**EXECUTION
      VERSION**


**REGISTRATION
      RIGHTS AGREEMENT**




**REGISTRATION
      RIGHTS AGREEMENT** (this
“ **Agreement** ”),
      dated
      as of February 15, 2008, by and among China Automotive Systems, Inc., a Delaware
      corporation, with headquarters located at No. 1 Henglong Road, Yu Qiao
      Development Zone, Shashi District, Jing Zhou City, Hubei Province, People’s
      Republic of China (the “ **Company** ”),
      and
      the undersigned buyers (each, a “ **Buyer** ”,
      and
      collectively, the “ **Buyers** ”).




**WHEREAS:**




A.  In
      connection with the Securities Purchase Agreement, dated as of February 1,
      2008,
      by and among the parties hereto (the “ **Securities
      Purchase Agreement** ”),
      the
      Company has agreed, upon the terms and subject to the conditions set forth
      in
      the Securities Purchase Agreement, to issue and sell to each Buyer senior
      convertible notes, (the “ **Notes** ”)
      and
      warrants (the “ **Warrants** ”)
      which
      will, among other things, both be convertible into shares of the Company’s
      common stock, par value $0.0001 per share (the “ **Common
      Stock** ,”
as
      converted, collectively, the “ **Conversion
      Shares** ”).




B.  In
      accordance with the terms of the Securities Purchase Agreement and subject
      to
      issuance of the Notes and the Warrants pursuant to the Securities Purchase
      Agreement, the Company has agreed to provide certain registration rights under
      the Securities Act of 1933, as amended, and the rules and regulations
      thereunder, or any similar successor statute (collectively, the “ **1933
      Act** ”),
      and
      applicable state securities laws.




**NOW,
      THEREFORE,** in
      consideration of the premises and the mutual covenants contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the Company and each of the Buyers hereby agree as
      follows:





1.  Definitions .




Capitalized
      terms used herein and not otherwise defined herein shall have the respective
      meanings set forth in the Securities Purchase Agreement. As used in this
      Agreement, the following terms shall have the following meanings:




“ **Business
      Day** ”
means
      any day other than Saturday, Sunday or any other day on which commercial banks
      in the City of New York are authorized or required by law to remain
      closed.




“ **Closing
      Date** ”
shall
      have the meaning set forth in the Securities Purchase Agreement.




“ **Effective
      Date** ”
means
      the date that the Registration Statement has been declared effective by the
      SEC.




“ **Effectiveness
      Deadline** ”
means
      the date that is 120 days after the Filing Deadline.









“ **Filing
      Date** ”
means
      the date on which the Registration Statement is filed with the SEC.




“ **Filing
      Deadline** ”
means
      sixty (60) **** calendar
      days after the Closing Date.




“ **Investor** ”
means
      a
      Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights
      under this Agreement and who agrees to become bound by the provisions of this
      Agreement in accordance with Section
      9 and any
      transferee or assignee thereof to whom a transferee or assignee assigns its
      rights under this Agreement and who agrees to become bound by the provisions
      of
      this Agreement in accordance with Section
      9 .




“ **Person** ”
means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization and a government or any
      department or agency thereof.




“ **register** ,”
      “ **registered** ,”
and
      “ **registration** ”
refer
      to a registration effected by preparing and filing one or more Registration
      Statements in compliance with the 1933 Act and pursuant to Rule 415 and the
      declaration or ordering of effectiveness of such Registration Statement(s)
      by
      the SEC.




“ **Registrable
      Securities** ”
for
      the
      Registration Statement means (i) the Notes, (ii) the Warrants,
      (iii) the Conversion Shares issued or issuable upon conversion of the
      Notes, (iv) the Conversion Shares issued or issuable upon exercise of the
      Warrants, and (v) any capital stock of the Company issued or issuable, with
      respect to the Notes, the Warrants or the Conversion Shares as a result of
      any
      stock split, stock dividend, recapitalization, exchange or similar event or
      otherwise, without regard to any limitations on conversion and/or exercise
      of
      the Notes or Warrants.




“ **Registration
      Statement** ”
means
      a
      resale registration statement or registration statements of the Company filed
      under the 1933 Act covering the Registrable Securities.




“ **Required
      Registration Amount** ” means
      120% of the
      sum of the number of Conversion Shares issued and issuable pursuant to the
      Notes
      and the Warrants as of the Trading Day (as defined in the Securities Purchase
      Agreement) immediately preceding the applicable date of
      determination .




“ **Rule
      415** ”
means
      Rule 415 promulgated under the 1933 Act or any successor rule providing for
      offering securities on a continuous or delayed basis.




“ **SEC** ”
means
      the United States Securities and Exchange Commission.




2.  Registration .




(a)  Mandatory
      Registration .
      The
      Company shall prepare, and, as soon as practicable, but in no event later than
      the Filing Deadline, file with the SEC the Registration Statement on Form S-3
      covering the resale of all of the Registrable Securities. In the event that
      Form
      S-3 is unavailable for such a registration, the Company shall use such other
      form as is available for such a registration on another appropriate form
      reasonably acceptable to the Required Holders, subject to the provisions of Section
      2(d ).
      The
      Registration Statement prepared pursuant hereto shall register for resale the
      Notes, the Warrants and at least the number of shares of Common Stock equal
      to
      the Required Registration Amount determined as of the date the Registration
      Statement is initially filed with the SEC. The Registration Statement shall
      contain (except if otherwise directed by the Required Holders) the “ **Selling
      Securityholders** ”
and
      “ **Plan
      of Distribution** ”
      sections in substantially the form attached hereto as Exhibit
      A .
      The
      Company shall use its commercially reasonable best efforts to have the
      Registration Statement declared effective by the SEC as soon as practicable,
      but
      in no event later than the Effectiveness Deadline. By the Business Day following
      the Effective Date, the Company shall file with the SEC in accordance with
      Rule
      424 under the 1933 Act the final prospectus to be used in connection with sales
      pursuant to such Registration Statement.




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(b)  Allocation
      of Registrable Securities .
      The
      initial number of Registrable Securities included in any Registration Statement
      and any increase in the number of Registrable Securities included therein shall
      be allocated pro rata among the Investors based on the number of Registrable
      Securities held by each Investor at the time the Registration Statement covering
      such initial number of Registrable Securities or increase thereof is declared
      effective by the SEC. In the event that an Investor sells or otherwise transfers
      any of such Investor’s Registrable Securities, each transferee shall be
      allocated a pro rata portion of the then remaining number of Registrable
      Securities included in such Registration Statement for such transferor. Any
      shares of Common Stock included in a Registration Statement and which remain
      allocated to any Person which ceases to hold any Registrable Securities covered
      by such Registration Statement shall be allocated to the remaining Investors,
      pro rata based on the number of Registrable Securities then held by such
      Investors which are covered by such Registration Statement. In no event shall
      the Company include any securities other than Registrable Securities on any
      Registration Statement without the prior written consent of the
      Investors.




(c)  Legal
      Counsel .
      Subject
      to Section
      5 hereof,
      the Investors shall have the right to select one legal counsel to review and
      oversee any registration pursuant to this Section 2 (“ **Investor**  **Legal
      Counsel** ”),
      which
      shall be Goodwin Procter LLP or such other counsel as thereafter designated
      by
      the Investors. The Company and Investor Legal Counsel shall reasonably cooperate
      with each other in performing the Company’s obligations under this
      Agreement.




(d)  Ineligibility
      for Form S-3 .
      In the
      event that Form S-3 is not available for the registration of the resale of
      Registrable Securities hereunder, the Company shall (i) register the resale
      of
      the Registrable Securities on another appropriate form reasonably acceptable
      to
      the Investors and (ii) undertake to register the Registrable Securities on
      Form
      S-3 as soon as such form is available, provided that the
      Company shall maintain the effectiveness of the Registration Statement then
      in
      effect until such time as a Registration Statement on Form S-3 covering the
      Registrable Securities has been declared effective by the SEC.




