**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION **

**FORM      10-Q **

| x | QUARTERLY                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF                1934 |
|---|-----------------------------------------------------------------------------------------------------------------|

| o | TRANSITION                    REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
|---|------------------------------------------------------------------------------------|

**SORL      AUTO PARTS, INC.**

| DELAWARE                                                                                     |   | 30-0091294                                                      |
|----------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------|
| (State                or other jurisdiction of incorporation                or organization) |   | (IRS                Employer Identification                No.) |

----

----

| Large                Accelerated Filer o | Accelerated                Filer o | Non-Accelerated                Filer x |
|-----------------------------------------------|-----------------------------------------|---------------------------------------------|

**APPLICABLE      ONLY TO CORPORATE ISSUERS **

**18,279,254      **

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SORL      AUTO      PARTS, INC. 

|                       |                                                                                                                                                                                                                                        | **Page** |
|--------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| PART                  I.             | FINANCIAL                  INFORMATION (Unaudited)                                                                                                                                                                                                    | 1        |
|                                 |                                                                                                                                                                                                                                                  |     |
| Item                  1.             | Financial                  Statements:                                                                                                                                                                                                                | 1        |
|                                 |                                                                                                                                                                                                                                                  |     |
|                                 | Condensed                  Consolidated Balance Sheets as of September 30, 2007 (Unaudited)                  and                  December 31, 2006 (Audited)                                                                                         | 2        |
|                                 |                                                                                                                                                                                                                                                  |     |
|                                 | Condensed                  Consolidated Statements of Operations and Comprehensive Income                  (Unaudited)                  for the Three and Nine Months Ended September 30, 2007and                  2006      | 3        |
|                                 |                                                                                                                                                                                                                                                  |     |
|                                 | Condensed                  Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three                  and Nine Months Ended September 30, 2007 and 2006                                                                         | 4        |
|                                 |                                                                                                                                                                                                                                                  |     |
|                                 | Condensed                  Consolidated Statements of Cash Flows (Unaudited) for the Three                  and Nine                  Months Ended September 30, 2007 and 2006                                                                        | 6        |
|                                 |                                                                                                                                                                                                                                                  |     |
|                                 | Notes                  to the Condensed Consolidated Financial Statements (Unaudited)                                                                                                                                                                 | 7   |
|                                 |                                                                                                                                                                                                                                                  |     |
| Item                  2.             | Management’s                  Discussion and Analysis or Financial Condition and Results of Operations                                                                                                                                          | 17       |
|                                 |                                                                                                                                                                                                                                                  |     |
| Item                3.     | Quantitative                  and Qualitative Disclosures About Market Risk                                                                                                                                                                      | 29       |
|                                 |                                                                                                                                                                                                                                                  |     |
| Item                4.     | Controls                  and Procedures                                                                                                                                                                                                         | 29       |
|                                 |                                                                                                                                                                                                                                                  |     |
| PART                II.         | OTHER                INFORMATION                                                                                                                                                                                                                 |  30 |
|                                 |                                                                                                                                                                                                                                                  |     |
| Item                1.          | Legal                Proceedings                                                                                                                                                                                                                 |  30 |
|                                 |                                                                                                                                                                                                                                                  |     |
| Item                1A.         | Risk                Factors                                                                                                                                                                                                                      |  30 |
|                                 |                                                                                                                                                                                                                                                  |     |
| Item                2.          | Unregistered                Sales of Equity Securities and Use of Proceeds                                                                                                                                                                       | 30       |
|                                 |                                                                                                                                                                                                                                                  |     |
| Item                3.          | Defaults                Upon Senior Securities                                                                                                                                                                                                   |  31 |
|                                 |                                                                                                                                                                                                                                                  |     |
| Item                4.          | Submission                Of Matters To a Vote of Security Holders                                                                                                                                                                               |  31 |
|                                 |                                                                                                                                                                                                                                                  |     |
|  Item                5.         | Other                Information                                                                                                                                                                                                                 |  31 |
|                                 |                                                                                                                                                                                                                                                  |     |
| Item                6.          | Exhibits                                                                                                                                                                                                                                         |  31 |
|                                 |                                                                                                                                                                                                                                                  |     |
| SIGNATURES                      | 31                                                                                                                                                                                                                                                    |

----

**SORL      Auto Parts, Inc. and Subsidiaries**

**Consolidated      Balance Sheets**

**September      30, 2007 and December 31,2006**

|                                                                                                                                                                                                                             |   | **September 30,****2007** |               | **December 31,****2006** |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------------------|-------------------------------|---------|
|                                                                                                                                                                                                                             |   | **(Unaudited)**                |               | **(Audited)**                 |    |
| **Assets**                                                                                                                                                                                                                       |   |                           |               |                          |    |   |   |
| **Current                Assets**                                                                                                                                                                                                |   |                           |               |                          |    |   |   |
| Cash                and Cash Equivalents                                                                                                                                                                                         |   | **US$**                        | 1,972,825          |                          | **US$** | 11,137,501 |   |
| Accounts                Receivable, Net of Provision                                                                                                                                                                             |   |                           | 31,351,401         |                          |    | 26,750,778 |   |
| Notes                Receivable                                                                                                                                                                                                  |   |                           | 5,953,499          |                          |    | 3,494,327 |   |
| Inventory                                                                                                                                                                                                                        |   |                           | 8,814,201          |                          |    | 4,528,856 |   |
| Prepayments                                                                                                                                                                                                                      |   |                           | 2,276,728          |                          |    | 5,532,802 |   |
| Other                current assets                                                                                                                                                                                              |   |                           | 4,216,545          |                          |    | 2,925,558 |   |
| **Total                Current Assets**                                                                                                                                                                                          |   |                           | 54,585,199         |                          |    | 54,369,822 |   |
| **Fixed                Assets**                                                                                                                                                                                                  |   |                           |               |                          |    |   |   |
| Property,                Plant and Equipment                                                                                                                                                                                     |   |                           | 26,172,629         |                          |    | 20,418,557 |   |
| Less:                Accumulated Depreciation                                                                                                                                                                                    |   |                           | (5,410,661         | )                             |    | (4,106,901 | ) |
| Property,                Plant and Equipment, Net                                                                                                                                                                                |   |                           | 20,761,968         |                          |    | 16,311,656 |   |
|                                                                                                                                                                                                                             |   |                           |               |                          |    |   |   |
| **Land                Use Rights, Net**                                                                                                                                                                                          |   |                           | 13,583,427         |                          |    | - |   |
|                                                                                                                                                                                                                             |   |                           |               |                          |    |   |   |
| **Other                Assets**                                                                                                                                                                                                  |   |                           |               |                          |    |   |   |
| Deferred                compensation cost-stock options                                                                                                                                                                          |   |                           | 84,480             |                          |    | 129,207 |   |
| Intangible                Assets                                                                                                                                                                                                 |   |                           | 74,059             |                          |    | 45,779 |   |
| Less:                Accumulated Amortization                                                                                                                                                                                    |   |                           | (22,768            | )                             |    | (17,655 | ) |
| Intangible                Assets, Net                                                                                                                                                                                            |   |                           | 51,291             |                          |    | 28,124 |   |
| Other                Non-current Assets                                                                                                                                                                                          |   |                           | 38,637             |                          |    | 41,299 |   |
| Total                Other Assets                                                                                                                                                                                                |   |                           | 174,408            |                          |    | 198,630 |   |
|                                                                                                                                                                                                                             |   |                           |               |                          |    |   |   |
|                                                                                                                                                                                                                             |   |                           |               |                          |    |   |   |
| **Total                Assets**                                                                                                                                                                                                  |   | **US$**                        | **89,105,002**     |                          | **US$** | **70,880,108** |   |
|                                                                                                                                                                                                                             |   |                           |               |                          |    |   |   |
| **Liabilities                and Shareholders' Equity**                                                                                                                                                                          |   |                           |               |                          |    |   |   |
|                                                                                                                                                                                                                             |   |                           |               |                          |    |   |   |
| **Current                Liabilities**                                                                                                                                                                                           |   |                           |               |                          |    |   |   |
| Accounts                Payable and Notes Payable                                                                                                                                                                                |   | **US$**                        | 5,649,773          |                          | **US$** | 4,620,692 |   |
| Deposit                Received from Customers                                                                                                                                                                                   |   |                           | 877,625            |                          |    | 508,268 |   |
| Short                term bank loans                                                                                                                                                                                             |   |                           | 4,705,709          |                          |    | - |   |
| Income                tax payable                                                                                                                                                                                                |   |                           | 540,063            |                          |    | 358,367 |   |
| Accrued                Expenses                                                                                                                                                                                                  |   |                           | 1,086,373          |                          |    | 1,232,845 |   |
| Other                Current Liabilities                                                                                                                                                                                         |   |                           | 491,823            |                          |    | 454,430 |   |
|                                                                                                                                                                                                                             |   |                           |     |                          |    |                       |   |
| **Total                Current Liabilities**                                                                                                                                                                                     |   |                           | 13,351,366         |                          |    | 7,174,602 |   |
|                                                                                                                                                                                                                             |   |                           |               |                          |    |   |   |
| Total                Liabilities                                                                                                                                                                                                 |   |                           | 13,351,366         |                          |    | 7,174,602 |   |
|                                                                                                                                                                                                                             |   |                           |               |                          |    |   |   |
| **Minority                Interest**                                                                                                                                                                                             |   |                           | 7,545,894          |                          |    | 6,336,557 |   |
|                                                                                                                                                                                                                             |   |                           |               |                          |    |   |   |
| **Shareholders'                Equity**                                                                                                                                                                                          |   |                           |               |                          |    |   |   |
| Common                Stock - $0.002 Par Value; 50,000,000 authorized, 18,279,254 and 18,275,126                issued and outstanding as of September 30, 2007 and December 31,                2006                respectively |   |                           | 36,558             |                          |    | 36,550 |   |
| Additional                Paid In Capital                                                                                                                                                                                        |   |                           | 37,498,452         |                          |    | 37,444,051 |   |
| Reserves                                                                                                                                                                                                                         |   |                           | 1,640,403          |                          |    | 797,116 |   |
| Accumulated                other comprehensive income                                                                                                                                                                            |   |                           | 3,553,626          |                          |    | 1,102,469 |   |
| Retained                Earnings                                                                                                                                                                                                 |   |                           | 25,478,703         |                          |    | 17,988,763 |   |
| Total                Shareholders' Equity                                                                                                                                                                                        |   |                           | 68,207,742         |                          |    | 57,368,949 |   |
|                                                                                                                                                                                                                             |   |                           |               |                          |    |   |   |
| **Total                Liabilities and Shareholders' Equity**                                                                                                                                                                    |   | **US$**                        | **89,105,002**     |                          | **US$** | **70,880,108** |   |

