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China Auto Logistics Reports 2014 Third Quarter and Nine Month Results

Depreciation and Interest Costs Major Factor in Reported Losses; Gross Margin in Auto Sales Up Slightly and Financial Services Grew

TIANJIN, CHINA /ETELIGIS/ China Auto Logistics Inc. (the "Company" or "CALI") (CALI), a top seller in China of luxury imported automobiles and a leading provider of auto-related services, today announced third quarter and nine month results for the periods ended September 30, 2014.

Revenues in the third quarter were $92,377,130, down 26.39% from $125,489,366 in the year earlier period as revenues from Automobile Sales, which accounted for 97.79% of total revenues, decreased 26.83% in the period. At the same time, primarily due to anticipated year over year increases in depreciation and interest costs stemming from the Zhonghe acquisition last November, the Company reported a net loss attributable to shareholders in the quarter of $(1,770,213) or $(0.44) per share, compared with net income attributable to shareholders in the 2013 third quarter of $553,275, or $0.15 per share.

In the first nine months of 2014, revenues declined 8.83% year over year from $343,370,742 in the 2013 nine month period to $313,038,947. Primarily due to a substantial year over year jump in interest expense and depreciation related to the Zhonghe acquisition in November 2013, the Company generated a net loss attributable to shareholders in the 2014 nine month period of $(4,962,635) or $(1.23) per share, compared with net income attributable to shareholders in the same period last year of $2,361,094 or $0.64 per share.

Airport International Auto Mall: Costly But Valuable Asset

Mr. Tong Shiping, Chairman and CEO of the Company, stated, "While the losses we incurred were quite substantial, they also were anticipated when we made the decision to acquire the Airport International Auto Mall, which we continue to view as an important component of our plans for the future. Among these are the start up of a retail auto sales business which, after months of planning, we expect to become a reality this month with anticipated contributions to revenues in the final quarter this year. The automall currently is serving as a base for our recent entry into the used car business, through our investment in Car King Tianjin. And, our plans to expand our luxury auto sales throughout China working with Tianjin Binhai International Automall are being firmed up."

"Further," Mr. Shiping continued, "I'm pleased to be able to point to some good news in the third quarter. First, while we still are locked in a highly competitive battle to maintain our leadership in luxury imported autos, which has necessitated operating with very thin margins, we have now seen another slight tilt up in the gross margin on Auto Sales. We see this as evidence of a new degree of stabilization of this business. And in our Financial Services Business, we also are seeing our strategy of focusing on higher margin services to improve our bottom line yielding results."

"I also should note," Mr. Shiping said, "that with our next installment payment on the Airport International Auto Mall of close to $20 million due shortly, we feel comfortable as of today of being able to handle it with our cash and short term loans despite our poor sales and earnings results in the third quarter."

Other Highlights

- Auto Sales - As the Company continued to sell its automobiles with low gross margins to maintain market leadership, it nevertheless experienced an approximately 30% decrease in sales volume year over year in Q3, but saw unit prices continue to increase to $103,000 compared with $99,000 for the same period a year ago. It also saw gross margins increase to 0.24% in the third quarter compared with 0.21% in the same period last year and from negative 0.06% in the second quarter of 2014.

- Financing Services – Net revenue from this business grew approximately 37% to just over $2.0 million compared with the year ago period. Of this total, approximately $870,800 was fee income, up over 11% over the prior year quarter, with the rest being interest income generated during the period. The growth in fee income came after a period in which fee income had been relatively flat, mainly due to a decision to divert income from the business to help finance the Zhonghe acquisition. This required the Company to limit one of its most popular financing services, which extends temporary credit beyond what banks typically offer. In this year's third quarter, the Company was able to increase the sales of other products to offset this and increase fees and income.

- Although the Airport International Mall was fully operational in the third quarter, the Company has still not determined the best and most profitable use of the facility. And, it still has not received a return on its investment with Car King China. However, the number of used cars sold continued to grow in the third quarter and, looking ahead, the Company sees the used car market in China as one with significant growth potential that it believes will generate reasonable returns over time.

- For some time, the Company has focused on possibly initiating a retail car sales business which also would utilize the Airport Auto Mall. A decision was reached to move ahead with this initiative in the fourth quarter, and plans are now being finalized for a start-up in November. The Company believes that before year end this new business will begin to generate revenues and net income.


"The way I see things," Mr. Shiping added, "is that after a difficult period, our Company has been able to begin to pursue a few major initiatives that incorporate its knowledge and skills in the automobile and automobile services areas. Each of these initiatives has excellent profitable growth potential, namely, used car sales, retail auto sales and, in particular, a major expansion of our luxury car sales throughout China. We also continue to enjoy some success with our Financing Services and are looking at ways to further expand this business in the future. Most of all, we are confident that no matter what the economic growth rate, CALI will be positioned to capitalize on what we believe will be continuing growth in automobile ownership. It will take some more patience and a lot more hard work, but I think we’ll get what we are aiming for."

Conference Call Invitation

The Company will discuss 2014 Third Quarter results during a live conference call and webcast on Monday, November 17th at 8:00am Eastern Standard Time. This will follow distribution of a news release with the Company's 2014 third quarter results on Friday, November 14, 2014.

To participate in the call, interested participants should call 1-888-572-7025 when calling within the United States or 1-719-325-2435 when calling internationally. Please ask for the China Auto Logistics 2014 Third Quarter Earnings Conference Call. Conference ID: 7879531. There will be a playback available until 11/24/14. To listen to the playback, please call 1-877-870-5176 when calling within the United States or 1-858-384-5517 when calling internationally. Use the Replay Pin Number: 7879531.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=111994 or at ViaVid's website at http://viavid.com.

About China Auto Logistics Inc.

China Auto Logistics Inc. is one of China's top sellers of imported luxury vehicles. It also provides a growing variety of "one stop" automobile related services such as short term dealer financing. Additionally, in November, 2013, it acquired the owner and operator of the 26,000 square meter Airport International Auto Mall in Tianjin for $91.4 million, with plans to develop the auto mall, among other things, as the flagship site for a joint venture with Car King (China) Used Car Trading Co., Ltd. In August, 2014, the Company also announced a Strategic Cooperation Agreement with a leading auto dealer leasing and development company to greatly expand its high end imported auto business via the purchase and construction of new auto malls throughout China coupled with a new e-commerce platform.

Information Regarding Forward-Looking Statements

Except for historical information contained herein, the statements in this press release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecasted results. These risks and uncertainties include, among other things, product demand, market competition, and risks inherent in our operations. These and other risks are described in our filings with the U.S. Securities and Exchange Commission. We do not undertake any obligation to publicly update these forward-looking statements, whether as a result of new information, future events or otherwise.

Sun Jiazhen

Ken Donenfeld
DGI Investor Relations Inc.
Tel: 212-425-5700
Fax: 646-381-9727

SOURCE: China Auto Logistics Inc.