(e)  Sufficient
      Number of Shares Registered .
      In the
      event the number of shares available under a Registration Statement filed
      pursuant to Section
      2(a) is
      insufficient to cover all of the Registrable Securities required to be covered
      by such Registration Statement or an Investor’s allocated portion of the
      Registrable Securities pursuant to Section
      2(b ),
      the
      Company shall amend the applicable Registration Statement, or file a new
      Registration Statement (on the short form available therefor, if applicable),
      or
      both, so as to cover at least the Required Registration Amount as of the Trading
      Day immediately preceding the date of the filing of such amendment or new
      Registration Statement, in each case, as soon as practicable, but in any event
      not later than 30 days after the necessity therefor arises and the Investors
      give the Company notice thereof. The Company shall use its commercially
      reasonable best efforts to cause such amendment and/or new Registration
      Statement to become effective as soon as practicable following the filing
      thereof. For purposes of the foregoing provision, the number of shares available
      under a Registration Statement shall be deemed “insufficient to cover all of the
      Registrable Securities” if at any time the number of shares of Common Stock
      available for resale under the Registration Statement is less than the product
      determined by multiplying (i) the Required Registration Amount as of such time
      by (ii) 0.90. The calculation set forth in the foregoing sentence shall be
      made
      without regard to any limitations on the conversion and/or exercise of the
      Notes
      and the Warrants and such calculation shall assume that the Notes and the
      Warrants are then convertible into or exercisable for shares of Common Stock
      at
      the then prevailing Conversion Rate (as defined in the Notes) or Warrant
      Exercise Price (as defined in the Warrants).




3




(f)  Effect
      of Failure to File and Obtain and Maintain Effectiveness of Registration
      Statement .
      If (i)
      a Registration Statement covering all of the Registrable Securities required
      to
      be covered thereby and required to be filed by the Company pursuant to this
      Agreement is (A) not filed with the SEC on or before the respective Filing
      Deadline (a “ **Filing
      Failure** ”)
      or (B)
      not declared effective by the SEC on or before the respective Effectiveness
      Deadline (an “ **Effectiveness
      Failure** ”)
      or
      (ii) on any day after the Effective Date sales of all of the Registrable
      Securities required to be included on such Registration Statement cannot be
      made
      (other than during an Allowable Grace Period (as defined in Section
      3(r) )
      pursuant to such Registration Statement or otherwise (including, without
      limitation, because of a failure to keep such Registration Statement effective,
      to disclose such information as is necessary for sales to be made pursuant
      to
      such Registration Statement, to register a sufficient number of shares of Common
      Stock or to maintain the listing of the Common Stock) (a “ **Maintenance
      Failure** ”)
      then,
      as partial relief for the damages to any holder by reason of any such delay
      in
      or reduction of its ability to sell the underlying shares of Common Stock (which
      remedy shall not be exclusive of any other remedies available at law or in
      equity), the Company shall pay to each holder of Registrable Securities relating
      to such Registration Statement an amount in cash equal to one percent (1.0%)
      of
      the portion of the Purchase Price (as such term is defined in the Securities
      Purchase Agreement) allocable to the Note and Warrants and associated with
      such
      Investor’s Registrable Securities not included in and still unsold under such
      Registration Statement, on each of the following dates: (i) the day of a Filing
      Failure; (ii) the day of an Effectiveness Failure; (iii) the initial day of
      a
      Maintenance Failure; (iv) on every thirtieth day after the day of a Filing
      Failure and thereafter (pro rated for periods totaling less than thirty days)
      until such Filing Failure is cured; (v) on every thirtieth day after the day
      of
      an Effectiveness Failure and thereafter (pro rated for periods totaling less
      than thirty days) until such Effectiveness Failure is cured; and (vi) on every
      thirtieth day after the initial day of a Maintenance Failure and thereafter
      (pro
      rated for periods totaling less than thirty days) until such Maintenance Failure
      is cured. The payments to which a holder shall be entitled pursuant to this Section
      2(f) are
      referred to herein as “ **Registration
      Delay Payments** .”
      Registration Delay Payments shall be paid on the earlier of (A) the dates set
      forth above and (B) the third Business Day after the event or failure giving
      rise to the Registration Delay Payments is cured. In the event the Company
      fails
      to make Registration Delay Payments in a timely manner, such Registration Delay
      Payments shall bear interest at the rate of 1.5% per month (prorated for partial
      months) until paid in full.




4




3.  Related
      Obligations .




At
      such
      time as the Company is obligated to file a Registration Statement with the
      SEC
      pursuant to Section
      2(a) , 2(d) ,
      or 2(e) ,
      the
      Company will use its commercially reasonable best efforts to effect the
      registration of the Registrable Securities in accordance with the intended
      method of disposition thereof and, pursuant thereto, the Company shall have
      the
      following obligations:




(a)  The
      Company shall promptly prepare and file with the SEC a Registration Statement
      with respect to the Registrable Securities and use its commercially reasonable
      best efforts to cause such Registration Statement relating to the Registrable
      Securities to become effective as soon as practicable after such filing (but
      in
      no event later than the Effectiveness Deadline). The Company shall keep each
      Registration Statement effective pursuant to Rule 415 at all times until the
      earlier of (i) the date as of which the Investors may sell all of the
      Registrable Securities covered by such Registration Statement without
      restriction pursuant to Rule 144(k) (or any successor thereto) promulgated
      under
      the 1933 Act or (ii) the date on which the Investors shall have sold all of
      the
      Registrable Securities covered by such Registration Statement (the “ **Registration
      Period** ”).
      The
      Company shall ensure that each Registration Statement (including any amendments
      or supplements thereto and prospectuses contained therein) shall not contain
      any
      untrue statement of a material fact or omit to state a material fact required
      to
      be stated therein, or necessary to make the statements therein (in the case
      of
      prospectuses, in the light of the circumstances in which they were made) not
      misleading. The term “commercially reasonable best efforts” shall mean, among
      other things, that the Company shall submit to the SEC, within two (2) Business
      Days after the later of the date that (i) the Company learns that no review
      of a
      particular Registration Statement will be made by the staff of the SEC or that
      the staff has no further comments on a particular Registration Statement, as
      the
      case may be, and (ii) the approval of Investor Legal Counsel pursuant to Section
      3(c) (which
      approval is immediately sought), a request for acceleration of effectiveness
      of
      such Registration Statement to a time and date not later than two (2) Business
      Days after the submission of such request. The Company shall respond in writing
      to comments made by the SEC in respect of a Registration Statement as soon
      as
      practicable after the receipt of comments by or notice from the SEC that an
      amendment is required in order for a Registration Statement to be declared
      effective.




(b)  The
      Company shall prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to a Registration Statement and
      the
      prospectus used in connection with such Registration Statement, which prospectus
      is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
      be
      necessary to keep such Registration Statement effective at all times during
      the
      Registration Period, and, during such period, comply with the provisions of
      the
      1933 Act with respect to the disposition of all Registrable Securities of the
      Company covered by such Registration Statement until such time as all of such
      Registrable Securities shall have been disposed of in accordance with the
      intended methods of disposition by the seller or sellers thereof as set forth
      in
      such Registration Statement. In the case of amendments and supplements to a
      Registration Statement which are required to be filed pursuant to this Agreement
      (including pursuant to this Section
      3(b) )
      by
      reason of the Company filing a report on Form 10-Q, Form 10-K or any analogous
      report under the Securities Exchange Act of 1934, as amended (the “ **1934
      Act** ”),
      the
      Company shall have incorporated such report by reference into such Registration
      Statement, if applicable, or shall file such amendments or supplements with
      the
      SEC on the same day on which the 1934 Act report is filed which created the
      requirement for the Company to amend or supplement such Registration
      Statement.




5




(c)  The
      Company shall (i) permit Investor Legal Counsel to review and comment upon
      (A) a
      Registration Statement at least five Business Days prior to its filing with
      the
      SEC and (B) all amendments and supplements to all Registration Statements
      (except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
      Reports on Form 8-K, and any similar or successor reports) within a reasonable
      number of days prior to their filing with the SEC, and (ii) not file any
      Registration Statement or amendment or supplement thereto in a form to which
      Investor Legal Counsel reasonably objects. The Company shall not submit a
      request for acceleration of the effectiveness of a Registration Statement or
      any
      amendment or supplement thereto without the prior approval of Investor Legal
      Counsel, which consent shall not be unreasonably withheld. The Company shall
      furnish to Investor Legal Counsel, without charge, (I) copies of any
      correspondence from the SEC or the staff of the SEC to the Company or its
      representatives relating to any Registration Statement, (II) promptly after
      the
      same is prepared and filed with the SEC, one copy of any Registration Statement
      and any amendment(s) thereto, including financial statements and schedules,
      all
      documents incorporated therein by reference, if requested by an Investor, and
      all exhibits and (III) upon the effectiveness of any Registration Statement,
      one
      copy of the prospectus included in such Registration Statement and all
      amendments and supplements thereto. The Company shall reasonably cooperate
      with
      Investor Legal Counsel in performing the Company’s obligations pursuant to this Section
      3 .




