China Auto Logistics Reports 2013 Results

Company Managed Small Full Year Profit As it Competed to Maintain Industry Leadership in Slower Luxury Imported Auto Market; Difficult Comparisons Expected to Continue Through the First Half of 2014 Until New Airport Auto Mall Related Businesses Come on Stream

Company Aims to Diversify Profits with a Used Car Business and Other Auto-Related Sales and Services Businesses Capitalizing on Potential of Anticipated New Free Trade Zone in Tianjin

China Auto Logistics 2013 Year End Investor Conference Call Scheduled for Friday, April 11th at 8:00am ET

TIANJIN, CHINA--(Marketwired - Apr 10, 2014) - China Auto Logistics Inc. (the "Company" or "CALI") (NASDAQ: CALI), a top seller in China of luxury imported automobiles, and a leading provider of auto-related services, reported today a lower year over year small profit for the year ended December 31, 2013, as it sought to maintain leadership in China's highly competitive luxury imported vehicle market. In a slower and more restrictive economic environment in 2013, the Company's luxury imported automobile sales declined approximately 22% and largely were of less profitable, lower end luxury vehicles.

Diversification and Free Trade Zone Potential

On a positive note, the Company saw fee income from Financing Services continue to grow despite slower auto sales. Most significantly, in the final months of the year, a key building block for diversifying into a potentially fast growing used car business as well as other auto related businesses was put into place, with the successful acquisition for $91.4 million on November 30, 2013 of Zhonghe Auto Sales Service Co., Ltd., which owns and operates the Tianjin Airport International Automall. The auto mall is in a prime location earmarked as one of the key sites in a proposed new Free Trade Zone (FTZ) in Tianjin, similar to the FTZ in Shanghai, which boosted real estate values and the value of companies located there. This followed an agreement in November with Car King China to launch Tianjin Car King Used Car Trading Company in which the Company has a 40% interest.

Mr. Tong Shiping, Chairman and CEO of the Company, stated, "While in 2013 we again absorbed the impact on our bottom line from competitive pricing in order to maintain leadership in our imported luxury auto business, I'm very pleased we succeeded in establishing a new leg for our business with significant long term growth potential. Used cars sales have become a much bigger slice of the auto sales pie in China, and we see a major opportunity for Car King Tianjin in the years ahead. It will take a while to build and measure our success with this new business as well as with our further possible diversification into higher margin retail auto sales. While we will continue to focus on expanding our existing auto-related services businesses and stabilizing auto sales margins, diversification will greatly strengthen our Company, position us well for new successes -- especially if the Tianjin FTZ comes to fruition -- and provide investors with new reasons for optimism about our future."

Financial Highlights

2013 revenues, which consisted primarily of luxury imported auto sales (98.30%), were $459,235,057, down 22.34% from $591,315,104 a year earlier, reflecting the year over year decline in Auto Sales.
Gross profit margins in 2013 decreased to 1.49% from 1.90% in 2012, primarily reflecting a continuing decline in Auto Sales pricing in order to remain an industry leader against strong competition.
Income from operations in 2013 was $2,929,747 compared with $3,582,194 a year earlier (including impairment changes for goodwill and intangible assets). The main contribution to income from operations came from Financing Services with operating income of $2,855,602 in 2013.
Net income attributable to shareholders in 2013 was $524,260, or $0.14 per share, compared with $2,567,087, or $0.69 per share in 2012.

Operations Overview

Sales of Automobiles declined 22.56% from a year earlier to $450,143,413 in 2013. The decline in volume was 26.58%, as the Company sold 4,837 imported luxury automobiles during the year compared with 6,588 a year earlier. Average unit selling prices, however, increased year over year in 2013 by 6.82% to approximately $94,000. Nevertheless, most of the Company's auto sales were of lower end luxury models where demand was stronger. Profit margins on these vehicles are lower and were further impacted by the Company's desire to maintain its leading position against strong competition by offering customers the lowest possible prices. In addition to the slower economy, two key factors influenced the declining sales of imported automobiles during 2013. The first was the implementation by PRC Customs of unified inspection standards, which prolonged purchasing cycles and led to insufficient inventories to meet customer's needs. Additionally, the PRC Motor Registration Office began strict enforcement of rules resulting in required alterations to imported automobiles to obtain registration permits. The additional costs to customers entailed by these alterations reduced demand for imported automobiles beginning in the second quarter.

Going forward, the Company is aiming to stabilize gross margins in 2014. At the same time, a new austerity program for government officials in effect is likely to extend the competitive environment in luxury auto sales.

Financing Services growth was impacted by the issues affecting Automobile Sales. Nevertheless, revenue from fee income increased 17.39% over 2012 results to $4,356,061. Revenue from the interest portion of this business was lower than in 2012 due to lower prevailing interest rates. The Company also was able to take advantage of available credit lines provided by banks, and does not foresee any difficulty in obtaining additional credit lines and loan facilities from its banks. As of April 7, 2014, the Company had a credit line of approximately $159 million and is regularly in negotiations for new credit lines.

