Exhibit 10.1


CHINA AUTOMOTIVE SYSTEMS, INC.


2004 STOCK OPTION PLAN


          1.          Purposes of the Plan.  The purposes of this 2004 Stock Option Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants and to promote the success of the Company’s business.  Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant of an option and subject to the applicable provisions of Section 422 of the Code and the regulations and interpretations promulgated thereunder.


          2.          Definitions.  As used herein, the following definitions shall apply:

	
  
 
  	
  
                  (a)      “Administrator”   means the Board or its Committee appointed pursuant to Section 4 of the Plan.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (b)     “Affiliate”   means an entity other than a Subsidiary (as defined below) which, together   with the Company, is under common control of a third person or entity.
  
	
   
  	
  
 
  
	
  
 
  	
  
                    (c)         “Applicable Laws” means the   legal requirements relating to the administration of stock option plans,   including under applicable U.S. state corporate laws, U.S. federal and applicable   state securities laws, other U.S. federal and state laws, the Code, any Stock   Exchange rules or regulations and the applicable laws, rules and regulations   of any other country or jurisdiction where Options are granted under the   Plan, as such laws, rules, regulations and requirements shall be in place   from time to time.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (d)         “Board” means the Board of   Directors of the Company.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (e)         “Change of Control” means   (1) a sale of all or substantially all of the Company’s assets, or (2) any   merger, consolidation or other business combination transaction of the   Company with or into another corporation, entity or person, other than a   transaction in which the holders of at least a majority of the shares of voting   capital stock of the Company outstanding immediately prior to such   transaction continue to hold (either by such shares remaining outstanding or   by their being converted into shares of voting capital stock of the surviving   entity) a majority of the total voting power represented by the shares of   voting capital stock of the Company (or the surviving entity) outstanding   immediately after such transaction, or (3) the direct or indirect acquisition   (including
by way of a tender or exchange offer) by any person, or persons   acting as a group, of beneficial ownership or a right to acquire beneficial   ownership of shares representing a majority of the voting power of the   then outstanding shares of capital stock of the Company.
  
	
   
  	
  
 
  
	
  
 
  	
  
                    (f)         “Code” means the Internal   Revenue Code of 1986, as amended.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                  (g)        “Committee” means one or more committees or subcommittees of   the Board appointed by the Board to administer the Plan in accordance with   Section 4 below.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (h)         “Common Stock” means the   Common Stock of the Company.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (i)         “Company” means China   Automotive Systems, Inc., a Delaware corporation.
  
	
   
  	
  
 
  
	
  
 
  	
  
                    (j)         “Consultant” means any   person, including an advisor, who is engaged by the Company or any Parent,   Subsidiary or Affiliate to render services and is compensated for such   services, and any non-Employee Director of the Company whether compensated   for such services or not.
  











	
  
 
  	
  
                    (k)         “Continuous Service Status”   means the absence of any interruption or termination of service as an   Employee or Consultant.  Continuous   Service Status as an Employee or Consultant shall not be considered   interrupted in the case of:    (i) sick leave; (ii) military leave; (iii) any other   leave of absence approved by the Administrator, provided that such leave is   for a period of not more than ninety (90) days, unless reemployment upon the   expiration of such leave is guaranteed by contract or statute, or unless   provided otherwise pursuant to Company policy adopted from time to time; or   (iv) in the case of transfers between locations of the Company or   between the Company, its Parents, Subsidiaries, Affiliates or their   respective successors.  A change
in   status from an Employee to a Consultant or from a Consultant to an Employee   will not constitute an interruption of Continuous Service Status.
  
	
   
  	
  
 
  
	
  
 
  	
  
                    (l)         “Corporate Transaction”   means a sale of all or substantially all of the Company’s assets, or a   merger, consolidation or other capital reorganization or business combination   transaction of the Company with or into another corporation, entity or   person, or the direct or indirect acquisition (including by way of a tender   or exchange offer) by any person, or persons acting as a group, of beneficial   ownership or a right to acquire beneficial ownership of shares representing a   majority of the voting power of the then outstanding shares of capital   stock of the Company.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (m)        “Director” means a member of   the Board.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (n)         “Employee” means any person   employed by the Company or any Parent, Subsidiary or Affiliate, with the   status of employment determined based upon such factors as are deemed appropriate   by the Administrator in its discretion, subject to any requirements of the   Code or the Applicable Laws.  The   payment by the Company of a director’s fee to a Director shall not be   sufficient to constitute “employment” of such Director by the Company.
  
	
   
  	
  
 
  
	
  
 
  	
  
                    (o)         “Exchange Act” means the   Securities Exchange Act of 1934, as amended.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (p)         “Fair Market Value” means,   as of any date, the fair market value of the Common Stock, as determined by   the Administrator in good faith on such basis as it deems appropriate and   applied consistently with respect to Participants.  Whenever possible, the determination of Fair Market Value shall   be based upon the closing price for the Shares as reported in the Wall Street   Journal for the applicable date.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (q)         “Incentive Stock Option”   means an Option intended to qualify as an incentive stock option within the   meaning of Section 422 of the Code, as designated in the applicable Option   Agreement.
  