(d)  The
      Company shall furnish to each Investor whose Registrable Securities are included
      in any Registration Statement, without charge, (i) promptly after the same
      is
      prepared and filed with the SEC, at least one copy of such Registration
      Statement and any amendment(s) thereto, including financial statements and
      schedules, all documents incorporated therein by reference, if requested by
      an
      Investor, all exhibits and each preliminary prospectus, (ii) upon the
      effectiveness of any Registration Statement, ten (10) copies of the prospectus
      included in such Registration Statement and all amendments and supplements
      thereto (or such other number of copies as such Investor may reasonably request)
      and (iii) such other documents, including copies of any preliminary or final
      prospectus, as such Investor may reasonably request from time to time in order
      to facilitate the disposition of the Registrable Securities owned by such
      Investor.




(e)  The
      Company shall use its commercially reasonable best efforts to (i) register
      and
      qualify, unless an exemption from registration and qualification applies, the
      resale by Investors of the Registrable Securities covered by a Registration
      Statement under such other securities or “blue sky” laws of all reasonably
      requested jurisdictions in the United States, (ii) prepare and file in those
      jurisdictions, such amendments (including post-effective amendments) and
      supplements to such registrations and qualifications as may be necessary to
      maintain the effectiveness thereof during the Registration Period, (iii) take
      such other actions as may be necessary to maintain such registrations and
      qualifications in effect at all times during the Registration Period, and (iv)
      take all other actions reasonably necessary or advisable to qualify the
      Registrable Securities for sale in such jurisdictions; provided , however ,
      that
      the Company shall not be required in connection therewith or as a condition
      thereto to (A) qualify to do business in any jurisdiction where it would not
      otherwise be required to qualify but for this Section
      3(e) ,
      (B)
      subject itself to general taxation in any such jurisdiction, or (C) file a
      general consent to service of process in any such jurisdiction. The Company
      shall promptly notify Investor Legal Counsel and each Investor who holds
      Registrable Securities of the receipt by the Company of any notification with
      respect to the suspension of the registration or qualification of any of the
      Registrable Securities for sale under the securities or “blue sky” laws of any
      jurisdiction in the United States or its receipt of actual notice of the
      initiation or threatening of any proceeding for such purpose.




6




(f)  The
      Company shall notify Investor Legal Counsel and each Investor in writing of
      the
      happening of any event, as promptly as practicable after becoming aware of
      such
      event, as a result of which the prospectus included in a Registration Statement,
      as then in effect, includes an untrue statement of a material fact or omission
      to state a material fact required to be stated therein or necessary to make
      the
      statements therein, in the light of the circumstances under which they were
      made, not misleading ( provided that in
      no event shall such notice contain any material, nonpublic information), and,
      subject to Section
      3(r) ,
      promptly prepare a supplement or amendment to such Registration Statement to
      correct such untrue statement or omission and deliver ten (10) copies of such
      supplement or amendment to Investor Legal Counsel and each Investor (or such
      other number of copies as Investor Legal Counsel or such Investor may reasonably
      request). The Company shall also promptly notify Investor Legal Counsel and
      each
      Investor in writing (i) when a prospectus or any prospectus supplement or
      post-effective amendment has been filed, and when a Registration Statement
      or
      any post-effective amendment has become effective (notification of such
      effectiveness shall be delivered to Investor Legal Counsel and each Investor
      by
      facsimile or e-mail on the same day of such effectiveness and by overnight
      mail), (ii) of any request by the SEC for amendments or supplements to a
      Registration Statement or related prospectus or related information, and (iii)
      of the Company’s reasonable determination that a post-effective amendment to a
      Registration Statement would be appropriate.




(g)  The
      Company shall use its commercially reasonable best efforts to prevent the
      issuance of any stop order or other suspension of effectiveness of a
      Registration Statement, or the suspension of the qualification of any of the
      Registrable Securities for sale in any jurisdiction and, if such an order or
      suspension is issued, to obtain the withdrawal of such order or suspension
      at
      the earliest possible moment and to notify Investor Legal Counsel and each
      Investor who holds Registrable Securities being sold of the issuance of such
      order and the resolution thereof or its receipt of actual notice of the
      initiation or threat of any proceeding for such purpose.




(h)  If
      any
      Investor is required under applicable securities laws to be described in the
      Registration Statement as an underwriter or
      an
      Investor believes that it could reasonably be deemed to be an underwriter of
      Registrable Securities ,
      at the
      reasonable request of such Investor, the Company shall furnish to such Investor,
      on the date of the effectiveness of the Registration Statement and thereafter
      from time to time on such dates as an Investor may reasonably request (i) a
      letter, dated such date, from the Company’s independent certified public
      accountants in form and substance as is customarily given by independent
      certified public accountants to underwriters in an underwritten public offering,
      addressed to the Investors, and (ii) an opinion, dated as of such date, of
      counsel representing the Company for purposes of such Registration Statement,
      in
      form, scope and substance as is customarily given in an underwritten public
      offering, addressed to the Investors.




7




(i)  If
      any
      Investor is required under applicable securities laws to be described in the
      Registration Statement as an underwriter or an Investor believes that it could
      reasonably be deemed to be an underwriter of Registrable Securities, the Company
      shall make available for inspection by (i) such Investor, (ii) Investor Legal
      Counsel and (iii) one firm of accountants or other agents retained by the
      Investors (collectively, the “ **Inspectors** ”),
      all
      pertinent financial and other records, and pertinent corporate documents and
      properties of the Company (collectively, the “ **Records** ”),
      as
      shall be reasonably deemed necessary by each Inspector, and cause the Company’s
      officers, directors and employees to supply all information which any Inspector
      may reasonably request; provided , however ,
      that
      each Inspector shall agree to hold in strict confidence and shall not make
      any
      disclosure (except to an Investor) or use of any Record or other information
      which the Company determines in good faith to be confidential, and of which
      determination the Inspectors are so notified, unless (A) the disclosure of
      such
      Records is necessary to avoid or correct a misstatement or omission in any
      Registration Statement or is otherwise required under the 1933 Act, (B) the
      release of such Records is ordered pursuant to a final, non-appealable subpoena
      or order from a court or government body of competent jurisdiction, or (C)
      the
      particular information in such Record has been made generally available to
      the
      public other than by disclosure in violation of this Agreement. Each Investor
      agrees that it shall, upon learning that disclosure of such Records is sought
      in
      or by a court or governmental body of competent jurisdiction or through other
      means, give prompt notice to the Company and allow the Company, at its expense,
      to undertake appropriate action to prevent disclosure of, or to obtain a
      protective order for, the Records deemed confidential. Nothing herein (or in
      any
      other confidentiality agreement between the Company and any Investor) shall
      be
      deemed to limit the Investors’ ability to sell Registrable Securities in a
      manner which is otherwise consistent with applicable laws and
      regulations.




(j)  The
      Company shall hold in confidence and not make any disclosure of information
      concerning an Investor provided to the Company unless (i) disclosure of such
      information is necessary to comply with federal or state securities laws, (ii)
      the disclosure of such information is necessary to avoid or correct a
      misstatement or omission in any Registration Statement, (iii) the release of
      such information is ordered pursuant to a subpoena or other final,
      non-appealable order from a court or governmental body of competent
      jurisdiction, or (iv) such information has been made generally available to
      the
      public other than by disclosure in violation of this Agreement or any other
      agreement. The Company agrees that it shall, upon learning that disclosure
      of
      such information concerning an Investor is sought in or by a court or
      governmental body of competent jurisdiction or through other means, give prompt
      written notice to such Investor and allow such Investor, at the Investor’s
      expense, to undertake appropriate action to prevent disclosure of, or to obtain
      a protective order for, such information.




(k)  The
      Company shall use its commercially reasonable best efforts either to (i) cause
      all of the Registrable Securities covered by a Registration Statement to be
      listed on each securities exchange on which securities of the same class or
      series issued by the Company are then listed, if any, if the listing of such
      Registrable Securities is then permitted under the rules of such exchange or
      (ii) secure the inclusion for quotation of all of the Registrable Securities
      on
      The NASDAQ Global Select Market or (iii) if, despite the Company’s commercially
      reasonable best efforts, the Company is unsuccessful in satisfying the preceding
      clauses (i) and (ii), to secure the inclusion for quotation on The New York
      Stock Exchange, The NASDAQ Capital Market or the American Stock Exchange for
      such Registrable Securities and, without limiting the generality of the
      foregoing, to use its commercially reasonable best efforts to arrange for at
      least two market makers to register with the Financial Industry Regulatory
      Authority (“ **FINRA** ”)
      as
      such with respect to such Registrable Securities. The Company shall pay all
      fees
      and expenses in connection with satisfying its obligation under this Section
      3(k) .
      For
      avoidance of doubt, this Section
      3(k) shall
      not apply to the Notes and Warrants themselves.




