Zongshen PEM Power Systems Inc. & Zongshen Industrial Group Sign 10-Year Master Support Agreement

January 7, 2008 — Vancouver, British Columbia — Zongshen PEM Power Systems Inc. ("ZPP" or "the Company") (TSXV:ZPP), is pleased to announce that pursuant to the news release issued on November 14, 2007 where the Company announced the signing of a Memorandum of Understanding, it has signed a 10-year Master Support Agreement (the "Agreement") with its largest shareholder, Zongshen Industrial Group. As part of the Agreement, Zongshen Industrial Group will not compete with ZPP, and will conduct all of its alternative power source business through ZPP, including the development and sale of all products and services related to electric vehicles, fuel cells, solar power and wind power.

Zongshen Industrial Group was founded in 1992, and has 30 wholly or majority owned subsidiaries, including Chongqing Zongshen Power Machinery Co., which is listed on the Shenzhen Stock Exchange. Zongshen Industrial Group is an established, leading motorcycle brand in China and has joint ventures with some of the world's leading motorcycle manufacturers. Zongshen Industrial Group currently has an annual production capacity of 2,000,000 motorcycles, 3,000,000 motorcycle engines, 5,000,000 general-purpose engines, and 100,000 car engines. Zongshen Industrial Group distributes its Zongshen branded motorcycles and accessories through some 5,000 dealers in China, including close to 1,000 Zongshen branded dealers, and distributes its products internationally through distributors and partners.

Under the terms of the Agreement, Zongshen Industrial Group will support ZPP by providing ZPP access to its corporate resources at cost including, without limitation, distribution, research and development, design, marketing and production expertise. ZPP has also been granted the right to use the Zongshen brand in perpetuity with no license fees.

In return for this support, ZPP has granted Zongshen Industrial Group the right to participate in all future equity or equity related financings of ZPP such that Zongshen Industrial Group can maintain, at all times, a minimum 25% ownership in ZPP on a fully- diluted basis.

"This Agreement demonstrates the dedication and long-term commitment of the Zongshen Industrial Group to building a major alternative power business through ZPP," noted Mr. Yao Li, President and CEO of Zongshen PEM Power Systems Inc. "ZPP is well positioned to leverage the resources of Zongshen Industrial Group to take advantage of the tremendous growth opportunities in China and globally for alternative power systems. Our competitive advantages in China combined with our enhanced presence in North America, through our listing on the TSXV and recent financing, will provide enhanced access to the technology and capital required to maximize shareholder value."

The Company's first commercialized products are electric bikes and motorcycles ("e- bikes"), which were launched in early 2007. 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 to produce 200,000 e-bikes, and a second facility going into production in 2008, the Company plans to significantly grow sales to more than 260,000 units for fiscal 2008. These expectations are consistent with the detailed growth strategy issued by way of a news release on October 23, 2007.

"The Zongshen brand name is already synonymous with high quality motorcycles in China and has the potential to become the leading provider of premium electric bikes and motorcycles," continued Mr. Li. "In addition to our ability to enjoy strong organic growth, we will take advantage of the fragmented marketplace and target selective acquisitions with an ambition to expand our product line and distribution network. We plan to focus our future growth on the top end of market for quality and features, where our technology, brand and R&D provide ZPP competitive advantages and better margins and will enable us to enter the European and North American markets."

ZPP plans to expand its offering of alternate power system products, including battery, fuel cell and solar power products, 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 growth and generate earnings while further diversifying the Company's product offering. Target markets for licensing and acquisition include battery systems for forklifts, solar power technologies and selected e-bike companies.

About Zongshen PEM Power Systems Inc.

Zongshen PEM Power Systems Inc. is a public company trading under the symbol ZPP on the Toronto Venture Stock Exchange. The Company is engaged in the commercialization of alternate power systems including batteries, fuel cells and solar power, for a variety of consumer and industrial applications. The Company manufactures low-cost, high quality, environmentally friendly electric motorcycles, electric bicycles and other e-vehicles in China for the domestic and international market. Zongshen PEM Power System's largest shareholder is Zongshen Industrial Group, one of China's largest manufacturers and distributors of motorcycles, engines, and power equipment.

About Zongshen Industrial Group

Zongshen Industrial Group was founded in 1992, and now consists of 30 totally or majority owned subsidiaries including Chongqing Zongshen Power Machinery Co., which is listed on the Shenzhen Stock Exchange. The Company employs in excess of 13,000 employees with assets in excess of RMB 4 billion Yuan. Zongshen Industrial Group implements the development strategy of related diversification within the thermodynamic machinery industry. Its engine products mainly include motorcycle engines, mini-car engines, speedboat engines, and general-purpose machinery. Its end products mainly include motorcycles, speedboats and other power equipment. Zongshen Industrial Group now has an annual production capacity of 2,000,000 motorcycles, 50,000 mini vans, 3,000,000 motorcycle engines, 5,000,000 general- purpose engines, and 100,000 car engines. Zongshen Industrial Group has established a leading brand for motorcycles in China attracting some of the world's largest motorcycle manufacturers as joint venture partners.

For more information please contact:
Ali Mahdavi
Zongshen PEM Power Systems Inc.
Vice President, Corporate Finance & Investor Relations
416.962.3300
1.877.775.8734
amahdavi@zongshenpem.com

The statements made in this presentation that are not historical facts are forward- looking statements that represent management's beliefs and assumptions based on currently available information. These statements may relate to matters such as expected financial performance, business prospects, technological developments, and development activities and like matters. These statements involve risks and uncertainties, including but not limited to the risk factors described in reporting documents filed by the Company. Actual results could differ materially from those projected as a result of these risks and should not be relied upon as a prediction of future events. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.