# Six months ended 30 June 2010 compared to six months ended 30 June 2009

Turnover. Our turnover increased by 53.0% from RMB 2,045.0 million for the six months ended 30 June 2009 to RMB 3,127.9 million for the six months ended 30 June 2010, primarily due to an increase in sales of new automobiles by 55.8% from RMB 1,723.1 million for the six months ended 30 June 2009 to RMB 2,684.6 million for the six months ended 30 June 2010.

Turnover increased by 90.2% from sales of premium and ultra premium branded automobiles from RMB 871.0 million for the six months ended 30 June 2009 to RMB 1,656.3 million for the six months ended 30 June 2010. We attribute this increase primarily to the growth of the PRC premium and ultra premium brands market in general, the continued expansion of our dealership operations, particularly our sales from two new BMW dealership stores in Baotou and Beijing that commenced operations in February and June 2010 respectively and one Porsche dealership store in Dongguan that commenced operation in May 2010, as well as the continued ramp-up of two BMW dealership stores in Nanchang and Zhuhai that commenced operations in October 2008 and March 2009 respectively. The three new dealership stores in Baotou, Beijing and Dongguan generated RMB 213.1 million in sales for the six months ended 30 June 2010. The BMW dealership stores in Nanchang and Zhuhai generated RMB 230.7 million in sales for the six months ended 30 June 2010, compared to RMB 67.6 million for the six months ended 30 June 2009. The increase in turnover from sales of premium and ultra premium branded automobiles was also attributable to the increased sales volumes as well as the average sales prices of our premium and ultra premium branded automobiles as we adjusted our sales strategies to market and sell higher-priced models of premium and ultra premium branded automobiles that were introduced by automobile manufacturers. Turnover from sales of middle market automobiles increased by 20.7% from RMB 852.1 million for the six months ended 30 June 2009 to RMB 1,028.4 million for the six months ended 30 June 2010, primarily due to the growth of the overall PRC automobile market and the continued expansion of our dealership operations, particularly our sales from one new middle market brand dealership store in Inner Mongolia that commenced operations in March 2010. The dealership store in Inner Mongolia generated RMB 29.0 million in sales for the six months ended 30 June 2010. Turnover from sales of new automobiles also increased as a result of the growth of the overall PRC automobile market. According to ACMR, sales values of automobiles increased by 49.6% from the six months ended 30 June 2009 to the six months ended 30 June 2010.

In addition, turnover from provision of after-sales services increased by 45.7% from RMB 166.7 million for the six months ended 30 June 2009 to RMB 242.9 million for the six months ended 30 June 2010, which was primarily attributable to our expanded customer base and our adjustments in sales strategies for automobile accessories to offer expanded range of selection and higher priced products. Turnover from provision of logistics services and sales of lubricant oil increased by 29.1% from RMB 155.2 million to RMB 200.4 million, which was primarily due to the increase in demand from our customers as a result of the increased sales of automobiles.

Cost of sales. Our cost of sales increased by 50.0% from RMB 1,892.3 million for the six months ended 30 June 2009 to RMB 2,838.7 million for the six months ended 30 June 2010. This increase was due primarily to the increase in cost of sales for new automobiles, which increased by 52.1% from RMB 1,667.7 million to RMB 2,536.6 million for the same period as our sales of new automobiles increased.

Cost of sales increased by 83.6% from RMB 843.7 million for the six months ended 30 June 2009 to RMB 1,549.0 million for the six months ended 30 June 2010 for premium branded automobiles and increased by 19.8% from RMB 824.1 million to RMB 987.6 million for middle market branded automobiles in the same period. The increase in cost of sales of new automobiles was generally in line with the increased turnover from sales of new automobiles. The increase in our cost of sales was also due in part to an increase in cost of sales of after-sales services, which increased by 37.7% from RMB 102.9 million to RMB 141.7 million during the same period, and was generally in line with the increased turnover from after-sales services. In addition, our cost of sales of our logistics services and lubricant oil trading business increased by 31.8% from RMB 121.7 million to RMB 160.4 million during the same period, which was generally in line with the increased turnover from our logistics services and lubricant oil trading business.

Gross profit. Our gross profit increased by 89.4% from RMB 152.7 million for the six months ended 30 June 2009 to RMB 289.2 million for the six months ended 30 June 2010.

Gross profit from our dealership business increased from RMB 119.2 million for the six months ended 30 June 2009 to RMB 249.2 million for the six months ended 30 June 2010, primarily due to an increase in gross profit from sales of new automobiles. Gross profit from sales of premium and ultra premium branded automobiles increased from RMB 27.4 million to RMB 107.2 million for the same period and gross profit from sales of middle market branded automobiles increased from RMB 28.0 million to RMB 40.8 million for the same period. In addition, gross profit from after-sales services increased from RMB 63.8 million to RMB 101.2 million in the same period.

Gross profit from our logistics services and lubricant oil trading business increased from RMB 33.5 million to RMB 40.0 million in the same period.

Our gross margin increased from 7.5% for the six months ended 30 June 2009 to 9.2% for the six months ended 30 June 2010. This increase was primarily due to the increased proportion of our sales of premium and ultra premium branded automobiles, which generally have higher gross margin than sales of middle market branded automobiles, as well as increased sales of higher priced premium branded automobile models and accessories which have higher margins as a result of our adjustments in the sales strategies.

Other revenue and other net income. Our other revenue and other net income increased by 82.7% from RMB 12.7 million for the six months ended 30 June 2009 to RMB 23.2 million for the six months ended 30 June 2010, primarily due to the increase in our commission income received from financial institutions and insurance companies as we brokered more loans and insurance policies in connection with our increased sales of new automobiles. In addition, interest income from bank deposits also increased as a result of the increased balance of our pledged bank deposits.