8




(l)  The
      Company shall cooperate with the Investors who hold Registrable Securities
      being
      offered and, to the extent applicable and consistent with securities laws,
      facilitate the timely preparation and delivery of certificates not bearing
      any
      restrictive legend representing the Registrable Securities to be offered
      pursuant to a Registration Statement and enable such certificates to be in
      such
      denominations or amounts, as the case may be, as the Investors may reasonably
      request and registered in such names as the Investors may request.




(m)  If
      requested by an Investor, the Company shall as soon as practicable (i)
      incorporate in a prospectus supplement or post-effective amendment such
      information as an Investor reasonably requests to be included therein relating
      to the sale and distribution of Registrable Securities, including, without
      limitation, information with respect to the number of Registrable Securities
      being offered or sold, the purchase price being paid therefor and any other
      terms of the offering of the Registrable Securities to be sold in such offering;
      (ii) make all required filings of such prospectus supplement or post-effective
      amendment after being notified of the matters to be incorporated in such
      prospectus supplement or post-effective amendment; and (iii) supplement or
      make
      amendments to any Registration Statement if reasonably requested by an Investor
      holding any Registrable Securities.




(n)  The
      Company shall use its commercially reasonable best efforts to cause the
      Registrable Securities covered by a Registration Statement to be registered
      with
      or approved by such other governmental agencies or authorities as may be
      necessary to consummate the disposition of such Registrable Securities; provided , however ,
      that
      this Section
      3(n) shall
      not apply to the Notes and Warrants themselves unless the Investors who propose
      to participate in such disposition pay the entire cost (including without
      limitation the Company’s reasonable attorneys fees) thereof, shared pro rata as
      among such Investors who propose to participate in such
      disposition.




(o)  The
      Company shall make generally available to its security holders as soon as
      practical, but not later than ninety (90) days after the close of the period
      covered thereby, an earnings statement (in form complying with, and in the
      manner provided by, the provisions of Rule 158 under the 1933 Act) covering
      a
      twelve-month period beginning not later than the first day of the Company’s
      fiscal quarter next following the applicable Effective Date of a Registration
      Statement.




(p)  The
      Company shall otherwise use its commercially reasonable best efforts to comply
      with all applicable rules and regulations of the SEC in connection with any
      registration hereunder.




9




(q)  Within
      two (2) Business Days after a Registration Statement which covers Registrable
      Securities is ordered effective by the SEC, the Company shall deliver, and
      shall
      cause legal counsel for the Company to deliver, to the transfer agent for such
      Registrable Securities (with copies to the Investors whose Registrable
      Securities are included in such Registration Statement) confirmation that such
      Registration Statement has been declared effective by the SEC in the form
      attached hereto as Exhibit
      B .




(r)  Notwithstanding
      anything to the contrary herein, at any time after the Effective Date, the
      Company may delay the disclosure of material, non-public information concerning
      the Company the disclosure of which at the time is not, in the good faith
      opinion of the Board of Directors of the Company and its counsel, in the best
      interest of the Company and, in the opinion of counsel to the Company, otherwise
      required (a “ **Grace
      Period** ”);
      provided, that the Company shall promptly (i) notify the Investors in writing
      of
      the existence of material, non-public information giving rise to a Grace Period
      ( provided that in
      each notice the Company will not disclose the content of such material,
      non-public information to the Investors) and the date on which the Grace Period
      will begin, and (ii) notify the Investors in writing of the date on which
      the Grace Period ends; and, provided further, that no Grace Period shall exceed
      20 consecutive days and during any three hundred sixty five (365) day period
      such Grace Periods shall not exceed an aggregate of 40 days and the first day
      of
      any Grace Period must be at least five (5) Trading Days after the last day
      of
      any prior Grace Period (each, an “ **Allowable
      Grace Period** ”).
      For
      purposes of determining the length of a Grace Period above, the Grace Period
      shall begin on and include the date the Investors receive the notice referred
      to
      in clause (i) and shall end on and include the later of the date the Investors
      receive the notice referred to in clause (ii) and the date referred to in such
      notice. The provisions of Section
      3(g) hereof
      shall not be applicable during the period of any Allowable Grace Period. Upon
      expiration of the Grace Period, the Company shall again be bound by the first
      sentence of Section
      3(f) with
      respect to the information giving rise thereto unless such material, non-public
      information is no longer applicable. Notwithstanding anything to the contrary,
      the Company shall cause its transfer agent to deliver unlegended shares of
      Common Stock to a transferee of an Investor in accordance with the terms of
      the
      Securities Purchase Agreement in connection with any sale of Registrable
      Securities with respect to which an Investor has entered into a contract for
      sale, prior to the Investor’s receipt of the notice of a Grace Period and for
      which the Investor has not yet settled, if such sale would otherwise have
      justified the delivery of unlegended shares.




(s)  Neither
      the Company nor any Subsidiary or affiliate thereof shall identify any Buyer
      as
      an underwriter in any public disclosure or filing with the SEC or any Principal
      Market (as
      defined in the Securities Purchase Agreement) or
      Eligible Market and any Buyer being deemed an underwriter by the SEC shall
      not
      relieve the Company of any obligations it has under this Agreement or any other
      Transaction Document (as
      defined in the Securities Purchase Agreement); provided , however ,
      that
      the foregoing shall not prohibit the Company from including the disclosure
      found
      in the “Plan of Distribution” section attached hereto as Exhibit
      A in the
      Registration Statement .




4.  Obligations
      of the Investors .




(a)  At
      least
      five (5) Business Days prior to the first anticipated filing date of a
      Registration Statement, the Company shall notify each Investor in writing of
      the
      information the Company requires from each such Investor if such Investor elects
      to have any of such Investor’s Registrable Securities included in such
      Registration Statement. It shall be a condition precedent to the obligations
      of
      the Company to complete the registration pursuant to this Agreement with respect
      to the Registrable Securities of a particular Investor that such Investor shall
      furnish to the Company such information regarding itself, the Registrable
      Securities held by it and the intended method of disposition of the Registrable
      Securities held by it, as shall be reasonably required to effect and maintain
      the effectiveness of the registration of such Registrable Securities and shall
      execute such documents in connection with such registration as the Company
      may
      reasonably request.




10




(b)  Each
      Investor, by such Investor’s acceptance of the Registrable Securities, agrees to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of any Registration Statement hereunder, unless
      such Investor has notified the Company in writing of such Investor’s election to
      exclude all of such Investor’s Registrable Securities from such Registration
      Statement.




(c)  Each
      Investor agrees that, upon receipt of any notice from the Company of the
      happening of any event of the kind described in Section
      3(g) or the
      first sentence of 3(f) ,
      such
      Investor will immediately discontinue disposition of Registrable Securities
      pursuant to any Registration Statement(s) covering such Registrable Securities
      until such Investor’s receipt of the copies of the supplemented or amended
      prospectus contemplated by Section
      3(g) or the
      first sentence of Section
      3(f )
      or
      receipt of notice that no supplement or amendment is required. Notwithstanding
      anything to the contrary, the Company shall cause its transfer agent to deliver
      unlegended shares of Common Stock to a transferee of an Investor in accordance
      with securities laws and the terms of the Securities Purchase Agreement in
      connection with any sale of Registrable Securities with respect to which an
      Investor has entered into a contract for sale prior to the Investor’s receipt of
      a notice from the Company of the happening of any event of the kind described
      in Section
      3(g) or the
      first sentence of Section
      3(f) and for
      which the Investor has not yet settled.




(d)  Each
      Investor covenants and agrees that it (i) will not sell any Registrable
      Securities except pursuant to the Registration Statement or an available
      exemption from 1933 Act registration, (ii) will comply with the prospectus
      delivery requirements of the 1933 Act as applicable to it or an exemption
      therefrom in connection with sales of Registrable Securities pursuant to the Registration Statement, and (iii) will not use any
      oral or written prospectus other than the official prospectus in connection
      with
      any such sales.




5.  Expenses
      of Registration .




All
      reasonable expenses, other than underwriting discounts and commissions, incurred
      in connection with registrations, filings or qualifications pursuant to Sections
      2 and 3 ,
      including, without limitation, all registration, listing and qualifications
      fees, printers and accounting fees, and fees and disbursements of counsel for
      the Company shall be paid by the Company. The Company shall also reimburse
      the
      Investors for the fees and disbursements of Investor Legal Counsel up to a
      cumulative $20,000 cap in connection with registration, filing or qualification
      pursuant to Sections
      2 and 3 of this
      Agreement.




