;
   * Net income increased to $2.4 million, reflecting a 71% year-over-year
     growth; and
   * Second quarter diluted earnings per share increased to $0.18,
     reflecting a 64% year-over-year growth



Total revenue for the second quarter of 2006 was $20.1 million, a 35% increase as compared to $14.9 million for the same period in 2005. Revenue from sales to Original Equipment Manufacturers (OEM) for the second quarter of 2006 was $6.0 million, an 18% increase as compared to $5.1 million for the second quarter of 2005. Aftermarket revenue from the Chinese domestic market for the second quarter of 2006 was $5.2 million, an increase of 11% as compared to $4.7 million for the second quarter of 2005. Revenue from exports from China was $8.9 million for the second quarter of 2006, an increase of 75% as compared to $5.1 million for the second quarter of 2005. The significant increase in export sales was a result of the company's participation in and growing focus on the higher margin business. The export market's contribution to total revenue has increased from 34% in the second quarter of 2005 to 44% in the second quarter of 2006.

Gross profit for the second quarter of 2006 was $4.6 million, an increase of 38% as compared to $3.4 million in the same period in 2005. Operating income for the second quarter of 2006 was $3.2 million, an increase of 81% as compared to $1.8 million in the same period in 2005. Net income for the second quarter of 2006 was $2.4 million or $0.18 diluted earnings per share, an increase of 69% and 64% respectively as compared to net income of $1.4 million or $0.11 diluted earnings per share in the same period in 2005.

Total cash and cash equivalents as of June 30, 2006 totaled $2.2 million as compared to $0.96 million as of December 31, 2005. Stockholder's equity increased to $20.6 million as of the end of June 30, 2006 from $16.0 million as of December 31, 2005.

Xiaoping Zhang, SORL Auto Parts' Chairman and CEO, said, "We are highly encouraged by our second quarter financial results. The solid export growth led our total revenue increase. Export sales accounted for 44% of the total revenue in the second quarter. We utilized our well-established international sales channels to broaden product offerings to our international customers. As the trend of global purchasing, especially in the auto parts area, continues, we believe that we are well positioned to benefit from the fast growing export market. Domestically, after a difficult period for heavy duty truck sales due to the macroeconomic regulation by the Chinese government, we are delighted to see that the market condition has been recovering during this quarter. We continue to execute our strategy in maintaining good relationships with large Chinese OEMs by introducing more innovative products to help them improve quality at a lower cost."

Ms Zongyun Zhou, Chief Financial Officer, said, "The rising price of raw materials continued to exert pressure on our gross margin. However, we successfully took advantage of our R&D capabilities to increase productivity, reduce power consumption and rearrange material mix. Therefore, we achieved the same gross margin as for the same period last year. Thanks to our successful collection of significant portion of above-one-year accounts receivable, the G&A expenses were lowered substantially. This demonstrates that our relationships with large OEMs remain stable and our high-quality product offerings are gaining traction. We continue to increase R&D by expanding our engineering team and strengthening internal career development. We believe that R&D is one of the key differentiating factors and a long-term investment for us to maintain leadership in the marketplace."

About SORL Auto Parts, Inc.

As China's leading manufacturer and distributor of automotive air brake valves, SORL Auto Parts, Inc. ranks first in market share in the segment for commercial vehicles weighing more than three tons, such as trucks and buses. The Company distributes products both within China and internationally under the SORL trademark. SORL ranks among the top 100 auto component suppliers in China, with a product range that includes 40 types of air brake valves and over 800 different specifications. The Company has three authorized international sales centers in Australia, United Arab Emirates, and the United States, with additional offices slated to open in other locations in the near future. For more information, please visit http://www.sorl.cn/

Safe Harbor Statement

Statements made in this press release that are not historical fact are "forward-looking statements," which are based on current expectations that include a number of risks and uncertainties. Additional factors that could potentially affect the Company's financial results may be found on the Company's filings with the Securities and Exchange Commission (http://www.sec.gov/).