	
   
  	
  
 
  
	
  
 
  	
  
                    (r)         “Named Executive” means any   individual who, on the last day of the Company’s fiscal year, is the chief   executive officer of the Company (or is acting in such capacity) or among the   four most highly compensated officers of the Company (other than the chief   executive officer).  Such officer   status shall be determined pursuant to the executive compensation disclosure   rules under the Exchange Act.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (s)         “Nonstatutory Stock Option”   means an Option not intended to qualify as an Incentive Stock Option, as   designated in the applicable Option Agreement.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (t)         “Option” means a stock   option granted pursuant to the Plan.
  
	
  
 
  	
  
 
  
	
   
  	
  
                    (u)         “Option Agreement” means a   written document, the form(s) of which shall be approved from time to time by   the Administrator, reflecting the terms of an Option granted under the Plan   and includes any documents attached to or incorporated into such Option   Agreement, including, but not limited to, a notice of stock option grant and   a form of exercise notice.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (w)         “Optioned Stock” means the   Common Stock subject to an Option.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (x)         “Optionee” means an Employee   or Consultant who receives an Option.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (y)         “Parent” means a “parent   corporation,” whether now or hereafter existing, as defined in   Section 424(e) of the Code, or any successor provision.
  
	
   
  	
  
 
  
	
  
 
  	
  
                    (z)         “Participant” means any   holder of one or more Options, or the Shares issuable or issued upon exercise   of such Options, under the Plan.
  




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                    (aa)         “Plan” means this Stock   Option Plan.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (bb)         “Reporting Person” means an   officer, Director, or greater than ten percent stockholder of the Company   within the meaning of Rule 16a-2 under the Exchange Act, who is required to   file reports pursuant to Rule 16a-3 under the Exchange Act.
  
	
   
  	
  
 
  
	
  
 
  	
  
                    (cc)         “Rule 16b-3” means Rule   16b-3 promulgated under the Exchange Act, as amended from time to time, or   any successor provision.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (dd)         “Share” means a share of the   Common Stock, as adjusted in accordance with Section 13 of the Plan.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (ee)         “Stock Exchange” means any   stock exchange or consolidated stock price reporting system on which prices   for the Common Stock are quoted at any given time.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (ff)         “Subsidiary” means a   “subsidiary corporation,” whether now or hereafter existing, as defined in   Section 424(f) of the Code, or any successor provision.
  
	
   
  	
  
 
  
	
  
 
  	
  
                    (gg)         “Ten Percent Holder” means a   person who owns stock representing more than ten percent (10%) of the voting   power of all classes of stock of the Company or any Parent or Subsidiary.
  







          3.          Stock
Subject to the Plan.  Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares that may be sold under the Plan
is 2,200,000 Shares of Common Stock.  The Shares may be authorized, but
unissued, or reacquired Common Stock.  If an award should expire or become
unexercisable for any reason without having been exercised in full, the
unpurchased Shares that were subject thereto shall, unless the Plan shall have
been terminated, become available for future grant under the Plan.  In
addition, any Shares of Common Stock which are retained by the Company upon
exercise of an award in order to satisfy the exercise or purchase price for such
award or any withholding taxes due with respect to such exercise or purchase
shall be treated as not issued and shall continue to be available under the
Plan.  Shares issued under the Plan and later repurchased by the Company
pursuant to any repurchase right which the Company may have shall not be
available for future grant under the Plan.




          4.          Administration
of the Plan.

	
   
  	
  


                 
(a)     General.  The Plan shall be
administered by the Board or a Committee, or a combination thereof, as
determined by the Board.  The Plan may be administered by different
administrative bodies with respect to different classes of Participants and, if
permitted by the Applicable Laws, the Board may authorize one or more officers
to make awards under the Plan.
 
	
  
 
  	
  
 
  
	
  
 
  	
  


                 
(b)     Committee Composition.  If a
Committee has been appointed pursuant to this Section 4, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board.  From time to time the Board may increase the size of any Committee
and appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies (however
caused) and remove all members of a Committee and thereafter directly administer
the Plan, all to the extent permitted by the Applicable Laws and, in the case of
a Committee administering the Plan in accordance with the requirements of Rule
16b-3 or Section 162(m) of the Code, to the extent permitted or required by such
provisions. The Committee shall in all events conform to any requirements of the
Applicable Laws.
 
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (c)     Powers of the Administrator.  Subject to the provisions of the Plan and   in the case of a Committee, the specific duties delegated by the Board to   such Committee, the Administrator shall have the authority, in its   discretion:
  
	
   
  	
  
 
  
	
  
 
  	
  
                             (i)     to determine the Fair Market Value of the   Common Stock, in accordance with Section 2(p) of the Plan, provided that such   determination shall be applied consistently with respect to Participants   under the Plan;
  




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                             (ii)     to select the Employees and Consultants to   whom Options may from time to time be granted;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (d)     to determine whether and to what extent   Options are granted;
  
	
  
 
  	
  
 
  
	
   
  	
  
                    (e)     to determine the number of Shares of Common   Stock to be covered by each award granted;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (f)     to approve the form(s) of agreement(s) used   under the Plan;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (g)     to determine the terms and conditions, not   inconsistent with the terms of the Plan, of any award granted hereunder,   which terms and conditions include but are not limited to the exercise or   purchase price, the time or times when awards may be exercised (which may be   based on performance criteria), any vesting acceleration or waiver of   forfeiture restrictions, any pro rata adjustment to vesting as a result of a   Participant’s transitioning from full- to part-time service (or vice versa),   and any restriction or limitation regarding any Option, Optioned Stock or   restricted stock issued upon exercise of an Option, based in each case on   such factors as the Administrator, in its sole discretion, shall determine;
  
