The information contained in this report includes some statements that are not purely historical fact and that are "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements regarding our management's expectations, hopes, beliefs, intentions or strategies regarding the future, including our financial condition, results of operations, ability to refinance outstanding debt, completion of our turbine manufacturing facility on our main Wuhan campus and workshop and related facilities of Wuhan Xingelin Machinery Equipment Manufacturing Co., Ltd. and growth of our businesses. The words "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "projects," "should," and similar expressions, or the negatives of such terms, identify forward-looking statements.

The forward-looking statements contained in this report are based on our current expectations and beliefs concerning future developments. There can be no assurance that future developments actually affecting us will be those anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results to be materially different from those expressed or implied by these forward-looking statements, including the following:

· vulnerability of our business to general economic downturn;

· our ability to obtain financing on favorable terms;

· establishing our new business segment relating to industrial parts and machinery equipment;

· operating in the PRC generally and the potential for changes in the laws of the PRC that affect our operations;

· remediating material weaknesses in our internal control over financial reporting;

· our failure to meet or timely meet contractual performance standards and schedules;

· our dependence on the steel and iron markets;

· exposure to product liability and defect claims;

· our ability to obtain all necessary government certifications and/or licenses to conduct our business;

· the cost of complying with current and future governmental regulations and the impact of any changes in the regulations on our operations; and

· the other factors referenced in this report.

These risks and uncertainties, along with others, are also described in the Risk Factors section in Part II, Item 1A of this Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Overview

Wuhan General Group (China), Inc. (the "Company") is a holding company whose primary business operations are conducted through our wholly owned subsidiary, Universe Faith Group, Ltd. ("UFG"), which has no operations of its own and only serves to hold our Chinese operating subsidiaries, Wuhan Blower Co., Ltd. ("Wuhan Blower"), Wuhan Generating Equipment Co., Ltd. ("Wuhan Generating") and Wuhan Xingelin Machinery Equipment Manufacturing Co., Ltd. ("Wuhan Xingelin"). Wuhan Blower is a manufacturer of industrial blowers that are principally components of steam-driven electrical power generation plants. Wuhan Generating manufactures industrial steam and water turbines, which also are principally used in electrical power generation plants. Wuhan Xingelin manufactures silencers, connectors and other general parts for industrial blowers and electrical equipment, and it produces general machinery equipment. Wuhan Blower, Wuhan General and Wuhan Xingelin conduct all of their operations in the People's Republic of China, which we refer to in this report as PRC or China. Our corporate structure is as follows:

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The information and data contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations reflect the operating results and financial condition for the three months ended March 31, 2009 and 2008.

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

Sales. Sales decreased $7.5 million, or 29.4%, to $18.1 million for the three months ended March 31, 2009 from $25.6 million for the same period in 2008. This decrease was mainly attributable to the decreased investments both in steel companies and power plants as the result of economic slow-down in China.

Cost of Sales. Our cost of sales decreased $3.3 million, or 18.7%, to $14.3 million for the three months ended March 31, 2009 from $17.6 million during the same period in 2008. As a percentage of sales, the cost of sales was 79% during the three months ended March 31, 2009 compared to 68.5% in the same period of 2008. This increase was primarily attributable to the decrease in selling prices.

Gross Profit. Our gross profit decreased $4.3 million, or 53%, to $3.8 million for the three months ended March 31, 2009 from $8.1 million for the same period in 2008. Gross profit as a percentage of sales was 21% for the three months ended March 31, 2009 compared to 31.5% during the same period in 2008.

Selling Expenses. Our selling expenses for the three months ended March 31, 2009 were consistent with that for the same period in 2008. As a percentage of sales, selling expenses were 2.3% for the three months ended March 31, 2009 compared to 1.4% for the same period in 2008. This increase as a percentage of sales was primarily attributable to the lower economies of scale as a result of the significant decrease in sales.

General and Administrative Expenses. Our general and administrative expenses decreased $0.9 million, or 38.6%, to $1.4 million for the three months ended March 31, 2009 from $2.2 million for the same period in 2008. As a percentage of sales, general and administrative expenses were 7.6% for the three months ended March 31, 2009 compared to 8.8% for the same period in 2008. This decrease as a percentage of sales was primarily attributable to more aggressive measures implemented to control costs.

Warranty Expense. Our warranty expense increased to approximately $154,000 for the three months ended March 31, 2009 from approximately $30,000 for the same period in 2008. As a percentage of sales, warranty expense was 0.9% for the three months ended March 31, 2009 compared to 0.1% for the same period in 2008.