**The      accompanying notes are an integral part of these financial      statements**

----

**SORL      Auto Parts, Inc. and Subsidiaries**

**Consolidated      Statements of Operations and Comprehensive Income **

**For      The Second Quarter Ended September 30, 2007 and 2006**

|                                                                                               |   | **Three Months Ended ****September 30,** |                               | **Nine Months Ended ****September 30,** |   |
|----------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|------------------------------------|-------------------------------------------------------------|--------|
|                                                                                               |   |                                                         | **2007**                           |                                                        |   | **2006** |   |   | **2007** |   |   | **2006** |   |
| Sales                                                                                              |   | US$                                                          | 29,703,227                         |                                                        |   | 21,288,002 |   | US$ | 83,309,788 |   |   | 60,824,588 |   |
| Cost                of Sales                                                                       |   |                                                         | 23,064,724                         |                                                        |   | 16,511,343 |   |   | 64,620,063 |   |   | 47,012,827 |   |
| Gross                Profit                                                                        |   |                                                         | 6,638,503                          |                                                        |   | 4,776,659 |   |   | 18,689,725 |   |   | 13,811,761 |   |
|                                                                                               |   |                                                         |                               |                                                        |   |   |   |   |   |   |   |   |   |
| Operating                Expenses                                                                  |   |                                                         |                               |                                                        |   |   |   |   |   |   |   |   |   |
| Selling                and Distribution Expenses                                                   |   |                                                         | 1,928,763                          |                                                        |   | 1,163,077 |   |   | 4,444,053 |   |   | 3,407,535 |   |
| General                and Administrative Expenses                                                 |   |                                                         | 1,682,071                          |                                                        |   | 1,028,862 |   |   | 4,402,694 |   |   | 2,212,113 |   |
| Financial                Expenses                                                                  |   |                                                         | 349,056                            |                                                        |   | 259,587 |   |   | 606,492 |   |   | 767,034 |   |
|                                                                                               |   |                                                         |                     |                                                        |   |                      |   |   |                       |   |   |                     |   |
| Total                Operating Expenses                                                            |   |                                                         | 3,959,890                          |                                                        |   | 2,451,526 |   |   | 9,453,239 |   |   | 6,386,682 |   |
|                                                                                               |   |                                                         |                               |                                                        |   |   |   |   |   |   |   |   |   |
| Operating                Income                                                                    |   |                                                         | 2,678,613                          |                                                        |   | 2,325,133 |   |   | 9,236,486 |   |   | 7,425,079 |   |
|                                                                                               |   |                                                         |                               |                                                        |   |   |   |   |   |   |   |   |   |
| Other                Income                                                                        |   |                                                         | 118,334                            |                                                        |   | 24,280 |   |   | 502,606 |   |   | 92,976 |   |
| Non-Operating                Expenses                                                              |   |                                                         | (10,357                            | )                                                           |   | (75,841 | ) |   | (94,996 | ) |   | (232,566 | ) |
| Income                Before Provision for Income Taxes                                            |   |                                                         | 2,786,590                          |                                                        |   | 2,273,572 |   |   | 9,644,096 |   |   | 7,285,489 |   |
|                                                                                               |   |                                                         |                               |                                                        |   |   |   |   |   |   |   |   |   |
| Provision                for Income Taxes                                                          |   |                                                         | 434,139                            |                                                        |   | 311,208 |   |   | 373,883 |   |   | 898,713 |   |
| Net                Income Before Minority Interest & Other Comprehensive                Income |   | US$                                                          | 2,352,451                          |                                                        |   | 1,962,364 |   | US$ | 9,270,213 |   |   | 6,386,776 |   |
|                                                                                               |   |                                                         |                               |                                                        |   |   |   |   |   |   |   |   |   |
| Minority                Interest                                                                   |   |                                                         | 239,867                            |                                                        |   | 196,236 |   |   | 936,986 |   |   | 638,677 |   |
| Net                Income Attributable to Shareholders                                             |   |                                                         | 2,112,584                          |                                                        |   | 1,766,128 |   |   | 8,333,227 |   |   | 5,748,099 |   |
|                                                                                               |   |                                                         |                               |                                                        |   |   |   |   |   |   |   |   |   |
| Foreign                Currency Translation Adjustment                                             |   |                                                         | 1,025,919                          |                                                        |   | 262,110 |   |   | 2,723,508 |   |   | 448,790 |   |
| Minority                Interest's Share                                                           |   |                                                         | (102,592                           | )                                                           |   | (26,211 | ) |   | (272,351 | ) |   | (44,879 | ) |
| Comprehensive                Income                                                                |   |                                                         | 3,035,911                          |                                                        |   | 2,002,027 |   |   | 10,784,384 |   |   | 6,152,010 |   |
|                                                                                               |   |                                                         |                               |                                                        |   |   |   |   |   |   |   |   |   |
| Weighted                average common share - Basic                                               |   |                                                         | 18,278,805                         |                                                        |   | 13,346,555 |   |   | 18,276,366 |   |   | 13,346,555 |   |
| Weighted                average common share - Diluted                                             |   |                                                         | 18,312,574                         |                                                        |   | 13,368,387 |   |   | 18,323,125 |   |   | 13,360,639 |   |
| EPS –                Basic                                                              |   |                                                         | 0.12                               |                                                        |   | 0.13 |   |   | 0.46 |   |   | 0.43 |   |
| EPS –                Diluted                                                            |   |                                                         | 0.12                               |                                                        |   | 0.13 |   |   | 0.45 |   |   | 0.43 |   |

