Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including the following "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results of the Company to differ materially from those anticipated, expressed or implied in the forward-looking statements. The words "believe," "expect," "anticipate," "project," "targets," "optimistic," "intend," "aim," "will" or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Risks and uncertainties that could cause actual results to differ materially from those anticipated include risks related to new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China; any statements of belief or intention; any of the factors mentioned in the "Risk Factors" section of our Form 10-K for the year ended December 31, 2008, and other risks mentioned in this Form 10-Q. The Company assumes no obligation and does not intend to update any forward-looking statements, except as required by law.

Certain Terms

Except as otherwise indicated by the context, references in this report to "Company," "WATG," "we," "us" and "our" are references to the combined business of Wonder Auto Technology, Inc., a Nevada corporation, and its subsidiaries on a consolidated basis. Unless the context otherwise requires, all references to:

· "Jinan Worldwide" are references to Jinan Worldwide Auto Accessories Co., Ltd., a corporation incorporated in the People's Republic of China and an indirect, wholly owned subsidiary of the Company;

· "Jinzhou Dongwoo" are references to Jinzhou Dongwoo Precision Co., Ltd., a corporation incorporated in the People's Republic of China and an indirect, 50% owned subsidiary of the Company;

· "Jinzhou Halla" are references to Jinzhou Halla Electrical Equipment Co., Ltd., a corporation incorporated in the People's Republic of China and an indirect, wholly owned subsidiary of the Company;

· "Jinzhou Hanhua" are references to Jinzhou Hanhua Electrical System Co., Ltd., a corporation incorporated in the People's Republic of China and an indirect, 50% owned subsidiary of the Company;

· "Jinzhou Karham" are references to Jinzhou Karham Electrical Equipment Co., Ltd., a corporation incorporated in the People's Republic of China and an indirect, 65% owned subsidiary of the Company;

· "Jinzhou Wanyou" are references to Jinzhou Wanyou Mechanical Parts Co., Ltd., a corporation incorporated in the People's Republic of China and an indirect, wholly owned subsidiary of the Company;

· "Wonder Auto" are references to Wonder Auto Limited, a British Virgin Islands company and a direct, wholly owned subsidiary of the Company;

· "China" and "PRC" are references to People's Republic of China;

· "RMB" are to Renminbi, the legal currency of China; and

· "$" are to the legal currency of the United States.

OVERVIEW

Wonder Auto Technology, Inc. is a Nevada holding company whose China-based operating subsidiaries, Jinzhou Halla, Jinzhou Dongwoo, Jinzhou Wanyou, Jinzhou Hanhua , Jinzhou Karham and Jinan Worldwide are primarily engaged in business of designing, developing, manufacturing and selling automotive electrical parts, specifically alternators and starters, engine valves, tappets, rods and shafts in China. We have been producing alternators and starters in China since 1997 and our newly acquired subsidiary Jinan Worldwide has been producing engine valves and tappets for over 50 years. According to a report issued by the China Association of Automobile Manufacturers (CAAM), we ranked second in sales revenue in China in the market for automobile alternators and starters in 2008, 2007 and 2006.

Our products are mainly used in passenger cars and commercial vehicles and sold to original equipment manufacturers in China. We offer over 230 different models of alternators and approximately 150 different models of starters. In addition, we have begun to manufacture and sell rectifier and regulator products for use in alternators as well as various rods and shafts for use in shock absorbers, alternators and starters. As a result of our acquisition of Jinan Worldwide, we have become one of the largest engine valves and tappets manufacturers in China.

We sell our products to automakers, engine manufacturers and, increasingly, auto parts suppliers, based primarily in China, and we are increasingly exporting our products to the international market.