11




6.  Indemnification .




In
      the
      event any Registrable Securities are included in a Registration Statement under
      this Agreement:




(a)  To
      the
      fullest extent permitted by law, the Company will, and hereby does, indemnify,
      hold harmless and defend each Investor, the directors, officers, members,
      partners, employees, agents, representatives of, and each Person, if any, who
      controls any Investor within the meaning of the 1933 Act or the 1934 Act (each,
      an “ **Indemnified
      Person** ”),
      against any losses, claims, damages, liabilities, judgments, fines, penalties,
      charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
      expenses, joint or several, (collectively, “ **Claims** ”)
      incurred in investigating, preparing or defending any action, claim, suit,
      inquiry, proceeding, investigation or appeal taken from the foregoing by or
      before any court or governmental, administrative or other regulatory agency,
      body or the SEC, whether pending or threatened, whether or not an indemnified
      party is or may be a party thereto (“ **Indemnified
      Damages** ”),
      to
      which any of them may become subject insofar as such Claims (or actions or
      proceedings, whether commenced or threatened, in respect thereof) arise out
      of
      or are based upon: (i) any untrue statement or alleged untrue statement of
      a
      material fact in a Registration Statement or any post-effective amendment
      thereto or in any filing made by the Company in connection with the
      qualification of the offering under the securities or other “blue sky” laws of
      any jurisdiction in which Registrable Securities are offered (“ **Blue
      Sky Filing** ”),
      or
      the omission or alleged omission to state a material fact required to be stated
      therein or necessary to make the statements therein not misleading, (ii) any
      untrue statement or alleged untrue statement of a material fact contained in
      the
      final prospectus (as amended or supplemented, if the Company files any amendment
      thereof or supplement thereto with the SEC) or the omission or alleged omission
      to state therein any material fact necessary to make the statements made
      therein, in light of the circumstances under which the statements therein were
      made, not misleading, (iii) any violation or alleged violation by the Company
      of
      the 1933 Act, the 1934 Act, any other law, including, without limitation, any
      state securities law, or any rule or regulation thereunder relating to the
      offer
      or sale of the Registrable Securities pursuant to a Registration Statement
      or
      (iv) any violation of this Agreement (the matters in the foregoing clauses
      (i)
      through (iv) being, collectively, “ **Violations** ”).
      Subject to Section
      6(c ),
      the
      Company shall reimburse the Indemnified Persons, promptly as such expenses
      are
      incurred and are due and payable, for any legal fees or other reasonable
      expenses incurred by them in connection with investigating or defending any
      such
      Claim. Notwithstanding anything to the contrary contained herein, the
      indemnification agreement contained in this Section
      6(a) :
      (A) shall not apply to a Claim by an Indemnified Person arising out of or
      based upon (i) a Violation which occurs in reliance upon and in conformity
      with
      information furnished in writing to the Company by such Indemnified Person
      for
      such Indemnified Person expressly for use in connection with the preparation
      of
      the Registration Statement or any such amendment thereof or supplement thereto,
      if such prospectus was timely made available by the Company pursuant to Section
      3(d) or (ii)
      failure to deliver the official prospectus as required or use of an unofficial
      oral or written prospectus; and (B) shall not apply to amounts paid in
      settlement of any Claim if such settlement is effected without the prior written
      consent of the Company, which consent shall not be unreasonably withheld or
      delayed. Such indemnity shall remain in full force and effect regardless of
      any
      investigation made by or on behalf of the Indemnified Person and shall survive
      the transfer of the Registrable Securities by the Investors pursuant to Section
      9 .




12




(b)  In
      connection with any Registration Statement in which an Investor is
      participating, each such Investor agrees to severally and not jointly indemnify,
      hold harmless and defend, to the same extent and in the same manner as is set
      forth in Section
      6(a) ,
      the
      Company, each of its directors, each of its officers who signs the Registration
      Statement and each Person, if any, who controls the Company within the meaning
      of the 1933 Act or the 1934 Act (each, an “ **Indemnified
      Party** ”),
      against any Claim or Indemnified Damages to which any of them may become
      subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
      or
      Indemnified Damages arise out of or are based upon (i) any Violation, in each
      case to the extent, and only to the extent, that such Violation occurs in
      reliance upon and in conformity with written information furnished to the
      Company by such Investor expressly for use in connection with such Registration
      Statement or (ii) failure to deliver the official prospectus as required or
      use
      of an unofficial oral or written prospectus; and, subject to Section
      6(c) ,
      such
      Investor shall reimburse the Indemnified Party, promptly as such expenses are
      incurred and are due and payable, for any legal or other expenses reasonably
      incurred by an Indemnified Party in connection with investigating or defending
      any such Claim; provided , however ,
      that
      the indemnity agreement contained in this Section
      6(b) and the
      agreement with respect to contribution contained in Section
      7 shall
      not apply to amounts paid in settlement of any Claim if such settlement is
      effected without the prior written consent of such Investor, which consent
      shall
      not be unreasonably withheld or delayed; provided , further , however ,
      that
      the Investor shall be liable under this Section
      6(b) for only
      that amount of a Claim or Indemnified Damages as does not exceed the net
      proceeds to such Investor as a result of the sale of Registrable Securities
      pursuant to such Registration Statement. Such indemnity shall remain in full
      force and effect regardless of any investigation made by or on behalf of such
      Indemnified Party and shall survive the transfer of the Registrable Securities
      by the Investors pursuant to Section
      9 .




(c)  Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section 6
      of
      notice of the commencement of any action or proceeding (including any
      governmental action or proceeding) involving a Claim, such Indemnified Person
      or
      Indemnified Party shall, if a Claim in respect thereof is to be made against
      any
      indemnifying party under this Section
      6 ,
      deliver
      to the indemnifying party a written notice of the commencement thereof, and
      the
      indemnifying party shall have the right to participate in, and, to the extent
      the indemnifying party so desires, jointly with any other indemnifying party
      similarly noticed, to assume control of the defense thereof with counsel
      selected by the indemnifying party and reasonably acceptable to the Indemnified
      Person or the Indemnified Party, as the case may be; provided , however ,
      that an
      Indemnified Person or Indemnified Party shall have the right to retain its
      own
      counsel with the fees and expenses of not more than one counsel for all such
      Indemnified Persons or Indemnified Parties to be paid by the indemnifying party,
      if, in the reasonable opinion of counsel retained by the indemnifying party,
      the
      representation by such counsel of the Indemnified Person or Indemnified Party
      and the indemnifying party would be inappropriate due to actual or potential
      differing interests between such Indemnified Person or Indemnified Party and
      any
      other party represented by such counsel in such proceeding. In the case of
      an
      Indemnified Person, legal counsel referred to in the immediately preceding
      sentence shall be selected by the Investors holding at least a
      majority **** in
      interest of the Registrable Securities included in the Registration Statement
      to
      which the Claim relates. The Indemnified Party or Indemnified Person shall
      cooperate reasonably with the indemnifying party in connection with any
      negotiation or defense of any such action or Claim by the indemnifying party
      and
      shall furnish to the indemnifying party all information reasonably available
      to
      the Indemnified Party or Indemnified Person which relates to such action or
      Claim. The indemnifying party shall keep the Indemnified Party or Indemnified
      Person fully apprised at all times as to the status of the defense or any
      settlement negotiations with respect thereto. No indemnifying party shall be
      liable for any settlement of any action, claim or proceeding effected without
      its prior written consent, provided , however ,
      that
      the indemnifying party shall not unreasonably withhold, delay or condition
      its
      consent. No indemnifying party shall, without the prior written consent of
      the
      Indemnified Party or Indemnified Person, consent to entry of any judgment or
      enter into any settlement or other compromise which does not include as an
      unconditional term thereof the giving by the claimant or plaintiff to such
      Indemnified Party or Indemnified Person of a release from all liability in
      respect to such Claim or litigation, and such settlement shall not include
      any
      admission as to fault on the part of the Indemnified Party or the Indemnified
      Person or require the Indemnified Party or Indemnified Person to do anything
      or
      to not do anything. Following indemnification as provided for hereunder, the
      indemnifying party shall be subrogated to all rights of the Indemnified Party
      or
      Indemnified Person with respect to all third parties, firms or corporations
      relating to the matter for which indemnification has been made. The failure
      to
      deliver written notice to the indemnifying party within a reasonable time of
      the
      commencement of any such action shall not relieve such indemnifying party of
      any
      liability to the Indemnified Person or Indemnified Party under this Section
      6 ,
      except
      to the extent that the indemnifying party is prejudiced in its ability to defend
      such action.




13




(d)  The
      indemnification required by this Section
      6 shall be
      made by periodic payments of the amount thereof during the course of the
      investigation or defense, as and when bills are received or Indemnified Damages
      are incurred.