----

**SORL      Auto Parts, Inc. and Subsidiaries**

**Consolidated      Statements of Changes in Shareholders' Equity**

| **Three                Months Ended September 30, 2007 and 2006** |   |
|-------------------------------------------------------------------|--------|
|                                                              |   |   | **Number****of Share** |   |   | **Common****Stock** |   |   | **Additional****Paid-in****Capital** |   |   | **Reserves**** ** |   |   | **Retained****Earnings****(Deficit)** |   |   | **Accumu. Other****Comprehensive****Income** |   |   | ** ****Shareholders'****Equity** |   |   |  **Minority****Interest** |   |
| **Beginning                Balance - June 30, 2006**              |   |   | **13,346,555** |   |   | **26,693** |   |   | **4,922,074** |   |   | - |   |   | **15,158,525** |   |   | **505,005.00** |   |   | **20,612,297** |   |   | **2,196,927** |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                Income                                         |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 1,766,128 |   |   | - |   |   | 1,766,128 |   |   | 196,236 |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                Comprehensive Income                         |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 235,899 |   |   | 235,899 |   |   | 26,211 |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Paid                In Capital Contributions                      |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| ***Ending                Balance - September 30, 2006***          |   |   | **13,346,555** |   |   | **26,693** |   |   | **4,922,074** |   |   |   |   |   | **16,924,653** |   |   | **740,904** |   |   | **22,614,324** |   |   | **2,419,374** |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Beginning                Balance - June 30, 2007**              |   |   | **18,275,126** |   |   | **36,550** |   |   | **37,467,252** |   |   | **1,424,523** |   |   | **23,581,999** |   |   | **2,630,299** |   |   | **65,140,623** |   |   | **7,203,435** |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                Income                                         |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 2,112,584 |   |   | - |   |   | 2,112,584 |   |   | 239,867 |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                Comprehensive Income                         |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 923,327 |   |   | 923,327 |   |   | 102,592 |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Transfer                to reserve                                |   |   | - |   |   | - |   |   | - |   |   | 215,880 |   |   | -215,880 |   |   | - |   |   | - |   |   | - |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common                Stock issued to previous employees          |   |   | 4,128 |   |   | 8 |   |   | 31,200 |   |   |   |   |   | - |   |   | - |   |   | 31,208 |   |   | - |   |
| ***Ending                Balance - September 30, 2007***          |   |   | **18,279,254** |   |   | **36,558** |   |   | **37,498,452** |   |   | **1,640,403** |   |   | **25,478,703** |   |   | **3,553,626** |   |   | **68,207,742** |   |   | **7,545,894** |   |

----

| **Nine                Months Ended September 30, 2007 and 2006** |
|------------------------------------------------------------------|
|                                                             |   |   | **Number****of Share** |   |   | **Common****Stock** |   |   | **Additional****Paid-in****Capital** |   |   | **Reserves** |   |   | **Retained****Earnings****(Deficit)** |   |   | **Accumu. Other****Comprehensive****Income** |   |   | **Shareholders'****Equity** |   |   |  **Minority****Interest** |   |
| **Beginning                Balance - December 31, 2005**         |   |   | **13,346,555** |   |   | **26,693** |   |   | **4,444,118** |   |   | - |   |   | **11,176,554** |   |   | **336,993** |   |   | **15,984,358** |   |   | **1,735,818** |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                Income                                        |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 5,748,099 |   |   | - |   |   | 5,748,099 |   |   | 638,677 |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                Comprehensive Income                        |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 403,911 |   |   | 403,911 |   |   | 44,879 |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Paid                In Capital Contributions                     |   |   | - |   |   | - |   |   | 477,956 |   |   | - |   |   | - |   |   | - |   |   | 477,956 |   |   | - |   |
|                                                             |   |   |                  |   |   |                  |   |   |                  |   |   |                  |   |   |                  |   |   |                  |   |   |                  |   |   |                   |   |
| ***Ending                Balance - September 30, 2006***         |   |   | **13,346,555** |   |   | **26,693** |   |   | **4,922,074** |   |   | - |   |   | **16,924,653** |   |   | **740,904** |   |   | **22,614,324** |   |   | **2,419,374** |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Beginning                Balance - December 31, 2006**         |   |   | **18,275,126** |   |   | **36,550** |   |   | **37,444,051** |   |   | **797,116** |   |   | **17,988,763** |   |   | **1,102,469** |   |   | **57,368,949** |   |   | **6,336,557** |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                Income                                        |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 8,333,227 |   |   |   |   |   | 8,333,227 |   |   | 936,986 |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                Comprehensive Income                        |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 2,451,157 |   |   | 2,451,157 |   |   | 272,351 |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Transfer                to reserve                               |   |   | - |   |   | - |   |   | - |   |   | 843,287 |   |   | -843,287 |   |   | - |   |   | - |   |   | - |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 4,128                options issued                              |   |   | - |   |   | - |   |   | 23,201 |   |   | - |   |   | - |   |   | - |   |   | 23,201 |   |   | - |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common                Stock issued to previous employees         |   |   | 4,128 |   |   | 8 |   |   | 31,200 |   |   | - |   |   | - |   |   | - |   |   | 31,208 |   |   | - |   |
| ***Ending                Balance - September 30, 2007***         |   |   | **18,279,254** |   |   | **36,558** |   |   | **37,498,452** |   |   | **1,640,403** |   |   | **25,478,703** |   |   | **3,553,626** |   |   | **68,207,742** |   |   | **7,545,894** |   |