On January 4, 2009, our indirect wholly owned subsidiary Jinzhou Halla entered into an equity transfer agreement with Magic Era Group Limited, a British Virgin Islands corporation ("Magic Era"), under which Jinzhou Halla agreed to purchase the remaining 35% equity interest in Yearcity Limited ("Yearcity") for total cash consideration of RMB 48 million (approximately $7.04 million), subject to certain price adjustments. Yearcity does not have any asset except its 100% equity ownership of Jinan Worldwide. Jinan Worldwide is a Chinese corporation engaged in the manufacturing of engine valves and tappets. Prior to our acquisition of the remaining 35% equity interest in Yearcity, Jinzhou Halla already owned 65% equity interest of Yearcity from Hony Capital II, L.P., a Cayman Islands corporation, in a separately negotiated equity purchase transaction. As a result of these two acquisitions, we now have 100% ownership of Yearcity and 100% indirect ownership of Jinan Worldwide. Please see our current report on Form 8-K filed with the U.S. Securities and Exchange (the "SEC") on January 8, 2009 for more details.

Recent Developments

On April 7, 2009, our former directors, Messrs. David Murphy and Xingye Zhang resigned from the Board of Directors of the Company. Each of Mr. Murphy and Mr. Zhang was a member of the Company's Audit, Compensation and Governance and Nominating Committees. Mr. Murphy was the Chair of the Compensation Committee and Mr. Zhang was the Chair of the Governance and Nominating Committee. On the same day, the Board of Directors of the Company appointed Mr. Xiaoyu Zhang and Mr. Xianzhang Wang as directors of the Company to fill the vacancies created by such resignations. Mr. Xiaoyu Zhang and Mr. Wang each qualifies as an "independent director" as defined by Rule 4200(a)(15) of the Marketplace Rules of The Nasdaq Stock Market, Inc. In addition, each of Messrs. Xiaoyu Zhang and Xianzhang Wang was appointed to each of the Audit, Compensation Committee, and Governance and Nominating Committees of the Company. Mr. Xiaoyu Zhang was appointed as the Chair of Governance and Nominating Committee and Mr. Xianzhang Wang was appointed as the Chair of Compensation Committee.

On April 7, 2009, the Company also entered into separate Independent Director's Contracts and Indemnification Agreements with each of our new directors. Under the terms of the Independent Director's Contracts, the Company agreed to pay each of the new directors an annual fee of $40,000, as compensation for the services to be provided by them as Independent Directors. Please see our Current Report on Form 8-K filed with the SEC on April 8, 2009 for biographical information and a copy of the Independent Director Contracts.

First Quarter Financial Performance Highlights

Despite the overall economic slowdown in the global economy, we continued to experience strong demand for our products during the first fiscal quarter of 2009, which resulted in continued growth in our sales revenue and net income. The automobile market in China, especially the market for small engine automobiles, continued to expand in the first quarter of 2009 due, in part, to the implementation of new PRC consumption tax regulations and the promulgation of new regulations which urge government agencies to use tax breaks and preferential oil-pricing policies to encourage consumers to buy low-emission automobiles. We were able to capitalize on this growth trend during the first fiscal quarter of 2009.

The following are some financial highlights for the first quarter of 2009:

Sales Revenue: Sales revenue increased approximately $8.9 million, or 28.5%, to approximately $40.0 million for the first quarter of 2009 from approximately $31.1 million for the same period last year.

Gross Margin: Gross margin was 25.3% for the first quarter of 2009, as compared to 26.3% for the same period in 2008.

Net Income attributable to the Company: Net income attributable to the Company increased approximately $1.2 million, or 29.8%, to approximately $5.2 million for the first quarter of 2009 from approximately $4.0 million for the same period of last year.

Fully diluted net income per share: Fully diluted net income per share was $0.19 for the first quarter of 2009, as compared to $0.15 for the same period last year.