Operating Income. Our operating income decreased $3.6 million, or 65.9%, to $1.8 million for the three months ended March 31, 2009 from $5.4 million for the same period in 2008. As a percentage of sales, operating income was 10.2% for the three months ended March 31, 2009 compared to 21.1% for the same period in 2008. This decrease as a percentage of sales was primarily attributable to decreased selling prices and decreased gross margin.

Interest Income. Our interest income decreased to approximately $184,000 for the three months ended March 31, 2009 from approximately $314,000 for the same period in 2008. This decrease was due to a decrease in bank deposits.

Interest Expense. Our interest expense decreased approximately $280,000, or 30.6%, to approximately $633,000 for the three months ended March 31, 2009 from approximately $913,000 for the same period in 2008. This decrease was due to the significant decrease in bank loans and notes.

Income Tax. The Company's subsidiaries, Wuhan Blower and Wuhan Generating were subject to 15% PRC income tax during the three months ended March 31, 2009. Wuhan Xingelin was in a loss position and consequently did not incur any tax liability. Wuhan General did not incur any U.S. income tax liability during the three months ended March 31, 2009.

Net Income. Net income decreased $3.7 million, or 76.8%, to $1.1 million during the three months ended March 31, 2009 from $4.8 million during the same period in 2008, as a result of the factors described above.

Liquidity and Capital Resources

As of March 31, 2009, we had cash and cash equivalents of $7.6 million,
including restricted cash of $6.6 million.

As of March 31, 2009, we had banking facilities in the form of bank loans and
loan facilities from other non-bank entities totaling approximately $28 million
(based on an exchange rate of 6.8456 RMB per 1 U.S. dollar). Information
regarding these loans is set forth below in US $.

                                                                          Interest           At
                                                                          Rate Per       March 31,
 Subsidiary        Type             Name of Creditor         Due Date      Annum            2009
                               Shanghai Pudong
Wuhan Blower   Bank Loans      Development Bank             5/20/2009          8.96 %   $    730,396
                               Shanghai Pudong
Wuhan Blower   Bank Loans      Development Bank             5/22/2009          8.96 %        730,396
                               Shanghai Pudong
Wuhan Blower   Bank Loans      Development Bank             5/25/2009          8.96 %        730,396
                               Shanghai Pudong
Wuhan Blower   Bank Loans      Development Bank             5/27/2009          8.96 %        730,396
                               Shanghai Pudong
Wuhan Blower   Bank Loans      Development Bank             5/29/2009          8.96 %        730,396
                               Shanghai Pudong
Wuhan Blower   Bank Loans      Development Bank              6/4/2009          8.96 %        730,396
                               Shanghai Pudong
Wuhan Blower   Bank Loans      Development Bank             6/23/2009          8.96 %        584,317
                               Shanghai Pudong
Wuhan Blower   Bank Loans      Development Bank             8/26/2009          8.96 %      1,168,634
                               Shanghai Pudong
Wuhan Blower   Bank Loans      Development Bank             8/24/2009          8.96 %      1,168,634
Wuhan Blower   Bank Loans      Bank of China, Ltd.          3/12/2010          5.40 %        803,437
Subtotal                                                                                   8,107,397

                               Shanghai Pudong
Wuhan Blower   Notes Payable   Development Bank             8/18/2009                        580,490
Wuhan Blower   Notes Payable   Industrial Bank Co., Ltd.    8/26/2009                      1,460,792
Wuhan Blower   Notes Payable   Industrial Bank Co., Ltd.    8/26/2009                      1,460,792
Wuhan Blower   Notes Payable   Bank of China, Ltd.          8/13/2009                        788,828
Subtotal                                                                                   4,290,902

               Long
Wuhan          Term
Generating     Loan            Bank of Communications       12/23/2010         5.67 %      1,460,792
               Long
Wuhan          Term
Generating     Loan            Bank of Communications       1/15/2011          5.40 %      1,460,793
subtotal                                                                                   2,921,585

Wuhan          Notes
Generating     Payable         Bank of Communications       6/26/2009                      2,483,347
Wuhan          Notes
Generating     Payable         Bank of Communications       7/19/2009                      2,921,585
Wuhan          Notes
Generating     Payable         Bank of Communications       7/20/2009                      2,921,585
Wuhan          Notes
Generating     Payable         Bank of Communications       6/24/2009                      4,382,376
subtotal                                                                                  12,708,893

total                                                                                   $ 28,028,777

We plan to either repay this debt as it matures or refinance this debt with other debt. For the quarter ended March 31, 2009, the amount of our outstanding debt from bank loans and notes decreased $8.6 million. Subsequent to March 31, 2009, the Company obtained bank facilities in the form of bank notes up to RMB 40 million (equivalent to approximately $5.8 million) from Standard Charted Bank Guangzhou Branch.