**The      accompanying notes are an integral part of these financial      statements**

----

**SORL      Auto Parts, Inc. and Subsidiaries**

**Consolidated      Statements of Cash Flows**

**For      The Third Quarter Ended September 30, 2007 and 2006**

|                                                                                                                    |   |  **Three Months Ended ****September 30,** |                                       |  **Nine Months Ended ****September 30,** |
|-------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------------------------------------------|-------------------------------------------------------------------|
|                                                                                                                    |   |                                                               | **2007**                                   |                                                              |   | **2006** |   |   | **2007** |   |   | **2006** |   |
|                                                                                                                    |   |                                                               |                                       |                                                              |   |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Operating Activities**                                                               |   |                                                               |                                       |                                                              |   |   |   |   |   |   |   |   |   |
| Net                  Income                                                                                             |   | US$                                                                | 2,112,584                                  |                                                              |   | 1,766,128 |   | US$ | 8,333,227 |   |   | 5,748,099 |   |
| **Adjustments                  to reconcile net income (loss) to net cash from operating                  activities:** |   |                                                               |                                       |                                                              |   |   |   |   |   |   |   |   |   |
| Minority                  Interest                                                                                      |   |                                                               | 239,867                                    |                                                              |   | 196,236 |   |   | 936,986 |   |   | 638,677 |   |
| Bad                  Debt Expense                                                                                       |   |                                                               | (163,553                                   | )                                                                 |   | (83,168 | ) |   | 23,623 |   |   | (869,618 | ) |
| Depreciation                  and Amortization                                                                          |   |                                                               | 447,548                                    |                                                              |   | 266,058 |   |   | 1,157,942 |   |   | 783,053 |   |
| Loss                  on disposal of Fixed Assets                                                                       |   |                                                               | (1,870                                     | )                                                                 |   | 2,129 |   |   | (762 | ) |   | 69,032 |   |
| Stock-Based                  Compensation Expense                                                                       |   |                                                               | 46,117                                     |                                                              |   | 89,672 |   |   | 99,136 |   |   | 259,077 |   |
| **Changes                  in Assets and Liabilities:**                                                                 |   |                                                               |                                       |                                                              |   |   |   |   |   |   |   |   |   |
| Account                  Receivables                                                                                    |   |                                                               | 1,198,001                                  |                                                              |   | 1,250,818 |   |   | (3,436,960 | ) |   | (1,991,058 | ) |
| Notes                  Receivables                                                                                      |   |                                                               | 3,449,736                                  |                                                              |   | (2,366,405 | ) |   | (2,165,666 | ) |   | (2,033,838 | ) |
| Other                  Currents Assets                                                                                  |   |                                                               | (238,235                                   | )                                                                 |   | (674,145 | ) |   | (1,150,292 | ) |   | (1,033,278 | ) |
| Inventory                                                                                                               |   |                                                               | (1,339,563                                 | )                                                                 |   | (923,930 | ) |   | (4,034,078 | ) |   | 214,474 |   |
| Prepayments                                                                                                             |   |                                                               | 45,087                                     |                                                              |   | (309,766 | ) |   | 3,377,736 |   |   | 82,795 |   |
| Account                  Payables and Notes payable                                                                     |   |                                                               | (252,806                                   | )                                                                 |   | 787,423 |   |   | 738,224 |   |   | 4,841,961 |   |
| Deposits                  Received from Customers                                                                       |   |                                                               | 56,601                                     |                                                              |   | 161,447 |   |   | 338,953 |   |   | (356,087 | ) |
| Other                  Current Liabilities and Accrued Expenses                                                         |   |                                                               | 315,101                                    |                                                              |   | 366,871 |   |   | 2,470 |   |   | 643,287 |   |
|                                                                                                                    |   |                                                               |                        |                                                              |   |                        |   |   |                       |   |   |                         |   |
| **Net                  Cash Flows from Operating Activities**                                                           |   |                                                               | **5,914,615**                              |                                                              |   | **529,368** |   |   | **4,220,539** |   |   | **6,996,576** |   |
|                                                                                                                    |   |                                                               |                                       |                                                              |   |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Investing Activities**                                                               |   |                                                               |                                       |                                                              |   |   |   |   |   |   |   |   |   |
| Acquisition                  of Property and Equipment                                                                  |   |                                                               | (5,521,198                                 | )                                                                 |   | (1,189,727 | ) |   | (10,856,559 | ) |   | (2,063,307 | ) |
| Acquisition                  of Land Use Rights                                                                         |   |                                                               | (7,377,271                                 | )                                                                 |   | - |   |   | (7,377,271 | ) |   | - |   |
| Investment                  in Intangible Assets                                                                        |   |                                                               | (5,818                                     | )                                                                 |   | - |   |   | (25,733 | ) |   | - |   |
|                                                                                                                    |   |                                                               |                                  |                                                              |   |      |   |   |     |   |   |     |   |
| **Net                  Cash Flows from Investing Activities**                                                           |   |                                                               | **(12,904,287**                            | **)**                                                             |   | **(1,189,727** | **)** |   | **(18,259,563** | **)** |   | **(2,063,307** | **)** |
|                                                                                                                    |   |                                                               |                                       |                                                              |   |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Financing Activities**                                                               |   |                                                               |                                       |                                                              |   |   |   |   |   |   |   |   |   |
| Proceeds                  from (Repayment of) Bank Loans                                                                |   |                                                               | 3,159,176                                  |                                                              |   | (632,227 | ) |   | 4,652,112 |   |   | (5,152,615 | ) |
|                                                                                                                    |   |                                                               |                                       |                                                              |   |   |   |   |   |   |   |   |   |
| **Net                  Cash flows from Financing Activities**                                                           |   |                                                               | **3,159,176**                              |                                                              |   | **(632,227** | **)** |   | **4,652,112** |   |   | **(5,152,615** | **)** |
|                                                                                                                    |   |                                                               |                                       |                                                              |   |   |   |   |   |   |   |   |   |
| **Effects                  on changes in foreign exchange rate**                                                        |   |                                                               | 51,979                                     |                                                              |   | 262,110 |   |   | 222,236 |   |   | 448,789 |   |
|                                                                                                                    |   |                                                               |                                       |                                                              |   |   |   |   |   |   |   |   |   |
| Net                  Increase (Decrease) in Cash                                                                        |   |                                                               | (3,778,517                                 | )                                                                 |   | (1,030,476 | ) |   | (9,164,676 | ) |   | 229,443 |   |
|                                                                                                                    |   |                                                               |                                       |                                                              |   |   |   |   |   |   |   |   |   |
| Cash                  - Beginning of the term                                                                           |   |                                                               | 5,751,342                                  |                                                              |   | 2,221,050 |   |   | 11,137,501 |   |   | 961,131 |   |
|                                                                                                                    |   |                                                               |                             |                                                              |   |     |   |   |     |   |   |      |   |
| **Cash                  - End of the term**                                                                             |   | **US$**                                                            | **1,972,825**                              |                                                              |   | **1,190,574** |   | **US$** | **1,972,825** |   |   | **1,190,574** |   |
|                                                                                                                    |   |                                                               |                                       |                                                              |   |   |   |   |   |   |   |   |   |
| **Supplemental                  Cash Flow Disclosures:**                                                                |   |                                                               |                             |                                                              |   |     |   |   |     |   |   |     |   |
| Interest                  Paid                                                                                          |   |                                                               | 105,363                                    |                                                              |   | 163,862 |   |   | 118,277                    |   |   | 565,802 |   |
| Tax                  Paid                                                                                               |   |                                                               | 331,779                                    |                                                              |   | 297,662 |   |   | 1,185,215                    |   |   | 586,420 |   |
|                                                                                                                    |   |                                                               |                                       |                                                              |   |   |   |   |   |   |   |   |   |
| **Non-Cash                  Transaction Disclosures:**                                                                  |   |                                                               |                                       |                                                              |   |   |   |   |   |   |   |   |   |
| Exchange                  of Construction in Progress for Acquisition of Property and                  Equipment        |   |                                                               | 3,040,203                                  |                                                              |   |   |   |   |   |   |   |   |   |
| Exchange                  of Construction in Progress for Acquisition of Land Use                  Rights               |   |                                                               | 6,206,156                                  |                                                              |   |   |   |   |   |   |   |   |   |

**The      accompanying notes are an integral part of these financial      statements**

----

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE      A - DESCRIPTION OF BUSINESS **