(e)  The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of
      action or similar right of the Indemnified Party or Indemnified Person against
      the indemnifying party or others, and (ii) any liabilities the indemnifying
      party may be subject to pursuant to the law.




7.  Contribution .




To
      the
      extent any indemnification by an indemnifying party is prohibited or limited
      by
      law, the indemnifying party agrees to make the maximum contribution with respect
      to any amounts for which it would otherwise be liable under Section
      6 to the
      fullest extent permitted by law; provided , however ,
      that:
      (i) no Person involved in the sale of Registrable Securities which Person is
      guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
      of
      the 1933 Act) in connection with such sale shall be entitled to contribution
      from any Person involved in such sale of Registrable Securities who was not
      guilty of fraudulent misrepresentation; and (ii) contribution by any seller
      of
      Registrable Securities shall be limited in amount to the amount of net proceeds
      received by such seller from the sale of such Registrable Securities pursuant
      to
      such Registration Statement.




8.  Reports
      Under the 1934 Act .




With
      a
      view to making available to the Investors the benefits of Rule 144 promulgated
      under the 1933 Act or any other similar rule or regulation of the SEC that
      may
      at any time permit the Investors to sell securities of the Company to the public
      without registration (“ **Rule
      144** ”),
      the
      Company agrees to:




(a)  make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144;




14




(b)  file
      with
      the SEC in a timely manner all reports and other documents required of the
      Company under the 1933 Act and the 1934 Act so long as the Company remains
      subject to such requirements and the filing of such reports and other documents
      is required for the applicable provisions of Rule 144; and




(c)  furnish
      to each Investor so long as such Investor owns Registrable Securities, promptly
      upon request, (i) a written statement by the Company, if true, that it has
      complied with the reporting requirements of Rule 144, the 1933 Act and the
      1934
      Act, (ii) a copy of the most recent annual or quarterly report of the Company
      and such other reports and documents so filed by the Company, and (iii) such
      other information as may be reasonably requested to permit the Investors to
      sell
      such securities pursuant to Rule 144 without registration.




9.  Assignment
      of Registration Rights .




The
      rights under this Agreement shall be automatically assignable by the Investors
      to any transferee of Registrable Securities of such Investor constituting or
      overlying at least 100,000 shares of Common Stock if: (i) the Investor agrees
      in
      writing with the transferee or assignee to assign such rights, and a copy of
      such agreement is furnished to the Company within a reasonable time after such
      assignment; (ii) the Company is, within a reasonable time after such transfer
      or
      assignment, furnished with written notice of (a) the name and address of such
      transferee or assignee, and (b) the securities with respect to which such
      registration rights are being transferred or assigned; (iii) immediately
      following such transfer or assignment the further disposition of such securities
      by the transferee or assignee is restricted under the 1933 Act or applicable
      state securities laws; (iv) at or before the time the Company receives the
      written notice contemplated by clause (ii) of this sentence the transferee
      or
      assignee agrees in writing with the Company to be bound by all of the provisions
      contained herein; and (v) such transfer shall have been made in accordance
      with
      the applicable requirements of the Securities Purchase Agreement.




10.  Amendment
      of Registration Rights .




Provisions
      of this Agreement may be amended and the observance thereof may be waived
      (either generally or in a particular instance and either retroactively or
      prospectively), only with the written consent of the Company and the holders
      of
      a majority of the Common Stock constituting or underlying Registrable
      Securities. Any amendment or waiver effected in accordance with this Section
      10 shall be
      binding upon each Investor and the Company. No such amendment shall be effective
      to the extent that it applies to less than all of the holders of the Registrable
      Securities. No consideration shall be offered or paid to any Person to amend
      or
      consent to a waiver or modification of any provision of this Agreement unless
      the same consideration also is offered to all of the parties to this
      Agreement.




15




11.  Miscellaneous .




(a)  A
      Person
      is deemed to be a holder of Registrable Securities whenever such Person owns
      or
      is deemed to own of record such Registrable Securities. If the Company receives
      conflicting instructions, notices or elections from two or more Persons with
      respect to the same Registrable Securities, the Company shall act upon the
      basis
      of instructions, notice or election received from such record owner of such
      Registrable Securities.




(b)  Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one Business Day after deposit with an internationally recognized
      courier service, in each case properly addressed to the party to receive the
      same. The addresses and facsimile numbers for such communications shall
      be:




If
      to the
      Company:





China
      Automotive Systems, Inc.


No.
      1
      Henglong Road


Yu
      Giao
      Development Zone


Shashi
      District, Jing Zhou City


Hubei
      Province, People’s Republic of China


Facsimile:  (86)
      27-5980-8808


Attention:  Hanlin
      Chen





With
      a
      copy (for informational purposes only) to:




Heller
      Ehrman LLP


4350
      La
      Jolla Village Drive


Seventh
      Floor


San
      Diego, CA 92122


Facsimile: ****  (858)
      587-5903


Attention: ****  Hayden
      J.
      Trubitt





If
      to the
      Transfer Agent:




Securities
      Transfer Corporation


2591
      Dallas Parkway #102


Frisco,
      TX 75034


Facsimile:  (469)
      633-0088


Attention:  George
      Johnson




16





If
      to
      Investor Legal Counsel:




Goodwin Procter LLP


53 State Street


Boston, MA 02109


Facsimile: (617)
      523-1231


Attention: Jocelyn
      M. Arel


James A. Hutchinson





If
      to a
      Buyer, to its address and facsimile number set forth on the Schedule of Buyers
      attached hereto, with copies (for informational purposes only) to such Buyer’s
      representatives as set forth on the Schedule of Buyers, or to such other address
      and/or facsimile number and/or to the attention of such other Person as the
      recipient party has specified by written notice given to each other party five
      (5) days prior to the effectiveness of such change. Written confirmation of
      receipt (A) given by the recipient of such notice, consent, waiver or other
      communication, (B) mechanically or electronically generated by the sender’s
      facsimile machine containing the time, date, recipient facsimile number and
      an
      image of the first page of such transmission or (C) provided by an
      internationally recognized courier service shall be rebuttable evidence of
      personal service, receipt by facsimile or receipt from an internationally
      recognized courier service in accordance with clause (i), (ii) or (iii) above,
      respectively.




(c)  Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.




(d)  All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of New
      York, without giving effect to any choice of law or conflict of law provision
      or
      rule (whether of the State of New York or any other jurisdictions) that would
      cause the application of the laws of any jurisdictions other than the State
      of
      New York. Each party hereby irrevocably submits to the exclusive jurisdiction
      of
      the state and federal courts sitting in The City of New York, Borough of
      Manhattan, for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein, and
      hereby irrevocably waives, and agrees not to assert in any suit, action or
      proceeding, any claim that it is not personally subject to the jurisdiction
      of
      any such court, that such suit, action or proceeding is brought in an
      inconvenient forum or that the venue of such suit, action or proceeding is
      improper. Each party hereby irrevocably waives personal service of process
      and
      consents to process being served in any such suit, action or proceeding by
      mailing a copy thereof to such party at the address for such notices to it
      under
      this Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof. Nothing contained herein shall be deemed
      to limit in any way any right to serve process in any manner permitted by law.
      If any provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement in that jurisdiction or
      the
      validity or enforceability of any provision of this Agreement in any other
      jurisdiction. **EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
      CONTEMPLATED HEREBY.**




17




(e)  This
      Agreement, the other Transaction Documents (as defined in the Securities
      Purchase Agreement) and the instruments referenced herein and therein constitute
      the entire agreement among the parties hereto with respect to the subject matter
      hereof and thereof. There are no restrictions, promises, warranties or
      undertakings, other than those set forth or referred to herein and therein.
      This
      Agreement, the other Transaction Documents and the instruments referenced herein
      and therein supersede all prior agreements and understandings among the parties
      hereto with respect to the subject matter hereof and thereof, other than
      pursuant to the agreements set forth on Schedule
      I attached
      hereto.




(f)  Subject
      to the requirements of Section
      9 ,
      this
      Agreement shall inure to the benefit of and be binding upon the permitted
      successors and assigns of each of the parties hereto.




(g)  The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.




(h)  This
      Agreement may be executed in identical counterparts, each of which shall be
      deemed an original but all of which shall constitute one and the same agreement.
      This Agreement, once executed by a party, may be delivered to the other party
      hereto by facsimile transmission of a copy of this Agreement bearing the
      signature of the party so delivering this Agreement.




(i)  Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents as any other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.




(j)  The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent and no rules of strict construction
      will
      be applied against any party.