On February 7, 2007, immediately following the consummation of the share exchange, we completed a private placement of Series A Preferred Stock and warrants to accredited investors. As a result of this private placement, we received approximately $24.0 million in gross proceeds. After the deduction of sales commissions and offering expenses, we received approximately $20.0 million in net proceeds.

On September 29, 2008, the Company raised approximately $11.8 million in gross proceeds from the exercise of a portion of the Company's Series J warrants. These warrant holders exercised the Series J warrants for 5,006,524 shares of the Company's Series B Preferred Stock, which is convertible on a one-to-one basis for the Company's common stock. The Company paid approximately $1.18 million in commissions in connection with these warrant exercises.

In October and November 2008, the Company raised approximately $3.03 million in gross proceeds from additional exercises of Series J warrants. These warrants were exercised for 1,302,554 shares of the Company's Series B Preferred Stock and the Company paid approximately $303,500 in commissions in connection with these warrant exercises.

The Company believes that its currently available working capital, combined with cash from operations, should be adequate to sustain operations at current levels through at least the next 12 months. In order to complete the Company's expansion plans, the Company may need additional capital.

At March 31, 2009, we had $38.9 million in accounts receivable, compared to $41.5 million at December 31, 2008. This represents a decrease of $2.6 million, or 6.2%. Our sales increased approximately 29% for the quarter ended March 31, 2009 compared to the prior quarter. In order to manage this increase in accounts receivable turn over period, we have employed additional resources in collecting on outstanding accounts receivable and have aligned more closely sales commissions with the collection on sales.

The majority of our customers pay us in installments at various stages of project completion. The percentage of the purchase price due at the various stages varies somewhat between contracts. In our standard sales contract, we receive 60% of the purchase price of a piece of equipment at the time of delivery. Alternatively, some sales contracts provide for 30% due upon signing and 30% due upon delivery. We generally receive an additional 30% of the purchase price when the equipment is installed and runs without problem for 72 hours. However, since our equipment is generally a component of a larger project, there are times that customers do not allow us to install the equipment immediately upon delivery. We generally receive the final 10% at 18 months following the installation. Although the payment terms in our standard sales contract result in a long payment cycle, we believe our payment terms are typical in our industry in China. Nonetheless, we are seeking more aggressive payment schedules on new sales contracts in order to improve our liquidity position.

At March 31, 2009, we had $6.4 million in other receivables.

We also had advances to suppliers of $13.3 million at March 31, 2009, which decreased by $6.9 million compared to the balance as at December 31, 2008.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. We consider our critical accounting policies to be those that require the more significant judgments and estimates in the preparation of financial statements, including the following:

Method of Accounting: We maintain our general ledger and journals with the accrual method of accounting for financial reporting purposes. The financial statements and notes are representations of management. Accounting policies that we have adopted conform to generally accepted accounting principles in the United States of America and have been consistently applied in the presentation of financial statements, which are compiled on the accrual basis of accounting.

Consolidation: The interim financial statements include the accounts of the Company and its subsidiaries, UFG, Wuhan Blower, Wuhan Generating and Wuhan Xingelin Equipment. Inter-company transactions, such as sales, cost of sales, due to/due from balances, investment in subsidiaries, and subsidiaries' capitalization have been eliminated.

Economic and Political Risks: Our operations are conducted in the PRC. Accordingly, our business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC and by the general state of the PRC economy.

Use of Estimates: In preparing the financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. These estimates and assumptions include, but are not limited to, the valuation of accounts receivable, inventories, deferred income taxes and the estimation of useful lives of property, plant and equipment. Actual results could differ from these estimates.

Cash and Cash Equivalents: We consider all cash and other highly liquid investments with initial maturities of three months or less to be cash equivalents. We maintain bank accounts in the People's Republic of China and in the United States of America.

Accounts Receivable-Trade: Trade receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is made when collection of the full amount is no longer probable. Pursuant to the Company's accounting policies, the allowance for doubtful accounts is determined by applying a rate of five percent on outstanding trade receivables. In addition, the Company uses a specific review process to determine if any additional allowances for doubtful accounts are required. Bad debts are charged against the allowance when outstanding trade receivables have been determined to be uncollectible.