**NOTE      B - BASIS OF PRESENTATION **

**NOTE      C- RECENTLY ISSUED FINANCIAL STANDARDS **

**Note      D - Related Party Transactions **

----

|                                                            |   | **Three                Months Ended****September                30,** |         | **Nine                Months Ended****September                30,** |   |
|--------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|--------------|----------------------------------------------------------------------|--------|
|                                                                      |   | **2007**                                                         |         | **2006**                                                        |   | **2007** |   |                  **2006** |   |
|                                                                      |   |                                                             |         |                                                            |   |   |   |                    |   |
| PURCHASES                NON-VALVE PRODUCT AND PACKAGING MATERIAL FROM:   |   |                                                                  |              |                                                                 |   |  |   |   |  |   |   |  |   |
| Ruili                Group Co., Ltd.                                      |   | $                                                                     | 7,577,793    |                                                                 | $      | 5,435,210 |   | $ | 20,256,572 |   | $ | 15,978,023 |   |
|                                                                      |   |                                                                  |         |                                                                 |   |   |   |   |   |   |   |                     |   |
| Total                                                                     |   | $                                                                     | 7,577,793    |                                                                 | $      | 5,435,210 |   | $ | 20,256,572 |   | $ | 15,978,023 |   |
|                                                                           |   |                                                                  |         |                                                                 |   |   |   |   |   |   |   |   |   |
| PURCHASES                PLANT AND LAND USE RIGHTS FROM :                      |   |                                                                  |         |                                                                 |   |   |   |   |   |   |   |   |   |
| Ruili                Group Co., Ltd.                                           |   | $                                                                     | 20,237,525   |                                                                 | $      | — |   | $ | — |   | $ | — |   |
|                                                                           |   |                                                                  |    |                                                                 |   |    |   |   |    |   |   |    |   |
|                                                                           |   | $                                                                     | 20,237,525   |                                                                 | $      | — |   | $ | — |   | $ | — |   |
| SALES                TO:                                                  |   |                                                                  |              |                                                                 |   |  |   |   |  |   |   |  |   |
| Ruili                Group Co., Ltd.                                      |   | $                                                                     | —      |                                                                 | $      | 1,768,115 |   | $ | 914,683 |   | $ | 4,398,313 |   |
|                                                                      |   |                                                                  |         |                                                                 |   |   |   |   |   |   |   |                     |   |
| Total                                                                     |   | $                                                                     | —      |                                                                 | $      | 1,768,115 |   | $ | 914,683 |   | $ | 4,398,313 |   |
|                                                                           |   |                                                                  |         |                                                                 |   |   |   |   |   |   |   |   |   |

|                                     |   | **September 30, ****2007** |      | **December 31, ****2006** |   |
|------------------------------------------|--------|--------------------------------------|-----------|-------------------------------------|--------|
| Prepayment                               |   |                                 |           |                                |   |  |   |
|                                     |   |                                 |           |                                |   |  |   |
| Ruili                Group Co., Ltd.     |   | $                                    | —   |                                | $      | 2,309,073 |   |
| Total                                    |   |                                 | —   |                                |   | 2,309,073 |   |
|                                     |   |                                 |           |                                |   |  |   |
| Other                Accounts receivable |   |                                 |           |                                |   |  |   |
| Ruili                Group Co., Ltd.     |   | $                                    | 1,686,125 |                                | $      | 903,304 |   |
|                                     |   |                                 |      |                                |   |   |   |
| Total                                    |   |                                 | 1,686,125 |                                |   | 903,304 |   |
| Accounts                payable          |   |                                 |      |                                |   |   |   |
| Ruili                Group Co., Ltd.     |   | $                                    | 775,166   |                                | $      | — |   |
| Total                                    |   |                                 | 775,166   |                                |   | — |   |

----

**NOTE      E - ACCOUNTS RECEIVABLE**

|                                        |   | **September ****30, ****2007** |    | **December ****31, ****2006** |   |
|--------------------------------------------------|--------|------------------------------------------|---------|-----------------------------------------|--------|
| Beginning                balance            |   | $                                        | 8,769   |                                    | $      | 914,721 |   |
| Add:                Increase to allowance   |   |                                     | 23,179  |                                    |   | (905,952 | ) |
| Less:                Accounts written off   |   |                                     | — |                                    |   | — |   |
|                                             |   |                                     |         |                                    |   |  |   |
| Ending                balance               |   | $                                        | 31,948  |                                    | $      | 8,769 |   |

|                                                             |   | September                30,                2007 |       | December                31,                2006 |   |
|-------------------------------------------------------------|--------|--------------------------------------------------|------------|-------------------------------------------------|--------|
| Accounts                receivable                     |   | $                                                | 31,383,349 |                                            | $      | 26,759,547 |   |
| Less:                allowance for doubtful accounts   |   |                                             | (31,948    | )                                               |   | (8,769 | ) |
|                                                   |   |                                             |            |                                            |   |  |   |
| Account                receivable balance, net         |   | $                                                | 31,351,401 |                                            | $      | 26,750,778 |   |

**NOTE      F - INVENTORIES**

|                           |   | **September 30, ****2007** |      | **December 31, ****2006** |   |
|--------------------------------|--------|--------------------------------------|-----------|-------------------------------------|--------|
| Raw                Material    |   | $                                    | 2,251,418 |                                | $      | 1,081,569 |   |
| Work                in process |   |                                 | 4,122,246 |                                |   | 2,429,979 |   |
| Finished                Goods  |   |                                 | 2,440,537 |                                |   | 1,017,308 |   |
| Total                Inventory |   | $                                    | 8,814,201 |                                | $      | 4,528,856 |   |

----

**NOTE      G - PROPERTY, PLANT AND EQUIPMENT **

|                                          |   | **September 30,****2007** |            | **December 31,****2006** |   |
|-----------------------------------------------|--------|--------------------------------|-----------------|-------------------------------|--------|
| Machinery                                     |   | $                              | 16,732,950      |                          | $      | 12,123,775 |   |
| Molds                                         |   |                           | 1,160,722       |                          |   | 1,116,441 |   |
| Office                equipment               |   |                           | 310,282         |                          |   | 226,647 |   |
| Vehicle                                       |   |                           | 711,442         |                          |   | 310,681 |   |
| Building                                      |   |                           | 7,257,233       |                          |   | 580,126 |   |
| Construction                In Progress       |   |                           | —  |                          |   | 6,060,887 |   |
| Sub-Total                                     |   |                           | 26,172,629      |                          |   | 20,418,557 |   |
|                                          |   |                           |                 |                          |   |  |   |
| Less:                Accumulated depreciation |   |                           | (5,410,661      | )                             |   | (4,106,901 | ) |
|                                          |   |                           |                 |                          |   |  |   |
| Fixed                Assets, net              |   | $                              | 20,761,968      |                          | $      | 16,311,656 |   |

**NOTE      H - LAND USE RIGHTS**

|                                           |   | September 30, 2007 |                                                    | December 31, 2006 |   |
|------------------------------------------------|--------|------------------------------|---------------------------------------------------------|-----------------------------|--------|
| Cost:                                          |   | $                            | 13,583,427                                              |                        | $      | — |   |
| Less:                Accumulated amortization: |   |                         |                   —   |                        |   |                  —  |   |
| Land                use rights, net            |   | $                            |                  13,583,427               |                        | $      | —  |   |

**NOTE      I - INTANGIBLE ASSETS **

----

| **2007**                                                                                                                    |   | **2008** |   |                  **2009**  |   | **2010** |   |                  **2011**  |   | **Thereafter** |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|------------------------------------------|--------|----------|--------|------------------------------------------|--------|----------------|--------|
| $                                  1,354 |   | $        | 5,845  |                                     | $      | 5,845    |   | $                                        | 5,845  |           | $      | 5,845 |   | $ | 26,557 |   |

**NOTE      J - PREPAYMENT**

|                                  |   | **September 30,****2007** |      |                  **December 31,****2006** |   |
|---------------------------------------|--------|--------------------------------|-----------|-----------------------------------------------------|--------|
| Raw                material suppliers |   | $                              | 1,585,404 |                                                | $      | 5,080,452 |   |
| Equipment                purchase     |   |                           | 691,324   |                                                |   | 452,350 |   |
|                                  |   |                           |           |                                                |   |  |   |
| Total                prepayment       |   | $                              | 2,276,728 |                                                | $      | 5,532,802 |   |

**NOTE      K - ACCRUED EXPENSES**

|                                  |   | **September 30, ****2007** |                                                            | **December 31, ****2006** |   |
|---------------------------------------|--------|--------------------------------------|-----------------------------------------------------------------|-------------------------------------|--------|
|                                  |   |                                 |                                                            |                                |   |
| Accrued                payroll        |   | $                                    | 583,412                                                         |                                | $      | 448,420 |   |
| Other                accrued expenses |   |                                 |                   502,961                  |                                |   |                  784,425 |   |
| Total                accrued expenses |   | $                                    |                  1,086,373                        |                                | $      | 1,232,845 |   |