	
  
 
  	
  
 
  
	
   
  	
  
                    (h)     to determine whether and under what   circumstances an Option may be settled in cash under Section 10(c) instead of   Common Stock;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (i)     to adjust the vesting of an Option held by   an Employee or Consultant as a result of a change in the terms or conditions   under which such person is providing services to the Company;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (j)     to construe and interpret the terms of the   Plan and awards granted under the Plan, which constructions, interpretations   and decisions shall be final and binding on all Participants; and
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (k)     in order to fulfill the purposes of the Plan   and without amending the Plan, to modify grants of Options to Participants   who are foreign nationals or employed outside of the United States in order   to recognize differences in local law, tax policies or customs.
  



          5.          Eligibility.

	
  
 
  	
  
                    (a)     Recipients of Grants.  Nonstatutory Stock Options may be granted   to Employees and Consultants.    Incentive Stock Options may be granted only to Employees, provided   that Employees of Affiliates shall not be eligible to receive Incentive Stock   Options.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (b)      Type of Option.  Each Option shall be designated in the   Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock   Option.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (c)      ISO $100,000 Limitation.  Notwithstanding any designation under   Section 5(b), to the extent that the aggregate Fair Market Value of Shares   with respect to which Options designated as Incentive Stock Options are   exercisable for the first time by any Optionee during any calendar year   (under all plans of the Company or any Parent or Subsidiary) exceeds   $100,000, such excess Options shall be treated as Nonstatutory Stock   Options.  For purposes of this   Section 5(c), Incentive Stock Options shall be taken into account in the   order in which they were granted, and the Fair Market Value of the Shares subject   to an Incentive Stock Option shall be determined as of the date of the grant   of such Option.
  
	
   
  	
  
 
  
	
  
 
  	
  
                    (d)      No Employment Rights.  The Plan shall not confer upon any   Participant any right with respect to continuation of an employment or   consulting relationship with the Company, nor shall it interfere in any way   with such Participant’s right or the Company’s right to terminate the   employment or consulting relationship at any time, for any reason.
  




          6.          Term of Plan.  The Plan shall become effective upon its adoption by the Board of Directors.  It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 15 of the Plan.


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          7.          Term of Option.  The term of each Option shall be the term stated in the Option Agreement; provided that the term shall be no more than ten years from the date of grant thereof or such shorter term as may be provided in the Option Agreement and provided further that, in the case of an Incentive Stock Option granted to a person who at the time of such grant is a Ten Percent Holder, the term of the Option shall be five years from the date of grant thereof or such shorter term as may be provided in the Option Agreement.


          9.          Option Exercise Price and Consideration.


          (a)          Exercise Price.  The per Share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is determined by the Administrator and set forth in the Option Agreement, but shall be subject to the following:

	
  
 
  	
  
          (i)     In   the case of an Incentive Stock Option
  
	
  
 
  	
  
 
  
	
  
 
  	
  
               (a)     granted   to an Employee who at the time of grant is a Ten Percent Holder, the per   Share exercise price shall be no less than 110% of the Fair Market Value per   Share on the date of grant; or
  
	
  
 
  	
  
 
  
	
  
 
  	
  
               (b)     granted   to any other Employee, the per Share exercise price shall be no less than   100% of the Fair Market Value per Share on the date of grant.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (ii)     In   the case of a Nonstatutory Stock Option, the per Share exercise price shall   be no less than 85% of the Fair Market Value per Share on the date of grant.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (iii)     Notwithstanding   the foregoing, Options may be granted with a per Share exercise price other   than as required above pursuant to a merger or other corporate transaction.
  




          (b)     Permissible Consideration.  The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant) and may consist entirely of (1) cash; (2) check; (3) cancellation of indebtedness; (4) other Shares that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which the Option is exercised, provided that in the case of Shares acquired, directly or indirectly, from the Company, such Shares must have been owned by the Optionee for more than six months on the date of surrender (or such other period as may be required to avoid the Company’s incurring an adverse accounting charge); (5) if, as of the date of
exercise of an Option the Company then is permitting employees to engage in a “same-day sale” cashless brokered exercise program involving one or more brokers, through such a program that complies with the Applicable Laws (including without limitation the requirements of Regulation T and other applicable regulations promulgated by the Federal Reserve Board) and that ensures prompt delivery to the company of the amount required to pay the exercise price and any applicable withholding taxes; or (6) any combination of the foregoing methods of payment.  In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company and the Administrator may, in its sole discretion, refuse to accept a particular form of consideration at the time of any Option exercise.


          10.          Exercise of Option.


                         (a)     General.