Airport Auto Mall Automotive Services contributed a negligible amount to 2013 results as the Airport Auto Mall had only one month of operations following its acquisition near year-end. The Company anticipates selling used cars through Car King Tianjin at the Airport Auto Mall, as well as leasing a portion of the facility. As of February 28, 2014, as previously announced, the Company's contract for managing the International Auto Mall in Tianjin was not renewed, and the Company will instead focus on developing the Airport Auto Mall.

Potential for Tianjin Free Trade Zone (FTZ)

Considerable excitement is building in Tianjin about the potential for it becoming the second major FTZ in China after the recent opening of the Shanghai FTZ. The Company's recently purchased Airport Auto Mall is in the area of Tianjin earmarked for the FTZ. If the pattern that emerged in Shanghai is followed in Tianjin, real estate values could increase and significant new business opportunities could be created.

Outlook

Commenting on the outlook for 2014 and beyond, Mr. Tong stated, "Near term, the Company will face continuing competition and softer demand for its luxury imported automobile business and, at the same time, does not anticipate generating meaningful results from the Airport Auto Mall and Car King Tianjin until at least the second half of the year. We also will be looking at higher interest costs in connection with the payment of the remaining installments of the purchase price for the Airport Auto Mall. We therefore anticipate comparisons will continue to be difficult through the first six months of 2014."

"However," he continued, "we believe that we have established a stronger company, with a more diversified base of operations that, in time, will be worth the expense and major effort we are putting into bringing our strategy to fruition - - and our goal is to be a leader in each new area we enter. As successful business managers for many years, we welcome the possible opening of a Free Trade Zone in Tianjin, and the freeing up of capital this could entail in China's second major port city which already is a major hub of commercial activity."

Conference Call Invitation

The Company will discuss 2013 year end results during a live conference call and webcast on Friday, April 11, 2014 at 8:00 am Eastern Time.

To participate in the call, interested participants should call 1-877-941-1427 when calling within the United States or 1-480-629-9664 when calling internationally. Please ask for the China Auto Logistics 2013 Year End Earnings Conference Call, Conference ID: 4678872. There will be a playback available until April 18, 2014. 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: 4678872.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=108683 or at ViaVid's website at http://viavid.com

SEE ATTACHED TABLES

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 Automall in Tianjin for $91.4 million, with plans to develop it, among other things, as the flagship site for a used car business, with Car King (China) Used Car Trading Co., Ltd.

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.



CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

				December 31,
				2013		2012
ASSETS:
Current assets:
	Cash and cash equivalents			$	15,041,505	$	8,888,749
	Restricted cash				29,665,536		27,015,351
	Receivable related to auto mall management fees				255,712		-
	Receivable related to financing services				68,568,562		57,134,815
	Notes receivable				-		1,587,024
	Inventories				15,343,671		27,141,004
	Advances to suppliers				38,074,096		43,019,343
	Prepaid expenses				12,311		19,071
	Value added tax receivable				283,478		338,513
	Deferred tax assets				48,345		714,161
		Total current assets			167,293,216		165,858,031

Property, plant, and equipment, net					72,977,985		314,126
Ownership interest in Car King Tianjin					577,904		-
Goodwill					20,159,365		-
Intangible assets, net					547,155		-
Other assets					-		23,559
Total assets				$	261,555,625	$	166,195,716

LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
	Bank overdraft			$	2,439,429	$	-
	Lines of credit related to financing services				66,173,312		51,528,018
	Short term borrowings				6,259,598		19,673,128
	Notes payable to suppliers				21,275,203		12,696,196
	Accrued expenses				236,599		356,114
	Customer deposits				35,205,567		19,131,420
	Deferred revenue				202,428		241,598
	Payable related to acquisition of Zhonghe - current portion, net				15,706,581		-
	Due to shareholders				2,223,458		2,156,166
	Due to director				597,393		512,023
	Income tax payable				174,540		400,932
	Deferred tax liability				786,413		-
		Total current liabilities			151,280,521		106,695,595

Payable related to acquisition of Zhonghe, excluding current portion, net					35,306,223		-
Deferred tax liability					12,239,842		-
			Total liabilities		198,826,586		106,695,595

Commitments and contingencies (Note 17)

CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)

			December 31,
			2013		2012

Equity:
China Auto Logistics Inc. shareholders' equity:
	Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued and outstanding			-		-
	Common stock, $0.001 par value, 95,000,000 shares authorized, 4,034,394 shares and 3,694,394 shares issued and outstanding as of December 31, 2013 and 2012, respectively			4,034		3,694
	Additional paid-in capital			22,979,734		21,994,074
	Accumulated other comprehensive income			7,642,886		5,923,398
	Retained earnings			31,530,669		31,006,409
		Total China Auto Logistics Inc. shareholders' equity		62,157,323		58,927,575
Noncontrolling interests				571,716		572,546
		Total equity		62,729,039		59,500,121