**NOTE      L - BANK LOANS**

|                                 |   |                  **September 30, ****2007** |       |   **December 31, ****2006** |   |
|--------------------------------------|--------|------------------------------------------------------------|------------|-------------------------------------------------|--------|
| Secured                              |   | $                                                          | 4,705,709  |                                            | $      | — |   |
| Less:                Current portion |   | $                                                          | (4,705,709 | )                                               | $      | — |   |
| Non-current                portion   |   | $                                                          | —    |                                            | $      | — |   |

----

**NOTE      M - RESERVE **

|                                          |   | **September 30,****2007**  |      | **December 31,****2006** |   |
|-----------------------------------------------|--------|--------------------------------------|-----------|-------------------------------|--------|
|                                          |   |                       |      |                     |   |
| Statutory                surplus reserve fund |   | $                                    | 1,640,403 |                          | $      | 797,116 |   |
| Total                                         |   | $                                    | 1,640,403 |                          | $      | 797,116 |   |

Net      income as reported in the US GAAP financial statements differs from that as      reported in the PRC statutory financial statements. In accordance with the      relevant laws and regulations in the PRC, the profits available for distribution      are based on the statutory financial statements. If the Joint Venture has      foreign currency available after meeting its operational needs, the Joint      Venture may make its profit distributions in foreign currency to the extent      foreign currency is available. Otherwise, it is necessary to obtain approval      and      convert such distributions at an authorized bank. 

**NOTE      N - INCOME TAXES **

| Statutory                tax rate           |   |   | 26.4  | %      |
|---------------------------------------------|--------|--------|-------|--------|
| Tax                holidays and concessions |   |   | -13.2 | %      |
|                                        |   |   |       |   |
| Effective                tax rate           |   |   | 13.2  | %      |

----

**NOTE      O - LEASES **

|                                         |   |                  **2007**  |                                   | **2008**  |   | **2009**                                                                                |   |                  **2010** |    | **2011** |   |                  **Thereafter**                                                  |   |
|----------------------------------------------|--------|------------------------------------------|----------------------------------------|------------------|--------|-----------------------------------------------------------------------------------------|--------|----------------------------------|---------|----------|--------|-----------------------------------------------------------------------------------------|--------|
| Rental                of apartment buildings |   |                                     |                   54,108 |             |   |                   242,043                                   |   |                             | 242,043 |     |   |                   242,043                                   |   |   | 242,043 |   |   |                   58,727 |   |
| Total                                        |   |                                     | 54,108                                 |             |   | 242,043                                                                                 |   |                             | 242,043 |     |   | 242,043                                                                                 |   |   | 242,043 |   |   | 58,727 |   |

**NOTE      P - ADVERTISING COSTS**

**NOTE      Q - RESEARCH AND DEVELOPMENT EXPENSE**

**NOTE      R - WARRANTY CLAIMS**

| Beginning                balance at Jan 01, 2007                                  |   | $ | 613,917   |   |
|-----------------------------------------------------------------------------------|--------|---|-----------|--------|
| Accrued                during the nine months ended September 30, 2007:           |   | $ | 912,623   |   |
| Less:                Actual Paid during the nine months ended September 30, 2007: |   | $ | 1,212,312 |   |
| Ending                balance at September 30, 2007                               |   | $ | 314,228   |   |

----

**NOTE      S - STOCK COMPENSATION PLAN **

| **Number of Shares** |   | **% of Shares Issued** |   | **Initial Vesting Date** |
|--------------------------------|--------|---------------------------------------|--------|------------------------------------|
|                           |   |                        |   |                               |
| 60,000                         |   | 100%                                  |   | March                1, 2009       |

| Dividend                Yield               |   |   | 0.00                   | %      |
|---------------------------------------------|--------|--------|------------------------|--------|
| Expected                Volatility          |   |   | 96.54                  | %      |
| Risk-Free                Interest Rate      |   |   | 4.59                   | %      |
| Contractual                Term             |   |   | 3                years |   |
| Stock                Price at Date of Grant |   | $      | 4.79                   |   |
| Exercise                Price               |   | $      | 4.79                   |   |

|                                                                 |   | **Options**                         |    | **Weighted****Average****Exercise****Price** |   | **Weighted****Average****Remaining****Contractual****Term** |   | **Aggregate****Intrinsic****Value** |     |
|----------------------------------------------------------------------|--------|-------------------------------------|---------|----------------------------------------------|--------|-------------------------------------------------------------|--------|-------------------------------------|----------|
|                                                                 |   |                      |    |                                         |   |                                              |   |                           |     |
| January                1, 2006                                       |   |                                | — |                                         | $      | —                                                     |   |                                | —  |   | $ | — |   |
| Granted                                                              |   |                                | 60,000  |                                         |   | 4.79                                                        |   |                                | 3Years   |   |   | — |   |
| Exercised                                                            |   |                                | — |                                         |   | —                                                     |   |                                | —  |   |   | — |   |
| Forfeited                                                            |   |                                | — |                                         |   | —                                                     |   |                                | —  |   |   | — |   |
|                                                                 |   |                                |         |                                         |   |                                                             |   |                                |          |   |   |  |   |
| Outstanding                at September                30, 2007 |   |                                | 60,000  |                                         | $      | 4.79                                                        |   |                                | 1.3Years |   | $ | 1                80,000 ` |   |
|                                                                 |   |                                |         |                                         |   |                                                             |   |                                |          |   |   |  |   |
| Exercisable                at September                30, 2007 |   |                                | — |                                         |   | —                                                     |   |                                | —  |   |   | — |   |

----

| **Number                of Shares** |   | **%                of Shares Issued** |   | **Initial                Vesting Date** |
|-------------------------------------|--------|---------------------------------------|--------|-----------------------------------------|
|                                |   |                        |   |                                    |
| 4,128                               |   | 100%                                  |   | June                20, 2007       |

| Dividend                Yield               |   |   | 0.00                   | %      |
|---------------------------------------------|--------|--------|------------------------|--------|
| Expected                Volatility          |   |   | 141.47                 | %      |
| Risk-Free                Interest Rate      |   |   | 5.14                   | %      |
| Contractual                Term             |   |   | 3                years |   |
| Stock                Price at Date of Grant |   | $      | 7.09                   |   |
| Exercise                Price               |   | $      | 7.25                   |   |

|                                                                 |   | **Warrants**                        |    | **Weighted****Average****Exercise****Price** |   | **Weighted** **Average****Remaining****Contractual****Term** |   | **Aggregate****Intrinsic****Value** |     |
|----------------------------------------------------------------------|--------|-------------------------------------|---------|----------------------------------------------|--------|-------------------------------------------------------------------|--------|-------------------------------------|----------|
|                                                                 |   |                      |    |                                    |   |                                                         |   |                           |     |
| January                1, 2007                                       |   |                                | — |                                         | $      | —                                                           |   |                                | —  |   | $ | — |   |
| Granted                                                              |   |                                | 4,128   |                                         | $      | 7.25                                                              |   |                                | 3Years   |   |   | — |   |
| Exercised                                                            |   |                                | — |                                         |   | —                                                           |   |                                | —  |   |   | — |   |
| Forfeited                                                            |   |                                | — |                                         |   | —                                                           |   |                                | —  |   |   | — |   |
|                                                                 |   |                                |         |                                         |   |                                                                   |   |                                |          |   |   |  |   |
| Outstanding                at September                30, 2007 |   |                                | 4,128   |                                         | $      | 7.25                                                              |   |                                | 2.8Years |   | $ | 2,229 |   |
|                                                                 |   |                                |         |                                         |   |                                                                   |   |                                |          |   |   |  |   |
| Exercisable                at September                30, 2007 |   |                                | 4,128   |                                         | $      | 7.25                                                              |   |                                | 2.8Years |   | $ | 2,229 |   |