	
  
 
  	
  
                         (i)          Exercisability.    Any Option granted   hereunder shall be exercisable at such times and under such conditions as   determined by the Administrator, consistent with the term of the Plan and   reflected in the Option Agreement, including vesting requirements and/or   performance criteria with respect to the Company and/or the Optionee.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                         (ii)          Leave   of Absence. The Administrator shall have the discretion to   determine whether and to what extent the vesting of Options shall be tolled   during any unpaid leave of absence; provided, however, that in the absence of   such determination, vesting of Options shall be tolled during any such unpaid   leave (unless otherwise required by the Applicable Laws).  In the event of military leave, vesting   shall toll during any unpaid portion of such leave, provided that, upon a   Participant’s returning from military leave (under conditions that would   entitle him or her to protection upon such return under the Uniform Services   Employment and Reemployment Rights Act), he or she shall be given vesting   credit with respect to Options to





 the same extent as
would have applied had the   Participant continued to provide services to the Company throughout the leave   on the same terms as he or she was providing services immediately prior to   such leave.
  



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                         (iii)          Minimum   Exercise Requirements.  An   Option may not be exercised for a fraction of a Share.  The Administrator may require that an   Option be exercised as to a minimum number of Shares, provided that such   requirement shall not prevent an Optionee from exercising the full number of   Shares as to which the Option is then exercisable.
  
	
  
 
  	
  
 
  
	
  
 
  	
  



                         (iv)          Procedures
for and Results of Exercise.  An Option shall be deemed exercised
when written notice of such exercise has been given to the Company in accordance
with the terms of the Option by the person entitled to exercise the Option and
the Company has received full payment for the Shares with respect to which the
Option is exercised.  Full payment may, as authorized by the Administrator,
consist of any consideration and method of payment allowable under
Section 9(b) of the Plan, provided that the Administrator may, in its sole
discretion, refuse to accept any form of consideration at the time of any Option
exercise. Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.
 
	
   
  	
  
 
  
	
  
 
  	
  
                         (v)          Rights   as Stockholder.  Until   the issuance of the Shares (as evidenced by the appropriate entry on the   books of the Company or of a duly authorized transfer agent of the Company),   no right to vote or receive dividends or any other rights as a stockholder   shall exist with respect to the Optioned Stock, notwithstanding the exercise   of the Option.  No adjustment will be   made for a dividend or other right for which the record date is prior to the   date the stock certificate is issued, except as provided in Section 13   of the Plan.
  




                    (b)     Termination of Employment or Consulting Relationship.  Except as otherwise set forth in this Section 10(b), the Administrator shall establish and set forth in the applicable Option Agreement the terms and conditions upon which an Option shall remain exercisable, if at all, following termination of an Optionee’s Continuous Service Status, which provisions may be waived or modified by the Administrator at any time.  Unless the Administrator otherwise provides in the Option Agreement, to the extent that the Optionee is not vested in Optioned Stock at the date of termination of his or her Continuous Service Status, or if the Optionee (or other person entitled to exercise the Option) does not exercise the Option to the extent so entitled within the time specified in the Option Agreement or
below (as applicable), the Option shall terminate and the Optioned Stock underlying the unexercised portion of the Option shall revert to the Plan.  In no event may any Option be exercised after the expiration of the Option term as set forth in the Option Agreement (and subject to Section 7). 


                    The following provisions (1) shall apply to the extent an Option Agreement does not specify the terms and conditions upon which an Option shall terminate upon termination of an Optionee’s Continuous Service Status, and (2) establish the minimum post-termination exercise periods that may be set forth in an Option Agreement:

	
  
 
  	
  
                    (i)          Termination   other than Upon Disability or Death.  In the event of termination of Optionee’s Continuous   Service Status other than under the circumstances set forth in subsections   (ii) through (iv) below, such Optionee may exercise an Option for 30 days   following such termination to the extent the Optionee was vested in the   Optioned Stock as of the date of such termination.  No termination shall be deemed to occur and this Section   10(b)(i) shall not apply if (i) the Optionee is a Consultant who becomes an   Employee, or (ii) the Optionee is an Employee who becomes a Consultant.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (ii)          Disability   of Optionee.  In the   event of termination of an Optionee’s Continuous Service Status as a result   of his or her disability (including a disability within the meaning of   Section 22(e)(3) of the Code), such Optionee may exercise an Option at any   time within six months following such termination to the extent the Optionee   was vested in the Optioned Stock as of the date of such termination.
  



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                    (iii)          Death   of Optionee.  In the   event of the death of an Optionee during the period of Continuous Service   Status since the date of grant of the Option, or within thirty days following   termination of Optionee’s Continuous Service Status, the Option may be   exercised by Optionee’s estate or by a person who acquired the right to   exercise the Option by bequest or inheritance at any time within twelve   months following the date of death, but only to the extent the Optionee was   vested in the Optioned Stock as of the date of death or, if earlier, the date   the Optionee’s Continuous Service Status terminated.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (c)     Buyout   Provisions.  The   Administrator may at any time offer to buy out for a payment in cash or   Shares an Option previously granted under the Plan based on such terms and   conditions as the Administrator shall establish and communicate to the   Optionee at the time that such offer is made.
  