(k)  This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.




(l)  The
      obligations of each Investor hereunder are several and not joint with the
      obligations of any other Investor, and no provision of this Agreement is
      intended to confer any obligations on any Investor vis-à-vis any other Investor.
      Nothing contained herein, and no action taken by any Investor pursuant hereto,
      shall be deemed to constitute the Investors as a partnership, an association,
      a
      joint venture or any other kind of entity, or create a presumption that the
      Investors are in any way acting in concert or as a group with respect to such
      obligations or the transactions contemplated herein.






[ *SIGNATURE
      PAGES FOLLOW* ]





18


**IN
      WITNESS WHEREOF** ,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.




**COMPANY:****CHINA
                AUTOMOTIVE SYSTEMS, INC.**By:/s/
                Hanlin Chan
              
              Name:  
                Hanlin Chan
              Title:     
                Chairman





*[Registration
        Rights Agreement Signature Page]*





**IN
      WITNESS WHEREOF** ,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.







**BUYERS:****LEHMAN
                BROTHERS COMMERCIAL CORPORATION ASIA LIMITED**By:/s/Steven
                J. Qian
              
              Name:  Steven
                J. Qian
              Title:   
                Senior Vice President**YA
                GLOBAL INVESTMENTS, L.P.**
              
              By:/s/
                Yorkville Advisors, LLC
              Investment Manager
              
              
              By:/s/
                Mark Angelo
              
              Name:
                Mark Angelo
              Title:  
                President and Portfolio Manager








*[Registration
        Rights Agreement Signature Page]*





SCHEDULE
      OF BUYERS





**Buyer**
            
            **Buyer
                Address**
              **and
                Facsimile Number**
            
            **Buyer’s
                Representative’s Address**
              **and
                Facsimile Number****Lehman
                Brothers Commercial Corporation Asia Limited**
            
            24F,
                Two International Finance Center
              8,
                Finance Street
              Central,
                Hong Kong
              +852-2372-5468
              Attn:
                Steven Qian
            
            Goodwin
                Procter LLP
              Exchange
                Place
              Boston,
                Massachusetts 02109
              Facsimile:
                (617) 525-1231
              Attention:
                Jocelyn M. Arel
              and
                James A. Hutchinson**YA
                Global Investments, L.P.**
            
            101
                Hudson Street
              Suite
                3700
              Jersey
                City, NJ 07302
              (201)
                985-8266
            
            David
                Gonzalez, Esq.
              101
                Hudson Street
              Suite
                3700
              Jersey
                City, NJ 07302
              (201)
                985-8266





1


**EXHIBIT
      A**





**SELLING
      SECURITYHOLDERS**




The
      shares of common stock being offered by the selling securityholders are issuable
      upon conversion of the convertible notes and warrants. For additional
      information regarding the issuance of those convertible notes and warrants,
      see
“Private Placement of Convertible Notes and Warrants” above. We are registering
      the convertible notes, warrants and shares of common stock in order to permit
      the selling securityholders to offer the convertible notes, warrants and shares
      for resale from time to time. Except for the ownership of the convertible notes
      and warrants issued pursuant to the Securities Purchase Agreement and in the
      case of YA Global Investments, L.P. (formerly known as Cornell Capital Partners,
      LP, “ **Cornell** ”)
      pursuant to the terms of that certain Standby Equity Distribution Agreement
      dated March 20, 2006 and the issuance of Common Stock and Warrants to Cornell
      for $5,000,000 pursuant to a Securities Purchase Agreement also dated on March
      20, 2006, the selling securityholders have not had any material relationship
      with us within the past three years.




The
      table
      below lists the selling securityholders and other information regarding the
      beneficial ownership of the convertible notes, warrants and shares of common
      stock by each of the selling securityholders. The second column lists the number
      of shares of common stock beneficially owned by each selling securityholder,
      based on its ownership of the convertible notes and warrants, as of ________,
      2008, assuming conversion of all convertible notes and exercise of all warrants
      held by the selling securityholders on that date, without regard to any
      limitations on conversions or exercises.




The
      fourth column lists the maximum aggregate principal amount of convertible notes
      to be sold pursuant to the prospectus.




The
      fifth
      column lists the maximum quantity of warrants, with size expressed by the number
      of shares underlying the warrants, to be sold pursuant to the
      prospectus.




The
      sixth
      column lists the shares of common stock being offered by this prospectus by
      the
      selling securityholders.




In
      accordance with the terms of a registration rights agreement with the selling
      securityholders, this prospectus generally covers the resale of the Notes and
      Warrants and 120% of the number of shares of common stock issuable upon
      conversion of the convertible notes and exercise of the warrants as of the
      Trading Day immediately preceding the date the registration statement is
      initially filed with the SEC. Because the conversion price of the convertible
      notes and the exercise price of the warrants may be adjusted, the number of
      shares that will actually be issued may be more or less than the number of
      shares being offered by this prospectus. The sixth and seventh columns assume
      the sale of all of the shares offered by the selling securityholders pursuant
      to
      this prospectus.




Under
      the
      terms of the convertible notes and warrants, a selling securityholder may not
      convert the convertible notes and (during certain time periods) exercise the
      warrants to the extent such conversion would cause such selling securityholder,
      together with its affiliates, to beneficially own a number of shares of common
      stock which would exceed 4.99% of our then outstanding shares of common stock
      following such conversion/exercise, excluding for purposes of such determination
      shares of common stock issuable upon conversion/exercise of the convertible
      notes and warrants which have not been converted/exercised. The number of shares
      in the second column does not reflect this limitation. The selling
      securityholders may sell all, some or none of their convertible notes, warrants
      and shares in this offering. See “Plan of Distribution.”




1




**Name
                of Selling Securityholder**
            
            **Number
                of Shares of Common Stock Beneficially Owned Prior to
                Offering**
            
            **Percentage
                of Class**
            
            **Maximum
                Aggregate Principal Amount of Convertible Notes to be Sold Pursuant
                to the
                Prospectus**
            
            **Maximum
                Number of Warrants to be Sold Pursuant to the
                Prospectus**
            
            **Maximum
                Number of Shares of Common Stock to be Sold Pursuant to the
                Prospectus**
            
            **Number
                of Shares of Common Stock Beneficially Owned After
                Offering**
            
            **Percentage
                of Class**Lehman
                Brothers Commercial Corporation Asia LimitedYA
                Global Investments, L.P.




(1)  **[NTD:
      Add description of the ultimate entities and individuals who have voting and
      investment discretion re: Lehman Brothers Commercial Corporation Asia’s
      investments and YA Global Investments.]**




2





**PLAN
      OF DISTRIBUTION**




We
      are
      registering the convertible notes, warrants and shares of common stock issuable
      upon conversion of the convertible notes and warrants to permit the resale
      of
      these convertible notes and warrants and the resale of these shares of common
      stock by the holders of the convertible notes and warrants from time to time
      after the date of this prospectus. We will not receive any of the proceeds
      from
      the sale by the selling securityholders of the convertible notes, warrants
      and
      shares of common stock. We will bear all fees and expenses incident to our
      obligation to register the convertible notes, warrants and shares of common
      stock.




The
      selling securityholders may sell all or a portion of the convertible notes,
      warrants and shares of common stock beneficially owned by them and offered
      hereby from time to time directly or through one or more underwriters,
      broker-dealers or agents. If the convertible notes, warrants and shares of
      common stock are sold through underwriters or broker-dealers, the selling
      securityholders will be responsible for underwriting discounts or commissions
      or
      agent’s commissions. The convertible notes, warrants and shares of common stock
      may be sold in one or more transactions at fixed prices, at prevailing market
      prices at the time of the sale, at varying prices determined at the time of
      sale, or at negotiated prices. These sales may be effected in transactions,
      which may involve crosses or block transactions,




·
            on
                any national securities exchange or quotation service on which the
                securities may be listed or quoted at the time of
                sale;




·
            in
                the over-the-counter market;




·
            in
                transactions otherwise than on these exchanges or systems or in the
                over-the-counter market;




·
            through
                the writing of options, whether such options are listed on an options
                exchange or otherwise;




·
            ordinary
                brokerage transactions and transactions in which the broker-dealer
                solicits purchasers;




·
            block
                trades in which the broker-dealer will attempt to sell the shares
                as agent
                but may position and resell a portion of the block as principal to
                facilitate the transaction;




·
            purchases
                by a broker-dealer as principal and resale by the broker-dealer for
                its
                account;




·
            an
                exchange distribution in accordance with the rules of the applicable
                exchange;




·
            privately
                negotiated transactions;




·
            short
                sales;




3




·
            broker-dealers
                may agree with the selling securityholders to sell a specified number
                of
                such shares at a stipulated price per
                share;




·
            a
                combination of any such methods of sale;
                and




·
            any
                other method permitted pursuant to applicable
                law.




