Growth Strategy

Zongshen PEM Power System ("ZPP") plans to leverage the resources of its major shareholder, Zongshen Industrial Group ("Zongshen Group"), to become a leading provider of alternative power systems and products, including electric vehicles and advanced battery technologies.

Zongshen Industrial Group, one of China's largest manufacturers of automotive engines, industrial motors and vehicles. ZPP is the platform through which Zongshen Group will undertake mass-market entry of the alternative power systems and products. ZPP is able to access and lever off the resources of Zongshen Group, including its brand name, research and development, product design & development, production, marketing and distribution network, providing a scalable platform for organic growth.

E-bike & Low emission small gas bikes

The first commercialized products were electric bikes and motorcycles ("e-bike"), and small gas bikes with an engine capacity of less than 50cc. Extensive market research, which is ongoing, was conducted in 2006 and the e-bike division commenced production and sales in early 2007. With current annual capacity at approximately 350,000 units between two plants, the Company has successfully ramped up product sales to more than 220,000 units in 2008 versus just over 50,000 units in the previous year.

The e-bike market in China has grown dramatically over the past six years, with studies estimating sales to exceed 21 million units in 2007, up from 1.6 million in 2002, representing a 68% compound annual growth rate (CAGR). The market drivers include the Chinese government's implementation of a 5-year plan to radically decrease carbon-based emissions, and the banning of new sales of gas motorcycles in some cities in China.

The Chinese market is currently served by an estimated 1,200 e-bike manufacturing a company, the largest of which has less than 5% market share. This highly fragmented market provides an opportunity for ZPP to compete with better technology, leveraging the brand, production scale and distribution of Zongshen Group. With production capacity in excess of 2 million motorcycles and 4 million motorcycle engines and some 5,000 retail outlets in China, Zongshen Group has established itself as a leading brand for motorcycles in China and the region, attracting joint venture partners such as Harley Davidson and Italy's Piaggio. ZPP anticipates that it will be able to take advantage of the fragmented marketplace and target selective acquisitions with an ambition to further expand its product line and distribution network.

Research & Development Projects

ZPP plans to further strengthen and expand its offering of alternative power system products with particular focus on battery systems through research and development, licensing and acquisitions. R&D efforts will focus on the continuous improvement of its e-bike battery power system and new technologies, which are expected to drive significant future revenue and earnings growth while further diversifying the Company's product offering. Target markets for licensing and acquisition include battery technologies and e-bike manufacturers with scale and distributions networks, which would complement the Company's, reach into the markets it targets to penetrate.