          11.          Taxes.


	
  
 
  	
  
                    (a)     As   a condition of the grant, vesting or exercise of an Option granted under the   Plan, the Participant (or in the case of the Participant’s death, the person   exercising the Option) shall make such arrangements as the Administrator may   require for the satisfaction of any applicable federal, state, local or   foreign withholding tax obligations that may arise in connection with such   grant, vesting or exercise of the Option or the issuance of Shares.  The Company shall not be required to issue   any Shares under the Plan until such obligations are satisfied.  If the Administrator allows the   withholding or surrender of Shares to satisfy a Participant’s tax withholding   obligations under this Section 11 (whether pursuant to Section 11(c), (d) or   (e), or otherwise), the Administrator
shall not allow Shares to be withheld   in an amount that exceeds the minimum statutory withholding rates for federal   and state tax purposes, including payroll taxes.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                       (b)     In the case of an Employee and in the   absence of any other arrangement, the Employee shall be deemed to have   directed the Company to withhold or collect from his or her compensation an   amount sufficient to satisfy such tax obligations from the next payroll   payment otherwise payable after the date of an exercise of the Option.
  
	
   
  	
  
 
  
	
  
 
  	
  
                       (c)     In the case of Participant other than an   Employee (or in the case of an Employee where the next payroll payment is not   sufficient to satisfy such tax obligations, with respect to any remaining tax   obligations), in the absence of any other arrangement and to the extent   permitted under the Applicable Laws, the Participant shall be deemed to have   elected to have the Company withhold from the Shares to be issued upon   exercise of the Option that number of Shares having a Fair Market Value determined   as of the applicable Tax Date (as defined below) equal to the amount required   to be withheld.  For purposes of this   Section 11, the Fair Market Value of the Shares to be withheld shall be   determined on the date that the amount of tax to be withheld is to be   determined under the Applicable Laws
(the “Tax Date”).
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                       (d)     If permitted by the Administrator, in its   discretion, a Participant may satisfy his or her tax withholding obligations   upon exercise of an Option by surrendering to the Company Shares that have a   Fair Market Value determined as of the applicable Tax Date equal to the   amount required to be withheld.  In   the case of shares previously acquired from the Company that are surrendered   under this Section 11(d), such Shares must have been owned by the Participant   for more than six (6) months on the date of surrender (or such other period   of time as is required for the Company to avoid adverse accounting charges).
  
	
   
  	
  
 
  
	
  
 
  	
  
                       (e)     Any election or deemed election by a   Participant to have Shares withheld to satisfy tax withholding obligations   under Section 11(c) or (d) above shall be irrevocable as to the particular   Shares as to which the election is made and shall be subject to the consent   or disapproval of the Administrator.    Any election by a Participant under Section 11(d) above must be made   on or prior to the applicable Tax Date.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                       (f)     In the event an election to have Shares   withheld is made by a Participant and the Tax Date is deferred under Section   83 of the Code because no election is filed under Section 83(b) of the Code,   the Participant shall receive the full number of Shares with respect to which   the Option is exercised but such Participant shall be unconditionally obligated   to tender back to the Company the proper number of Shares on the Tax Date.
  




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          12.          Non-Transferability of Options.  

	
  
 
  	
  
                    (a)     General.    Except as set forth in   this Section 12, Options may not be sold, pledged, assigned, hypothecated,   transferred or disposed of in any manner other than by will or by the laws of   descent or distribution.  The   designation of a beneficiary by an Optionee will not constitute a transfer.  An Option may be exercised, during the   lifetime of the holder of an Option, only by such holder or a transferee   permitted by this Section 12.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (b)     Limited   Transferability Rights.  Notwithstanding anything else in this Section 12, the   Administrator may in its discretion grant Nonstatutory Stock Options that may   be transferred by instrument to an inter vivos or testamentary trust in which   the Options are to be passed to beneficiaries upon the death of the trustor   (settlor) or by gift or pursuant to domestic relations orders to “Immediate   Family Members” (as defined below) of the Optionee. “Immediate Family” means   any child, stepchild, grandchild, parent, stepparent, grandparent, spouse,   former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,   daughter-in-law, brother-in-law, or sister-in-law (including adoptive   relationships), a trust in which these persons have more than fifty
percent   of the beneficial interest, a foundation in which these persons (or the   Optionee) control the management of assets, and any other entity in which   these persons (or the Optionee) own more than fifty percent of the voting   interests.
  



          13.          Adjustments Upon Changes in Capitalization, Merger or Certain Other Transactions.

	
  
 
  	
  
                    (a)     Changes   in Capitalization.    Subject to any action required under Applicable Laws by the   stockholders of the Company, the number of Shares of Common Stock covered by   each outstanding Option, and the number of Shares of Common Stock that have been   authorized for issuance under the Plan but as to which no Options have yet   been granted or that have been returned to the Plan upon cancellation or   expiration of an Option, as well as the price per Share of Common Stock   covered by each such outstanding Option, shall be proportionately adjusted   for any increase or decrease in the number of issued Shares of Common Stock   resulting from a stock split, reverse stock split, stock dividend,   combination, recapitalization or reclassification of the Common Stock, or any   other increase or
decrease in the number of issued Shares of Common Stock   effected without receipt of consideration by the Company; provided, however,   that conversion of any convertible securities of the Company shall not be   deemed to have been “effected without receipt of consideration.”  Such adjustment shall be made by the   Administrator, whose determination in that respect shall be final, binding   and conclusive.  Except as expressly   provided herein, no issuance by the Company of shares of stock of any class,   or securities convertible into shares of stock of any class, shall affect,   and no adjustment by reason thereof shall be made with respect to, the number   or price of Shares of Common Stock subject to an Option.
  