Inventory: Inventory, consisting of raw materials, work in progress, and finished products, is stated at the lower of cost or market value. Finished products are comprised of direct materials, direct labor and an appropriate proportion of overhead.

Property, Plant, and Equipment: Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method with 5% salvage value. Estimated useful lives of the property, plant and equipment are as follows:

Buildings 30 years Machinery and Equipment 10 years Furniture and Fixtures 5 years Motor Vehicles 5 years

Intangible Assets: Intangible assets are stated at cost less accumulated amortization. Amortization is provided over the respective useful lives, using the straight-line method. Estimated useful lives of intangibles are as follows:

Technical Licenses 10 years Trademark 20 years

Land Use Rights: We carry land use rights at cost less accumulated amortization. Land use rights are amortized straight-line over the useful life of 50 years for the Wuhan Blower and Wuhan Generating Equipment campus and of 30 years for Wuhan Xingelin Equipment campus.

Accounting for Impairment of Long-Lived Assets: We adopted Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. We periodically evaluate the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. Based on its review, we believe that, as of March 31, 2009 and December 31, 2008, there were no significant impairments of long-lived assets.

Revenue Recognition: Revenue from the sale of blower products and generating equipment is recognized at the time of the transfer of risks and rewards of ownership, which generally occurs when the goods are delivered to customers and the title passes. There are no customer acceptance clauses in the Company's standard sales contracts. Typically, installation begins between one to two weeks following delivery of the product. The installation process typically takes four to eight weeks.

Cost of Sales: Our cost of sales is comprised of raw materials, factory worker salaries and related benefits, machinery supplies, maintenance supplies, depreciation, utilities, inbound freight, purchasing and receiving costs, inspection and warehousing costs.

Selling Expenses: Selling expenses are comprised of outbound freight, salary for the sales force, client entertainment, commissions, depreciation, advertising, and travel and lodging expenses.

General & Administrative Expenses: General and administrative expenses include outside consulting services, research & development, executive compensation, quality control, and general overhead such as the finance department, administrative staff, and depreciation and amortization expense.

Advertising: We expense all advertising costs as incurred.

Research and Development: We expense all research and development costs as incurred.

Foreign Currency Translation: We maintain our financial statements in the functional currency, which is the Renminbi (RMB). Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.

For financial reporting purposes, the financial statements, which are prepared using the functional currency, have been translated into U.S. dollars. Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and stockholders' equity is translated at historical exchange rates. Translation adjustments are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders' equity.

Exchange Rates                           3/31/2009       12/31/2008      3/31/2008
Period end RMB : US$ exchange rate          6.84560          6.85420         7.0222
Average period RMB : US$ exchange rate      6.84659          6.96225        7.17568

RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.

Income Taxes: We use the accrual method of accounting to determine and report its taxable income and tax credits for the year in which they are available. We have implemented Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Income tax liabilities computed according to the U.S. and PRC tax laws are provided for the tax effects of transactions reported in the financial statements and consists of taxes currently due plus deferred taxes related primarily to differences between the basis of fixed assets and intangible assets for financial and tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will be either taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes. A valuation allowance is created to evaluate deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize that tax benefit, or that future realization is uncertain.

Effective January 1, 2008, PRC government implemented a new 25% tax rate across the board for all enterprises regardless of whether domestic or foreign enterprise without any tax holiday which is defined as "two-year exemption followed by three-year half exemption" hitherto enjoyed by tax payers. As a result of the new tax law of a standard 15% tax rate, tax holidays terminated as of December 31, 2007. However, PRC government has established a set of transition rules to allow enterprises already started tax holidays before January 1, 2008, to continue enjoying the tax holidays until being fully utilized. Our operating subsidiaries expect to be subject to a 15% income tax rate starting January 1, 2009.

We are subject to U.S. income tax according to Internal Revenue Code Sections 951 and 957. Corporate income tax is imposed on progressive rates in the range of:

                                 Taxable Income
               Rate        Over         But Not Over       Of Amount Over
                 15 %             0            50,000                    0
                 25 %        50,000            75,000               50,000
                 34 %        75,000           100,000               75,000
                 39 %       100,000           335,000              100,000
                 34 %       335,000        10,000,000              335,000
                 35 %    10,000,000        15,000,000           10,000,000
                 38 %    15,000,000        18,333,333           15,000,000
                 35 %    18,333,333                 -                    -

Based on the consolidated net income for the quarter ended March 31, 2009, we do not believe we have any U.S. income tax liability.

. . .