----

| **Number                of Shares** |   |                   **%                of Shares Issued**   |   | **Initial                Vesting Date** |
|-------------------------------------|--------|-------------------------------------------------------------------------------|--------|-----------------------------------------|
|                                |   |                                                                |   |                                    |
| 100,000                             |   |                   100%                                    |   | January                5, 2006     |

| Dividend                Yield               |   |   | 0.00                   | %      |
|---------------------------------------------|--------|--------|------------------------|--------|
| Expected                Volatility          |   |   | 95.01                  | %      |
| Risk-Free                Interest Rate      |   |   | 4.36                   | %      |
| Contractual                Term             |   |   | 4                years |   |
| Stock                Price at Date of Grant |   | $      | 4.70                   |   |
| Exercise                Price               |   | $      | 6.25                   |   |

|                                                                 |   | **Warrants**                        |    | **Weighted****Average****Exercise****Price** |   | **Weighted****Average****Remaining****Contractual****Term** |   | **Aggregate****Intrinsic****Value**  |     |
|----------------------------------------------------------------------|--------|-------------------------------------|---------|----------------------------------------------|--------|-------------------------------------------------------------|--------|-------------------------------------------|----------|
|                                                                 |   |                      |    |                                    |   |                                                        |   |                            |     |
| January                1, 20 06                                      |   |                                | — |                                         | $      | —                                                     |   |                                      | —  |   | $ | — |   |
| Granted                                                              |   |                                | 100,000 |                                         | $      | 6.25                                                        |   |                                      | 4Years   |   |   | — |   |
| Exercised                                                            |   |                                | — |                                         |   | —                                                     |   |                                      | —  |   |   | — |   |
| Forfeited                                                            |   |                                | — |                                         |   | —                                                     |   |                                      | —  |   |   | — |   |
|                                                                 |   |                                |         |                                         |   |                                                             |   |                                      |          |   |   |  |   |
| Outstanding                at September                30, 2007 |   |                                | 100,000 |                                         | $      | 6.25                                                        |   |                                      | 2.3Years |   | $ | 154,000 |   |
|                                                                 |   |                                |         |                                         |   |                                                             |   |                                      |          |   |   |  |   |
| Exercisable                at September                30, 2007 |   |                                | 100,000 |                                         | $      | 6.25                                                        |   |                                      | 2.3Years |   | $ | 154,000 |   |

----

**NOTE      T- COMMITMENTS AND CONTINGENCIES**

**NOTE      U - OFF-BALANCE SHEET ARRANGEMENTS **

**NOTE      V - SUBSEQUENT EVENTS**

**ITEM      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      OPERATIONS **

**OVERVIEW      **

----

   

        The      consideration was based on a valuation by an independent PRC valuation firm.      Fairford then contributed these assets and liabilities as a capital contribution      for its 90% interest in the Joint Venture. The Ruili Group also transferred      inventory as its capital contribution for its 10% interest in the Joint Venture.      The assets and liabilities transferred to the Joint Venture by Fairford and      the      Ruili Group represented all the relevant assets and liabilities of the      Transferred Business. Certain historical information of the Transferred Business      is based on the operation of the Transferred Business when it was owned by      the      Ruili Group. 

        Pursuant      to the formation of the Joint Venture, on January 17, 2004, the Ruili Group      and      Fairford signed a binding Joint Venture agreement (the “JV Agreement”). Pursuant      to the JV Agreement, the Board of Directors consists of three directors;      Fairford has the right to designate two members of the board and the Ruili      Group      has the right to designate one member. The majority of the Board has decision      making authority with respect to operating matters. As a result, Fairford      maintains operating control over the Joint Venture. 

----

**CRITICAL      ACCOUNTING POLICIES AND ESTIMATES **

We      believe that the following critical accounting policies set forth below involve      the most significant judgments and estimates used in the preparation of our      consolidated financial statements. We evaluate these policies on an ongoing      basis, based upon historical results and experience, consultation with experts,      trends and other methods we consider reasonable in the particular circumstances,      as well as our forecasts as to how these might change in the future.

*Accounting      Method*

*Accounts      Receivable and Allowance for Doubtful Accounts *

*Inventories*

*Income      Taxes*

----

*Revenue      Recognition*

*Concentration      of Credit Risk *

**Results      of Operations **

***(1)      Results of operations for the three months ended September 30, 2007 as compared      to the three months ended September 30, 2006.***

**SALES      **

|                                                     |   | **Three                Months ended**                 **30-Sep-07**  |                        | **three                Months ended** **30-Sep-06**  |   |
|----------------------------------------------------------|--------|------------------------------------------------------------------------------------|-----------------------------|------------------------------------------------------------------|--------|
| Air                brake valves & related components |   | $                                                                                  | 22.4                        | M                                                           |   | 75 | % | $ | 15.9 | M  |   | 75 | % |
| Non-valve                products                        |   | $                                                                                  |                  7.3 | M                                                           |   |                  25 | % | $ | 5.4 | M  |   |                  25 | % |
| Total                                                    |   | $                                                                                  | 29.7                        | M                                                           |   | 100 | % | $ | 21.3 | M  |   | 100 | % |

----

|                                |   | **Three Months**** ** **ended**  **30-Sep-07**  |                                 |  % |   | **Three Months** **ended** **30-Sep-06**  |   |  % |        |
|-------------------------------------|--------|------------------------------------------------------------------------------|--------------------------------------|---------|--------|-----------------------------------------------------------------|--------|---------|-------------|
|                                |   | **(U.S.                dollars in million)**                                 |                                 |
| China                OEM market     |   | $                                                                            | 9.2                                  |    |   | 31                                                              | %      | $       | 6.7         |   |   | 32 | % |
| China                Aftermarket    |   | $                                                                            | 7.7                                  |    |   | 26                                                              | %      | $       | 5.2         |   |   | 24 | % |
| International                market |   | $                                                                            |                  12.8  |    |   |                  43                                      | %      | $       | 9.4  |   |   |                  44 | % |
| Total                               |   | $                                                                            | 29.7                                 |    |   | 100                                                             | %      | $       | 21.3        |   |   | 100 | % |

**COST      OF SALES **

**GROSS      PROFIT **

----

**SELLING      EXPENSES **

|   | (1) | Increased                transportation expenses for domestic sales: Because of the shorter                lead                time resulting from the delivery requirements of the OEM’s,                products                needed to be shipped more frequently in smaller quantities. Accordingly,                the associated transportation expenses increased by $ 261,746 for                the                three months ended September 30, 2007, as compared to $196,821 for                the                same period of 2006, even though the Company had taken many steps                to                optimize its shipping                management. , . |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Packaging                costs were $ 484,539 for the three months ended September 30, 2007,                an                increase of $162,467 as compared with the same period of 2006 , as                a                result of the increase in international sales which generally require                a                higher standard for packaging material. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Advertising                costs were $ 106,437 for the three months ended September 30, 2007,                as                compared to $1,335 for the same period of 2006, an increase of                $105,102. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**GENERAL      AND ADMINISTRATIVE EXPENSES**

|  | (1) | The                expansion of economic activities, facilities and workforce resulted                in                increased depreciation, office expenses, staff salary and welfare,                travel                expenses, supplies and utilities totaling $ 479,420, as compared                to the                same period of 2006. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (2) | R&D                expense, which is included in general and administrative expenses,                increased by $ 152,696, as compared to the same period of 2006, as                discussed below. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (3) | Additionally, there                was an increase in professional fees of $69,281. The professional                fees included audit and legal fees associated with SEC filings, related                consulting fees, stock transfer fees and other items associated with                the                costs of being a public entity. The aforementioned increases were                partly                offset by a decreased stock-based compensation expenses at                $43,555. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**RESEARCH      AND DEVELOPMENT EXPENSE **

**DEPRECIATION      AND AMORTIZATION **

----

**FINANCIAL      EXPENSE **

**OTHER      INCOME **

**INCOME      TAX **

**STOCK—BASED      COMPENSATION **

**MINORITY      INTEREST **

----

**FINANCIAL      CONDITION **

**Liquidity      and Capital Resources **

 The      Company had working capital of $ 41,233,833 at September 30, 2007, as compared      to working capital of $47,195,220 at December 31, 2006, reflecting current      ratios of 4.09:1 and 7.58:1, respectively.