	
   
  	
  
 
  
	
  
 
  	
  
                    (b)     Dissolution   or Liquidation.  In the   event of the dissolution or liquidation of the Company, each Option will   terminate immediately prior to the consummation of such action, unless   otherwise determined by the Administrator.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (c)     Corporate   Transaction.  In the   event of a Corporate Transaction (including without limitation a Change of   Control), each outstanding Option shall be assumed or an equivalent option or   right shall be substituted by such successor corporation or a parent or   subsidiary of such successor corporation (the “Successor Corporation”),   unless the Successor Corporation does not agree to assume the award or to   substitute an equivalent option or right, in which case such Option shall   terminate upon the consummation of the transaction.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    For   purposes of this Section 13(c), an Option shall be considered assumed,   without limitation, if, at the time of issuance of the stock or other   consideration upon a Corporate Transaction or a Change of Control, as the   case may be, each holder of an Option would be entitled to receive upon   exercise of the award the same number and kind of shares of stock or the same   amount of property, cash or securities as such holder would have been   entitled to receive upon the occurrence of the transaction if the holder had   been, immediately prior to such transaction, the holder of the number of   Shares of Common Stock covered by the award at such time (after giving effect   to any adjustments in the number of Shares covered by the Option as provided   for in this Section 13); provided that if such consideration received in   the
transaction is not solely common stock of the Successor Corporation, the   Administrator may, with the consent of the Successor Corporation, provide for   the consideration to be received upon exercise of the award to be solely   common stock of the Successor Corporation equal to the Fair Market Value of   the per Share consideration received by holders of Common Stock in the   transaction.
  



-8-








	
  
 
  	
  
                    (d)     Certain   Distributions.  In the   event of any distribution to the Company’s stockholders of securities of any   other entity or other assets (other than dividends payable in cash or stock   of the Company) without receipt of consideration by the Company, the   Administrator may, in its discretion, appropriately adjust the price per   Share of Common Stock covered by each outstanding Option to reflect the   effect of such distribution.
  




          14.          Time of Granting Options.  The date of grant of an Option shall, for all purposes, be the date on which the Administrator makes the determination granting such Option, or such other date as is determined by the Administrator, provided that in the case of any Incentive Stock Option, the grant date shall be the later of the date on which the Administrator makes the determination granting such Incentive Stock Option or the date of commencement of the Optionee’s employment relationship with the Company.  Notice of the determination shall be given to each Employee or Consultant to whom an Option is so granted within a reasonable time after the date of such grant.


          15.          Amendment and Termination of the Plan.

	
  
 
  	
  
                    (a)     Authority   to Amend or Terminate.  The Board may at any time amend, alter, suspend or discontinue   the Plan, but no amendment, alteration, suspension or discontinuation (other   than an adjustment pursuant to Section 13 above) shall be made that would   materially and adversely affect the rights of any Optionee under any   outstanding grant, without his or her consent.  In addition, to the extent necessary and desirable to comply   with the Applicable Laws, the Company shall obtain stockholder approval of   any Plan amendment in such a manner and to such a degree as required.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                    (b)     Effect   of Amendment or Termination.  Except as to amendments which the Administrator has the   authority under the Plan to make unilaterally, no amendment or termination of   the Plan shall materially and adversely affect Options already granted,   unless mutually agreed otherwise between the Optionee and the Administrator,   which agreement must be in writing and signed by the Optionee or holder and   the Company.
  




          16.          Conditions Upon Issuance of Shares.  Notwithstanding any other provision of the Plan or any agreement entered into by the Company pursuant to the Plan, the Company shall not be obligated, and shall have no liability for failure, to issue or deliver any Shares under the Plan unless such issuance or delivery would comply with the Applicable Laws, with such compliance determined by the Company in consultation with its legal counsel.  As a condition to the exercise of an Option, the Company may require the person exercising the award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by law.  


          17.          Reservation of Shares.  The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.


          18.          Agreements.  Options shall be evidenced by Option Agreements in such form(s) as the Administrator shall from time to time approve.


          19.          Stockholder Approval.  If required by the Applicable Laws, continuance of the Plan shall be subject to approval by the stockholders of the Company within twelve (12) months before or after the date the Plan is adopted.  Such stockholder approval shall be obtained in the manner and to the degree required under the Applicable Laws.


-9-









CHINA AUTOMOTIVE SYSTEMS, INC.


STOCK OPTION PLAN


Notice of Stock Option Grant


<<Optionee>>
 <<OptioneeAddress1>>
 <<OptioneeAddress2>>


          You have been granted an option to purchase Common Stock of China Automotive Systems, Inc., (the “Company”) as follows:

	
  
 
  	
  
Board Approval Date:
  	
  
<<Merge Record #>>
  
	
   
  	
  
 
  	
  
 
  
	
  
 
  	
  
Date of Grant (Later of Board
   Approval Date or
   Commencement of
   Employment/Consulting):
  	
  
<<GrantDate>>
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
Exercise Price Per Share:
  	
  
<<ExercisePrice>>
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
Total Number of Shares Granted:
  	
  
<<Merge Record #>>
  
	
  
 
  	
  
 
  	
  
 
  
	
   
  	
  
Total Exercise Price:
  	
  
<<TotalExercisePrice>>
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
Type of Option:
  	