Results of Operations

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

The following table sets forth key components of our results of operations for
the periods indicated, in dollars and as a percentage of sales revenue.
      (All amounts, other than percentages, in thousands of U.S. dollars)

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                                                 3-Month Period Ended                    3-Month Period Ended
                                                    March 31, 2009                          March 31, 2008
Item                                                  (Unaudited)                            (Unaudited)
                                                                  As a                                     As a
                                               In             percentage of                            percentage of
                                            thousands         sales revenue       In thousands         sales revenue
Sales revenue                              $    39,976                 100.0 %   $       31,117                 100.0 %
Cost of sales                                   29,882                  74.7 %           22,944                  73.7 %

Gross profit                                    10,094                  25.3 %            8,173                  26.3 %

Operating expenses
Administrative expenses                          2,316                   5.8 %            1,338                   4.3 %
Research and development costs                     456                   1.1 %              378                   1.2 %
Selling expenses                                 1,213                  3.0. %              708                   2.3 %
Total operating expenses                         3,985                  10.0 %            2,424                   7.8 %

Income before income taxes and
noncontrolling interests                         6,315                  15.8 %            4,900                  15.7 %
Income taxes                                       920                   2.3 %              431                   1.4 %
Net income attributable to
noncontrolling interests                           223                   0.6 %              484                   1.6 %

Net Income attributable to Wonder Auto
Technology, Inc. common stockholders             5,172                  12.9 %            3,986                  12.8 %

Sales Revenue. Our sales revenue is generated from sales of our alternator and starter products, rods and shafts, and engine valves and tappets. Sales revenue increased by approximately $8.9 million, or 28.5%, to approximately $40.0 million for the three months ended March 31, 2009, compared with $31.1 million of the same period last year. This increase was mainly attributable to the sales of our valve and tappet products manufactured by our new subsidiary Jinan Worldwide, which contributed approximately $7.3 million in this quarter.

Sales revenue from China increased by approximately $10.9 million, or 41.9%, to approximately $37.0 million in the first quarter of 2009, compared with approximately $26.1 million for the same period last year. The organic revenue increase from China was $4.0 million, or 15.4%, to $30.1 million for the first quarter of 2009, compare with $ 26.1 million for the same period last year.

Cost of Sales. Our cost of sales is primarily comprised of the costs of our raw materials, labor and overhead. Our cost of sales increased by approximately $6.9 million, or 30.2%, to approximately $29.9 million for the three months ended March 31, 2009 from approximately $22.9 million during the same period in 2008. This increase was mainly due to the increase of our sales volume. As a percentage of sales revenue, the cost of sales increased approximately 1.0% to 74.7 % during the three months ended March 31, 2009 from 73.7 % for the same period of 2008. The percentage increase in the first quarter of 2009 was due to the fact that a larger portion of our total sales revenue was generated from alternators and starters with mid-to-small displacement as compared to the same period of 2008. Our alternators and starters with small displacement generally have a lower margin than our alternators and starters with large displacement.

Gross Profit. Our gross profit is equal to the difference between our sales revenue and our cost of sales. Our gross profit increased by approximately $1.9 million, or 23.5 %, to approximately $10.1 million for the three months ended March 31, 2009, compared with approximately $8.2 million for the same period in 2008 as a result of increased demand for and sales of our alternators and starters, rods and shafts, and engine valve and tappet products. Gross margin was 25.3 % for the three-month period ended March 31, 2009, as compared to 26.3 % of the same period in 2008. Such decrease was mainly due to the increase of cost of sales on a percentage basis as discussed above.

Total Operating Expenses. Our total operating expenses increased by approximately $1.6 million, or 64.4 %, to approximately $ 4.0 million for the three months ended March 31, 2009, compared with approximately $2.4 million for the same period in 2008. As a percentage of sales revenue, our total expenses increased to 10.0% for the three months ended March 31, 2009, compared from 7.8% for the same period in 2008. The percentage increase was primarily attributable to the increase of administrative expenses, selling expenses and research and development expenses as discussed below.

Administrative Expenses. Administrative expenses consist of the costs associated with staff and support personnel who manage our business activities and professional fees paid to third parties. Our administrative expenses increased $977,619, or 73.0 %, to approximately $2.3 million for the three months ended March 31, 2009, from approximately $1.3 million for the same period in 2008. As a percentage of sales revenue, administrative expenses increased to 5.8 % for the three months ended March 31, 2009, as compared to 4.3 % for the same period in 2008. The increase was primarily due to the consolidation of the financial results of Yearcity and the increased professional expenses related to the acquisition of Yearcity. We acquired 100% equity interest in Yearcity, the addition of Yearcity increased our administrative costs.