If
      the
      selling securityholders effect such transactions by selling convertible notes,
      warrants and shares of common stock to or through underwriters, broker-dealers
      or agents, such underwriters, broker-dealers or agents may receive commissions
      in the form of discounts, concessions or commissions from the selling
      securityholders or commissions from purchasers of the convertible notes,
      warrants and shares of common stock for whom they may act as agent or to whom
      they may sell as principal (which discounts, concessions or commissions as
      to
      particular underwriters, broker-dealers or agents may be in excess of those
      customary in the types of transactions involved). In connection with sales
      of
      the convertible notes, warrants and shares of common stock or otherwise, the
      selling securityholders may enter into hedging transactions with broker-dealers,
      which may in turn engage in short sales of the convertible notes, warrants
      and
      shares of common stock in the course of hedging in positions they assume. The
      selling securityholders may also sell convertible notes, warrants and shares
      of
      common stock short and deliver convertible notes, warrants and shares of common
      stock covered by this prospectus to close out short positions and to return
      borrowed shares in connection with such short sales. The selling securityholders
      may also loan or pledge convertible notes, warrants and shares of common stock
      to broker-dealers that in turn may sell such convertible notes, warrants and
      shares.




The
      selling securityholders may pledge or grant a security interest in some or
      all
      of the convertible notes, warrants, or shares of common stock owned by them
      and,
      if they default in the performance of their secured obligations, the pledgees
      or
      secured parties may offer and sell the convertible notes, warrants and shares
      of
      common stock from time to time pursuant to this prospectus or any supplement
      or
      amendment to this prospectus under Rule 424(b)(3) or other applicable provision
      of the Securities Act of 1933, as amended, amending, if necessary, the list
      of
      selling securityholders to include the pledgee, transferee or other successors
      in interest as selling securityholders under this prospectus. The selling
      securityholders also may transfer and donate the convertible notes, warrants
      and
      shares of common stock in other circumstances in which case the transferees,
      donees, pledgees or other successors in interest will be the selling beneficial
      owners for purposes of this prospectus.




The
      selling securityholders and any broker-dealer participating in the distribution
      of the shares of common stock may be deemed to be “underwriters” within the
      meaning of the Securities Act, and any commission paid, or any discounts or
      concessions allowed to, any such broker-dealer may be deemed to be underwriting
      commissions or discounts under the Securities Act. At the time a particular
      offering of the convertible notes, warrants and shares of common stock is made,
      a prospectus supplement, if required, will be distributed to set forth the
      aggregate principal amount of the convertible notes, the aggregate amount of
      warrants and aggregate amount of shares of common stock being offered and the
      terms of the offering, including the name or names of any broker-dealers or
      agents, any discounts, commissions and other terms constituting compensation
      from the selling securityholders and any discounts, commissions or concessions
      allowed or reallowed or paid to broker-dealers.




4




Under
      the
      securities laws of some states, the convertible notes, warrants and shares
      of
      common stock may be sold in such states only through registered or licensed
      brokers or dealers. In addition, in some states the convertible notes, warrants
      and shares of common stock may not be sold unless such shares have been
      registered or qualified for sale in such state or an exemption from registration
      or qualification is available and is complied with.




There
      can
      be no assurance that any selling securityholder will sell any or all of the
      convertible notes, warrants and shares of common stock registered pursuant
      to
      the registration statement, of which this prospectus forms a part.




The
      selling securityholders and any other person participating in such distribution
      will be subject to applicable provisions of the Securities Exchange Act of
      1934,
      as amended, and the rules and regulations thereunder, including, without
      limitation, Regulation M of the Exchange Act, which may limit the timing of
      purchases and sales of any of the convertible notes, warrants and shares of
      common stock by the selling securityholders and any other participating person.
      Regulation M may also restrict the ability of any person engaged in the
      distribution of the convertible notes, warrants and shares of common stock
      to
      engage in market-making activities with respect to the convertible notes,
      warrants and shares of common stock. All of the foregoing may affect the
      marketability of the convertible notes, warrants and shares of common stock
      and
      the ability of any person or entity to engage in market-making activities with
      respect to the convertible notes, warrants and shares of common
      stock.




We
      will
      pay all expenses of the registration of the convertible notes, warrants and
      shares of common stock pursuant to the registration rights agreement, estimated
      to be $[ ] in total, including, without limitation, Securities sand Exchange
      Commission filing fees and expenses of compliance with state securities or
“blue
      sky” laws; provided , however ,
      that a
      selling securityholder will pay all underwriting discounts and selling
      commissions, if any. We will indemnify the selling securityholders against
      liabilities, including some liabilities under the Securities Act, in accordance
      with the registration rights agreements, or the selling securityholders will
      be
      entitled to contribution. We may be indemnified by the selling securityholders
      against civil liabilities, including liabilities under the Securities Act,
      that
      may arise from any written information furnished to us by the selling
      securityholder specifically for use in this prospectus, in accordance with
      the
      related registration rights agreement, or we may be entitled to
      contribution.




Once
      sold
      under the registration statement, of which this prospectus forms a part, the
      convertible notes, warrants and shares of common stock will be freely tradable
      in the hands of persons other than our affiliates.




5


**EXHIBIT
      B**





**FORM
      OF NOTICE OF EFFECTIVENESS**


**OF
      REGISTRATION STATEMENT**




_______________________


_______________________


_______________________


Attention:
      [Transfer Agent]





Re:  China
      Automotive Systems, Inc.




Ladies
      and Gentlemen:




[We
      are][I am] counsel to China Automotive Systems, Inc., a Delaware corporation
      (the “ **Company** ”),
      and
      have represented the Company in connection with that certain Securities Purchase
      Agreement (the “ **Securities
      Purchase Agreement** ”)
      entered into by and among the Company and the buyers named therein
      (collectively, the “ **Holders** ”)
      pursuant to which the Company issued to the Holders senior convertible notes
      (the “ **Notes** ”)
      and
      warrants (the “ **Warrants** ”)
      which
      are convertible into/exercisable for the Company’s common stock, par value
      $0.0001 per share (the “ **Common
      Stock** ”).
      Pursuant to the Securities Purchase Agreement, the Company also has entered
      into
      a Registration Rights Agreement with the Holders (the “ **Registration
      Rights Agreement** ”)
      pursuant to which the Company agreed, among other things, to register the
      Registrable Securities (as defined in the Registration Rights Agreement),
      including the shares of Common Stock issuable upon conversion of the Notes
      and
      the Warrants, under the Securities Act of 1933, as amended (the “ **1933
      Act** ”).
      In
      connection with the Company’s obligations under the Registration Rights
      Agreement, on __________, 2008, the Company filed a Registration Statement
      on
      Form S-3 (File No. 333-_____________) (the “ **Registration
      Statement** ”)
      with
      the Securities and Exchange Commission (the “ **SEC** ”)
      relating to the Registrable Securities which names each of the Holders as a
      selling securityholder thereunder.




In
      connection with the foregoing, [we][I] advise you that a member of the SEC’s
      staff has advised [us][me] by telephone that the SEC has entered an order
      declaring the Registration Statement effective under the 1933 Act at **[** ENTER
      TIME OF EFFECTIVENESS **]** on **[** ENTER
      DATE OF EFFECTIVENESS **]** and
      [we][I] have no knowledge, after telephonic inquiry of a member of the SEC’s
      staff, that any stop order suspending its effectiveness has been issued or
      that
      any proceedings for that purpose are pending before, or threatened by, the
      SEC
      and the Registrable Securities are available for resale under the 1933 Act
      pursuant to the Registration Statement.




1




This
      letter shall serve as our standing instruction to you that the convertible
      notes, warrants and shares of Common Stock are freely transferable by the
      Holders pursuant to the Registration Statement. You need not require further
      letters from us to effect any future legend-free issuance or reissuance of
      convertible notes, warrants and shares of Common Stock to the Holders as
      contemplated by the Company’s Irrevocable Transfer Agent Instructions dated
      February 15, 2008.


Very
              truly
              yours,[ISSUER’S COUNSEL]By:


CC:  [ **LIST
      NAMES OF HOLDERS** ]







2


**SCHEDULE
      I**





Non-Disclosure
      Agreement between the Company and Lehman Brothers Commercial Corporation Asia
      Limited dated November 14, 2007.





Mutual
      Nondisclosure Agreement dated December 27, 2007 between the Company and
      Yorkville Advisors, LLC.





1