  
<<NoSharesISO>> Shares Incentive Stock Option
  
	
  
 
  	
  
 
  	
  
 
  
	 	 	 <<NoSharesNSO>> Shares Nonstatutory Stock Option
	 	 	 
	
  
 
  	
  
Expiration Date:
  	
  
<<Term>>/<<ExpirDate>>
  
	
  
 
  	
  
 
  	
  
 
  
	
   
  	
  
Vesting Commencement Date:
  	
  
<<Merge Record #>>
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
Vesting/Exercise Schedule:
  	
  
So long as your Continuous Service Status continues,   the Shares underlying this Option shall vest and become exercisable in   accordance with the following schedule:    ___________ of the Shares subject to the Option shall vest and become   exercisable on the ________ month anniversary of the Vesting Commencement   Date and _______ of the total number of Shares subject to the Option shall   vest and become exercisable each month thereafter.
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
Termination Period:
  	
  
Option may be exercised for ____ days after   termination of your Continuous Service Status except as set out in   Section 5 of the Stock Option Agreement (but in no event later than the   Expiration Date).  Optionee is   responsible for keeping track of these exercise periods following termination   for any reason of his or her service relationship with the Company.  The Company will not provide further   notice of such periods.
  
	
   
  	
  
 
  	
  
 
  
	
  
 
  	
  
Transferability:
  	
  
This Option may not be transferred.
  




          By your signature and the signature of the Company’s representative below, you and the Company agree that this option is granted under and governed by the terms and conditions of the China Automotive Systems, Inc. Stock Option Plan and the Stock Option Agreement, both of which are attached and made a part of this document.


-10-









In addition, you agree and acknowledge that your rights to any Shares underlying the Option will be earned only as you provide services to the Company over time, that the grant of the Option is not as consideration for services you rendered to the Company prior to your Vesting Commencement Date, and that nothing in this Notice or the attached documents confers upon you any right to continue your employment or consulting relationship with the Company for any period of time, nor does it interfere in any way with your right or the Company’s right to terminate that relationship at any time, for any reason, with or without cause.

	
   
  	
  
 
  	
  
CHINA AUTOMOTIVE   SYSTEMS, INC.
  
	

  
 


	
  
 
  	
  
 
  	
  
By:
  	
  
 
  
	
  


  	
  
 
  	
  
 
  	
  


  
	
  
<<Merge Record #>>
  	
  
 
  	
  
Name:
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  


  
	
  
 
  	
  
 
  	
  
Title:
  	
  
 
  
	
   
  	
  
 
  	
  
 
  	
  


  
	
  


  	
  
 
  	
  
 
  	
  
 
  
	
  
Print Name
  	
  
 
  	
  
 
  	
  
 
  




-11-









CHINA AUTOMOTIVE SYSTEMS, INC.


STOCK OPTION PLAN


Stock Option Agreement




          1.          Grant
of Option.  China Automotive Systems, Inc., a Delaware corporation
(the “Company”), hereby grants to <<Merge Record #>>
(“Optionee”), an option (the “Option”) to purchase the total
number of shares of Common Stock (the “Shares”) set forth in the
Notice of Stock Option Grant (the “Notice”), at the exercise price per
Share set forth in the Notice (the “Exercise Price”) subject to the
terms, definitions and provisions of the China Automotive Systems, Inc. Stock
Option Plan (the “Plan”) adopted by the Company, which is incorporated
in this Agreement by reference.  Unless otherwise defined in this
Agreement, the terms used in this Agreement shall have the meanings defined in
the Plan. This Stock Option Agreement shall be deemed executed by the Company
and Optionee upon execution by such parties of the Notice.


          2.          Designation of Option.  This Option is intended to be an Incentive Stock Option as defined in Section 422 of the Code only to the extent so designated in the Notice, and to the extent it is not so designated or to the extent the Option does not qualify as an Incentive Stock Option, it is intended to be a Nonstatutory Stock Option.  


          Notwithstanding the above, if designated as an Incentive Stock Option, in the event that the Shares subject to this Option (and all other Incentive Stock Options granted to Optionee by the Company or any Parent or Subsidiary, including under other plans of the Company) that first become exercisable in any calendar year have an aggregate fair market value (determined for each Share as of the date of grant of the option covering such Share) in excess of $100,000, the Shares in excess of $100,000 shall be treated as subject to a Nonstatutory Stock Option, in accordance with Section 5(c) of the Plan.


          3.          Exercise of Option.  This Option shall be exercisable during its term in accordance with the Vesting/Exercise Schedule set out in the Notice and with the provisions of Section 10 of the Plan as follows:


                      (a)          Right to Exercise.


                                    (i)          This Option may not be exercised for a fraction of a share. 


                                    (ii)          In the event of Optionee’s death, disability or other termination of employment, the exercisability of the Option is governed by Section 5 below, subject to the limitations contained in this Section 3.


                                    (iii)          In no event may this Option be exercised after the Expiration Date of the Option as set forth in the Notice.


                    (b)          Method of Exercise.