***(      2) Results of operations for the nine months ended September 30, 2007 as      compared to the nine months ended September 30, 2006.***

**SALES**

|                                                     |   | **Nine                Months ended****30-Sep-07** |                                  | **Nine                Months ended****30-Sep-06** |   |
|----------------------------------------------------------|--------|---------------------------------------------------|---------------------------------------|---------------------------------------------------|--------|
| Air                brake valves & related components |   | $                                                 | 63.7                                  | M                                            |   | 76 | % | $ | 44.6 | M  |   | 73 | % |
| Non-valve                products                        |   | $                                                 |                  19.6   | M                                            |   | 24 | % | $ | 16.2 | M  |   |                  27 | % |
| Total                                                    |   | $                                                 | 83.3                                  | M                                            |   | 100 | % | $ | 60.8 | M  |   | 100 | % |

----

|                                |   | **Nine                Months****ended****30-Sep-07** |                                 |  % |   | **Nine                Months****ended****30-Sep-06** |   |  % |         |
|-------------------------------------|--------|------------------------------------------------------|--------------------------------------|---------|--------|------------------------------------------------------|--------|---------|--------------|
|                                |   | **(U.S.                dollars in million)**         |                                 |
| China                OEM market     |   | $                                                    | 30.1                                 |    |   | 36                                                   | %      | $       | 18.5         |   |   | 30 | % |
| China                Aftermarket    |   | $                                                    | 21.1                                 |    |   | 25                                                   | %      | $       | 17.9         |   |   | 29 | % |
| International                market |   | $                                                    |                  32.1  |    |   |                  39                           | %      | $       | 24.4  |   |   |                  41 | % |
| Total                               |   | $                                                    | 83.3                                 |    |   | 100                                                  | %      | $       | 60.8         |   |   | 100 | % |

**COST      OF SALES **

----

**GROSS      PROFIT **

**SELLING      EXPENSES **

|   | (1) | Increased                transportation expenses for domestic sales:                Because of the shorter lead time resulting from the delivery requirements                of the OEM’s,                products                needed to be shipped more frequently in smaller quantities.                Accordingly, the associated transportation expenses increased by $$                473,121 for the nine months ended September 30, 2007, as compared                to                $451,377 for the same period of 2006, even though the Company had                taken                many steps to optimize its shipping management. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | (2) | Packaging                costs were $ 1,386,103 for the nine months ended September 30, 2007,                an                increase of $804,890 as compared with the same period of 2006 , as                a                result of the increase in international sales which generally require                a                higher standard for packaging material. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | (3) | Advertising                costs were $ 107,023 for the nine months ended September 30, 2007,                as                compared to $23,358 for the same period of 2006, an increase of                $83,682. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | (4) | The                Company recorded product warranty expenses at $ 912,623 for the nine                months ended September 30, 2006, as compared to $1,174,437 for the                same                period of 2006, a decrease of $261,814. During the nine months ended                September 30, 2006, there was one large amount of a one-time                indemnification payment to an OEM customer, resulting from                miscommunication in certain technical parameters for the                products. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**GENERAL      AND ADMINISTRATIVE EXPENSES**

|  | (1) | The                expansion of economic activities, facilities and workforce resulted                in                increased depreciation, office expenses, staff salary and welfare,                travel                expenses, supplies and utilities totaling $708,993, as compared to                the                same period of 2006. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (2) | R&D                expense, which is included in general and administrative expenses,                increased by $ 466,232, as compared to the same period of 2006, as                discussed below. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (3) | Stock-based                compensation expenses decreased by $ 191,149, as compared to $259,077                for                the same period of 2006. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (4) | During                the nine months ended September 30, 2006, the Joint Venture reversed                a bad                debt provision resulting from collecting a significant portion of                accounts                receivable with aging over one year, which had been reflected as                a                reduction to general and administrative expenses. Compared with the                negative $869,463 of bad debt provision for the nine month ended                September                30, 2006, the bad debt provision included in general and administrative                expenses was $23,623 for the nine months ended September 30, 2007,                an                increase of by $893,086. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**RESEARCH      AND DEVELOPMENT EXPENSE **

**DEPRECIATION      AND AMORTIZATION **

**FINANCIAL      EXPENSE **

**OTHER      INCOME **

**INCOME      TAX **

----

**STOCK—BASED      COMPENSATION **

**MINORITY      INTEREST **

**FINANCIAL      CONDITION **

**Liquidity      and Capital Resources **

----

**ITEM      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

**ITEM      4. CONTROLS AND PROCEDURES **

| (a) | Evaluation                of Disclosure Controls and                Procedures. |
|-----|---------------------------------------------------------------------------------|

----

| (b) | Changes                in Internal Controls. |
|-----|----------------------------------------------|

**PART      II **

**OTHER      INFORMATION **

**ITEM      1. LEGAL PROCEEDINGS **

**ITEM      1A. RISK FACTORS **

**ITEM      2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS **

----

**ITEM      3. DEFAULTS UPON SENIOR SECURITIES**

**ITEM      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

| 1. | Election                  of Directors |
|----|----------------------------------------|

|                             | For        | Withheld |
|----------------------------------|------------|----------|
| Xiao                  Ping Zhang | 17,141,525 | 182,362  |
| Xiao                  Feng Zhang | 17,215,219 | 108,668  |
| Jung                  Kang Chang | 17,207,719 | 116,168  |
| Li                  Min Zhang    | 17,258,051 | 65,836   |
| Zhi                  Zhong Wang  | 17,258,651 | 65,236   |
| Yi                  Guang Huo    | 17,258,651 | 65,236   |
| Jiang                  Hua Feng  | 17,258,051 | 65,836   |

| 2. | Ratification                  of Auditors |
|----|-------------------------------------------|

| For        | Against | Abstain |
|------------|---------|---------|
| 17,273,934 | 21,985  | 27,968  |

**ITEM      5. OTHER INFORMATION**

**ITEM      6. EXHIBITS**

|   |                  31.1   | Certification                of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),                promulgated under the Securities and Exchange Act of 1934, as amended.                |
|--------|------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                    |                                                                                                                                                                                                         |
|   |                  31.2   | Certification                of Principal Accounting Officer pursuant to Rule 13a-14 and Rule                15d-14(a)                promulgated under the Securities and Exchange Act of 1934, as amended. |
|   |                    |                                                                                                                                                                                                         |
|   |                  32.1   | Certification                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                      |
|   |                    |                                                                                                                                                                                                         |
|   |                  32.2   | Certification                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                      |

| Dated                :November 12, 2007   | SORL                AUTO PARTS, INC.       |
|------------------------------------------------|--------------------------------------------|
|                                           |                        |                    |
|                                           | By:                              | /s/ Xiao                Ping Zhang |
|                                           |                                       | Name:                Xiao Ping Zhang |
|                                           |                                       | Title:                Chief Executive Officer |
|                                           |                                       |   |
|                                           | By:                              | /s/ Zong                Yun Zhou |
|                                           |                                       | Name:                Zong Yun Zhou |
|                                           |                                       | Title:                Chief Financial Officer (Principal                Financial Officer) |

----