		Total liabilities and shareholders' equity	$	261,555,625	$	166,195,716

CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

			Year Ended December 31,
			2013			2012

Net revenue			$	459,235,057		$	591,315,104
Cost of revenue				452,379,416			580,057,718
		Gross profit		6,855,641			11,257,386

Operating expenses:
	Selling and marketing			751,114			977,555
	General and administrative			3,174,780			2,036,436
	Impairment loss of goodwill and intangible assets			-			4,661,201
		Total operating expenses		3,925,894			7,675,192

Income from operations				2,929,747			3,582,194

Other income (expenses):
	Interest income			515,212			230,916
	Interest expense			(999,360	)		(531,301	)
	Loss on disposal of property and equipment			-			(172,043	)
	Gain on forgiveness of debt			-			1,139,861
	Foreign exchange loss			(217,764	)		-
	Equity loss - share of investee company loss			(76,660	)		-
	Miscellaneous			-			(72,922	)
		Total other income (loss)		(778,572	)		594,511

Income before income taxes				2,151,175			4,176,705

Income taxes				1,634,518			1,596,179

Net income				516,657			2,580,526

Less: Net income (loss) attributable to noncontrolling interests				(7,603	)		13,439

Net income attributable to shareholders of China Auto Logistics Inc.			$	524,260		$	2,567,087

Earnings per share attributable to shareholders of China Auto Logistics Inc.
	- basic and diluted		$	0.14		$	0.69

Weighted average number of common shares outstanding
	- basic and diluted			3,723,271			3,694,394

CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2013			2012

Cash flows from operating activities:
Net income	$	516,657		$	2,580,526

Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization		314,126			341,483
Loss on disposal of property and equipment		5,816			172,043
Impairment loss of goodwill and intangible assets		-			4,661,201
Gain on forgiveness of debt		-			(1,139,861	)
Equity loss - share of investee company loss		76,660			-
Stock issuance related to Zhonghe acquisition		986,000			-
Change of deferred tax liabilities		(32,418	)		(45,106	)
Inventory reserve		190,877			-

Changes in operating assets and liabilities:
Restricted cash		(13,792,120	)		(8,207,076	)
Accounts receivable - trade		-			107,894
Receivable related to auto mall management fees		(252,403	)		-
Receivables related to financing services		(9,955,175	)		32,524,609
Notes receivable		1,615,378			3,172,891
Inventories		13,708,851			1,559,629
Advances to suppliers		9,450,667			1,725,410
Prepaid expenses, other current assets and other assets		33,003			136,617
Value added tax receivable		305,993			287,087
Deferred tax assets		679,201			(713,900	)
Accounts payable		-			(1,565	)
Lines of credit related to financing services		13,297,886			(36,588,686	)
Notes payable		3,230,757			12,691,563
Accrued expenses		(137,505	)		(54,205	)
Accrued interest on payable related to Zhonghe acquisition		258,273			-
Customer deposits		15,266,991			(27,722,918	)
Deferred revenue		(51,867	)		(78,336	)
Income tax payable		(235,813	)		(760,417	)
Net cash provided by (used in) operating activities		35,479,835			(15,351,117	)

Cash flows from investing activities:
Acquisition of Zhonghe, net of cash received of $194,445		(38,574,637	)		-
Repayments of receivable from former owner of Zhonghe		7,111,260			-
Purchase of property and equipment		(14,842	)		(6,058	)
Net cash used in investing activities		(31,478,219	)		(6,058	)

Cash flows from financing activities:
Bank overdraft		2,407,865			-
Proceeds from short-term borrowings		28,444,740			32,464,014
Repayments of short-term borrowings		(42,472,868	)		(16,902,607	)
Decrease of restricted cash related to short-term borrowings		13,462,283			-
Proceeds from a director		862,200			852,075
Repayment of amount due to director		(755,921	)		(352,335	)
Net cash flows provided by financing activities		1,948,299			16,061,147

CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)

	Year Ended December 31,
	2013		2012

Effect of exchange rate change on cash		202,841		(16	)

Net increase in cash and cash equivalents		6,152,756		703,956

Cash and cash equivalents at the beginning of year		8,888,749		8,184,793
Cash and cash equivalents at the end of year	$	15,041,505	$	8,888,749

Supplemental disclosure of cash flow information:
Interest paid	$	3,650,929	$	3,905,767
Income taxes paid	$	1,062,331	$	3,115,602

Non cash investing activities:
Payable related to the acquisition of Zhonghe	$	52,197,645	$	-