                                     (i)          This Option shall be exercisable by delivering to the Company a written notice of exercise (in the form attached as Exhibit A or in any other form of notice approved by the Plan Administrator) which shall state Optionee’s election to exercise the Option, the number of Shares in respect of which the Option is being exercised, and such other representations and agreements as to the holder’s investment intent with respect to such Shares as may be required by the Company pursuant to the provisions of the Plan.  Such written notice shall be signed by Optionee and shall be delivered to the Company by such means as are determined by the Plan Administrator in its discretion to
constitute adequate delivery.  The written notice shall be accompanied by payment of the Exercise Price.  This Option shall be deemed to be exercised upon receipt by the Company of such written notice accompanied by the Exercise Price.


                                     (ii)          As a condition to the exercise of this Option and as further set forth in Section 12 of the Plan, Optionee agrees to make adequate provision for federal, state or other tax withholding obligations, if any, which arise upon the vesting or exercise of the Option, or disposition of Shares, whether by withholding, direct payment to the Company, or otherwise.









                                     (iii)          The Company is not obligated, and will have no liability for failure, to issue or deliver any Shares upon exercise of the Option unless such issuance or delivery would comply with the Applicable Laws, with such compliance determined by the Company in consultation with its legal counsel. This Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any applicable federal or state securities or other law or regulation, including any rule under Part 221 of Title 12 of the Code of
Federal Regulations as promulgated by the Federal Reserve Board.  As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by the Applicable Laws.  Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Optionee on the date on which the Option is exercised with respect to such Shares.


          4.          Method of Payment.  Payment of the Exercise Price shall be by any of the following, or a combination of the following, at the election of Optionee:  


                                     (a)          cash or check; or


                                     (b)          delivery of a properly executed exercise notice together with irrevocable instructions to a broker approved by the Company to deliver promptly to the Company the amount of sale or loan proceeds required to pay the exercise price. 


          5.          Termination of Relationship.  Following the date of termination of Optionee’s Continuous Service Status for any reason (the “Termination Date”), Optionee may exercise the Option only as set forth in the Notice and this Section 5.  To the extent that Optionee is not entitled to exercise this Option as of the Termination Date, or if Optionee does not exercise this Option within the Termination Period set forth in the Notice or the termination periods set forth below, the Option shall terminate in its entirety.  In no event, may any Option be exercised after the Expiration Date of the Option as set forth in the Notice.


                      (a)          Termination.  In the event of termination of Optionee’s Continuous Service Status other than as a result of Optionee’s disability or death, Optionee may, to the extent otherwise so entitled at the date of such termination (the “Termination Date”), exercise this Option during the Termination Period set forth in the Notice.


                       (b)          Other Terminations.  In connection with any termination other than a termination covered by Section 5(a), Optionee may exercise the Option only as described below:


                                     (i)          Termination upon Disability of Optionee.  In the event of termination of Optionee’s Continuous Service Status as a result of Optionee’s disability, Optionee may, but only within twelve months from the Termination Date, exercise this Option to the extent Optionee was entitled to exercise it as of such Termination Date.  


                                     (ii)          Death of Optionee.   In the event of the death of Optionee (a) during the term of this Option and while an Employee or Consultant of the Company and having been in Continuous Service Status since the date of grant of the Option, or (b) within thirty (30) days after Optionee’s Termination Date, the Option may be exercised at any time within twelve months following the date of death by Optionee’s estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent Optionee was entitled to exercise the Option as of the Termination Date.


          6.          Non-Transferability of Option.  [Except as otherwise set forth in the Notice,] [T]his Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by him or her.  The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of Optionee.


          7.          Effect of Agreement.  Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof (and has had an opportunity to consult counsel regarding the Option terms), and hereby accepts this Option and agrees to be bound by its contractual terms as set forth herein and in the Plan.  Optionee hereby agrees to accept as binding, conclusive and final all decisions and interpretations of the Plan Administrator regarding any questions relating to the Option.  In the event of a conflict between the terms and provisions of the Plan and the terms and provisions of the Notice and this Agreement, the Plan terms and provisions shall prevail.  The Option, including the Plan, constitutes the entire agreement between Optionee and the Company on the subject matter
hereof and supersedes all proposals, written or oral, and all other communications between the parties relating to such subject matter.









EXHIBIT A


Notice of Exercise


To:                            China Automotive Systems, Inc.
 Attn:                         Stock Option Administrator
 Subject:                    Notice of Intention to Exercise Stock Option


          This is official notice that the undersigned (“Optionee”) intends to exercise Optionee’s option to purchase __________ shares of China Automotive Systems, Inc. Common Stock, under and pursuant to the Company’s Stock Option Plan and the Stock Option Agreement dated ___________, as follows:

	
  
 
  	
  
Grant Number:
  
	
  
 
  	
  
 
  
	
  
 
  	
  
Date of Purchase:
  
	
  
 
  	
  
 
  
	
  
 
  	
  
Number of Shares:
  
	
   
  	
  
 
  
	
  
 
  	
  
Purchase Price:
  
	
  
 
  	
  
 
  
	
  
 
  	
  
Method of Payment
   of Purchase Price:
  




          Social Security No.:


          The shares should be issued as follows:

	
  
 
  	
  
Name:
  
	
  
 
  	
  
 
  
	
  
 
  	
  
Address:
  
	
  
 
  	
  
 
  
	
  
 
  	
  
 
  
	
   
  	
  
 
  
	
  
 
  	
  
Signed:
  
	
  
 
  	
  
 
  
	
  
 
  	
  
Date: