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Lentuo International Inc. Reports Third Quarter 2010 Financial Results

Third Quarter 2010 Financial Performance

Revenues in the third quarter 2010 increased by 56.0% to RMB945.9 million ($141.4 million) from RMB606.3 million in the same period of 2009. The revenue growth was driven by the increased sales volume of new vehicles and increased average unit price, as well as the increased volume of automobile repair and maintenance services.

For the third quarter 2010, we sold 4,871 vehicles, representing a 29.5% increase from 3,761 in the same period of 2009. The average unit price for the third quarter 2010 was RMB176,000, a 23% increase from RMB143,000 in the same period of 2009. In addition, we serviced approximately 32,210 vehicles at our dealerships in the three months ended September 30, 2010, representing a 15.4% increase over the third quarter of 2009. The growth was primarily driven by the increased market demand and our enhanced sales efforts, consistent with the trend in recent quarters.

Cost of goods sold increased by 64.6% to RMB851.8 million ($127.3 million) in the third quarter of 2010 from RMB517.4 million in the same quarter of 2009, primarily as a result of increased sales of new vehicles, as well as automobile repair and maintenance services. As a percentage of revenues, cost of goods sold increased to 90.1% in the third quarter of 2010 from 85.3% in the third quarter of 2009.

Gross profit increased by 5.8% to RMB94.1 million ($14.1 million) from RMB88.9 million for the third quarter of 2009. The increase in gross profit was primarily due to the increase in revenues both from new vehicles sales and automobile repair and maintenance services.

Gross margin for the third quarter of 2010 decreased to 9.9% from 14.7% for the third quarter of 2009 for a number of reasons. Firstly, new vehicle sales as a portion of total revenues increased in the third quarter of 2010 to 90.9% from 89.2% in the same period of 2009. Secondly, gross margin of automobile repair and maintenance services decreased in the third quarter of 2010 to 54.6% from 65.1% in the same period of 2009 due to discounts on repair and maintenance we offered to existing customers.

Selling, marketing and distribution expenses increased by 4.1% to RMB10.2 million ($1.5 million) in the third quarter of 2010 from RMB9.8 million in the same quarter of 2009, primarily as a result of the increased performance-related bonuses paid to our salespersons in line with our increased revenues. As a percentage of our revenues, selling, marketing and distribution expenses decreased to 1.1% in the third quarter of 2010 from 1.6% in the third quarter of 2009.

General and administrative expenses decreased by 5.9% to RMB8.4 million ($1.3 million) in the third quarter of 2010 from RMB8.9 million in the same quarter of 2009, primarily due to our stricter expense controls. As a percentage of our revenues, general and administrative expenses decreased to 0.9% in the third quarter of 2010 from 1.5% in the third quarter of 2009.

Operating Income for the third quarter 2010 increased by 7.4% to RMB75.4 million ($11.3 million) from RMB70.2 million in the same period in 2009.

Operating margin in the third quarter of 2010 was 8.0%, compared to 11.6% in the same quarter of 2009. The decrease of the operating margin was mainly attributable to the decrease in gross margin as well as the increased selling, marketing and distribution expenses discussed above.

Income tax expenses in the third quarter of 2010 were RMB18.0 million ($2.7 million), representing an effective tax rate of 28.5%, increasing from 27.9% in the same period of 2009.

Net income was RMB45.0 million ($6.7 million), an increase of 2.6% from RMB43.9 million in the comparable period of 2009.

Diluted earnings per ADS were RMB1.06 ($0.16) in the third quarter of 2010 compared to RMB1.11 in the third quarter of 2009.

As of September 30, 2010, the Company had cash and cash equivalents of RMB266.9 million ($39.9 million), compared to RMB72.1 million as of December 31, 2009. Net cash provided by operating activities was RMB165.3 million ($24.7 million) in the nine months ended September 30, 2010, compared to RMB193.1 million in the nine months ended September 30, 2009.

Initial Public Offering

On December 10, 2010, Lentuo’s ADSs began trading on the New York Stock Exchange under the ticker symbol “LAS.” Lentuo issued 6,500,000 ADSs, each representing two ordinary shares, at a price of $8.00 per ADS and received total proceeds of US$52.0 million.

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