Research and Development Expenses. Research and development expenses consist of amounts spent on developing new products and enhancing our existing products. Our research and development costs increased $78,675, or 20.8 %, to $456,232 for the three months ended March 31, 2009 from $377,557 for the same period in 2008. As a percentage of sales revenue, research and development costs decreased to1.1 % from 1.2% for the three months ended March 31, 2008. The Company expects to increase the amount of investments in research and development as revenues increase and will maintain the ratio of research and development costs to total sales revenue at approximately 1.0 %.

Selling Expenses. Selling expenses include sales commissions, the cost of advertising and promotional materials, salaries and fringe benefits of sales personnel, after-sale support services and other sales related costs. Our selling expenses increased $504,802, or 71.3% to approximately $1.2 million for the three months ended March 31, 2009 from $707,857 for the same period in 2008. As a percentage of sales revenue, our selling expenses were3.0 % for the three months ended March 31, 2009, which was 2.3 % in the first quarter last year. The increase in the amount and percentage of selling expenses was mainly attributable to the consolidation, the addition of our new subsidiary, Yearcity increased our selling expenses.

Net finance cost. Net finance cost includes interest income, interest expenses, bill discounting charges and net exchange (gain) loss. Our net finance cost decreased $869,713, or 91.2% to $83,989 for the three months ended on March 31, 2009 from $953,702 for the same period last year. The decrease of net finance cost was mainly due to the exchange gain of $ 762,035 resulted from the EUR8.3 million loan from DEG bank.

Income before Income Taxes and Noncontrolling Interests. Income before income taxes and noncontrolling interests increased by approximately $1.4 million or 28.9 %, to approximately $6.3 million during the three months ended March 31, 2009 from approximately $4.9 million during the same period in 2008. Income before income taxes as a percentage of sales revenue increased to 15.8 % during the three months ended March 31, 2009, as compared to 15.7% for the same period last year due to the factors described above.

Income taxes. Our income taxes increased by $489,188, or 113.5%, to $920,005 for the three months ended March 31, 2009 from $430,817 for the same period last year. Our effective income tax rate was approximately 14.6% for the first quarter in 2009, as compared to 8.8% for the same period last year.

Net Income attributable to Noncontrolling Interests. Our financial statements reflect an adjustment to our consolidated group net income, and our net income attributable to noncontrolling interests decreased $260,310, or 53.8% to $ 223,435 for the first quarter in 2009 from $ 483,745 for the same period in 2008, reflecting the net income attributable to noncontrolling interests held by third parties in Jinzhou Dong Woo, Jinzhou Hanhua and Jinzhou Karham.

Net Income attributable to Wonder Auto Technology, Inc. common stockholders. Our net income attributable to Wonder Auto Technology, Inc. common stockholders increased by approximately $ 1.2 million, or 29.8%, to approximately $ 5.2 million during the three months ended March 31, 2009 from approximately $ 4.0 million during the same period in 2008, as a result of the factors described above.

Business Segment Information

Our business operations can be categorized into four segments based on the type of products we manufacture and sell, specifically (i) alternators, (ii) starters, (iii) rods and shafts, and (iv) engine valves and tappets.

In the first quarter of 2009, our sales revenue from our alternator products was approximately $14.4 million, our sales revenue from our starter products was approximately $13.3 million, our sales revenue from our rod and shaft products was approximately $5.0 million, and our sales revenue from our engine valves and tappets was approximately $7.3 million.

We manufacture and sell both our alternators and starters using largely the same facilities, personnel and other resources in our subsidiary Jinzhou Halla. Rods and shafts are mainly manufactured by our subsidiary Jinzhou Wanyou. Valves and tappets are manufactured by our newly acquired subsidiary Jinan Worldwide.

Additional information regarding our products can be found at Note 14 in our unaudited consolidated financial statements contained under Part I, Item I "FINANCIAL STATEMENTS" above.