                            (TABLE TO FOLLOW)


                  SORL Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income (Unaudited)

                           Three Months Ended        Six Months Ended
                                June 30,                  June 30,
                            2006        2005          2006         2005
  Sales             US $20,117,002   14,924,151 US $39,536,586   29,440,016
  Cost of Sales         15,477,658   11,561,779     30,501,484   22,857,952
  Gross Profit           4,639,344    3,362,372      9,035,102    6,582,064

  Operating Expenses
    Selling and
     Distribution
     Expenses            1,376,442      954,666      2,244,458    1,881,755
    General and
     Administrative
     Expenses               86,289      652,039      1,183,251    1,206,293
      Total Operating
       Expenses          1,462,731    1,606,705      3,427,709    3,088,048

  Operating Income       3,176,613    1,755,667      5,607,393    3,494,016

  Financial Expenses      (241,900)    (126,348)      (507,447)    (186,800)
  Other Income              68,696            -         68,696            -
  Non-Operating Expenses   (67,050)     (66,473)      (156,725)     (75,626)
  Income Before Provision
   for Income Taxes      2,936,359    1,562,846      5,011,917    3,231,590

  Provision for Income
   Taxes                   293,897            -        587,505            -
  Net Income Before
   Minority Interest &
   Other Comprehensive
   Income            US $2,642,462    1,562,846  US $4,424,412    3,231,590

  Minority Interest        264,246      156,285        442,441      323,159
  Net Income Attributable
   to Shareholders       2,378,216    1,406,561      3,981,971    2,908,431

  Foreign Currency
   Translation Adjustment   59,974            -        186,680            -
  Minority Interest's
   Share                    (5,997)           -        (18,668)           -
  Comprehensive Income   2,432,193    1,406,561      4,149,983    2,908,431

  Weighted average
   common share -
   Basic                13,346,555   13,287,055     13,346,555   13,287,055
  Weighted average
   common share -
   Diluted              13,359,861   13,287,055     13,355,426   13,287,055
  EPS - Basic                 0.18         0.11           0.30         0.22
  EPS - Diluted               0.18         0.11           0.30         0.22



                  SORL Auto Parts, Inc. and Subsidiaries
                       Consolidated Balance Sheets

                                                   June 30,     December 31,
                                                     2006          2005
                                                 (Unaudited)     (Audited)
  Assets
  Current Assets
    Cash and Cash Equivalents                 US  $2,221,050 US    $961,131
    Accounts Receivable, Net of Provision         29,368,553     25,339,774
    Notes Receivable                               1,155,537      1,488,104
    Inventory                                      1,374,179      2,512,583
    Prepayments                                    1,409,268      1,801,829
    Other current assets                             407,250         48,115
      Total Current Assets                        35,935,837     32,151,536
  Fixed Assets
    Property, Plant and Equipment                 10,670,515     10,140,947
    Less: Accumulated Depreciation                (3,494,385)    (3,024,281)
      Property, Plant and Equipment, Net           7,176,130      7,116,666
    Construction in progress                         344,012              -
  Other Assets
    Deferred compensation cost-stock options         308,551              -
    Intangible Assets                                 44,709         44,297
    Less: Accumulated Amortization                   (15,369)       (11,873)
      Intangible Assets, Net                          29,340         32,424
      Total Other Assets                             337,891         32,424
    Total Assets                              US $43,793,870 US $39,300,626

  Liabilities and Shareholders' Equity
  Current Liabilities
    Accounts Payable and Notes Payable        US  $7,651,396 US  $3,746,666
    Deposit Received from Customers                  806,551      1,324,085
    Short term bank loans                         11,506,328     16,026,717
    Accrued Expenses                                 595,968        482,982
    Other Current Liabilities                        424,403              -
      Total Current Liabilities                   20,984,646     21,580,450

  Minority Interest                                2,196,927      1,735,818

  Shareholders' Equity
    Common Stock - $0.002 Par Value; 50,000,000
                   authorized, 13,346,555 issued
                   and outstanding as of June 30,
                   2006 and December 31, 2005         26,693         26,693
    Additional Paid In Capital                     4,922,074      4,444,118
    Accumulated other comprehensive income           505,005        336,993
    Retained Earnings                             15,158,525     11,176,554
                                                  20,612,297     15,984,358
    Total Liabilities and Shareholders'
     Equity                                   US $43,793,870 US $39,300,626


DATASOURCE: SORL Auto Parts, Inc.



CONTACT:  David Ming He of SORL Auto Parts, Inc., [phone],

; or Christopher Chu of The Global Consulting Group,

[phone], 



Web site:  http://www.sorl.cn/ 

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