Zongshen PEM Power Systems to commence construction of e-bike production facility in Chongqing

  • ZPP accelerated production capacity growth to meet market demand
  • Total capacity of the new facility to be 1.2 million units
  • Return on capital to exceed 100 percent

April 24, 2008 — Vancouver, British Columbia — Zongshen PEM Power Systems Inc. ("ZPP" or the "Company") (TSXV: ZPP), is pleased to announce that in addition to the Company's existing production facility in Wuxi, China, it has commenced construction of an e-bike production facility in Chongqing, China with initial capacity of 600,000 e-bike units per annum. The total cost of land, construction and two production lines is expected to be approximately $8 million (RMB 55 million). The production facility has been designed such that it can be expanded to four production lines with total production capacity of 1.2 million e-bike units with an incremental investment of approximately $1.5 million (RMB 10 million). Construction of the new facility is expected to be completed in early 2009, with production expected to commence in early March 2009. Zongshen Industrial Group ("ZIG"), the Company's major shareholder, will continue to manufacture premium e-bikes for ZPP at cost pursuant to the Master Support Agreement, until the new facility is completed.

ZPP has agreed to acquire the land for the production facility from ZIG for a price of $1.9 million (RMB 12.5 million), subject to an independent third party valuation due to the related party nature of the transaction. ZPP believes that the market value of the land is in excess of $3 million (RMB 20 million).

The estimated average selling price per unit of the premium e-bikes to be manufactured at the new facility in Chongqing is $400 (RMB 3,000). The Company believes it can earn net income margins of at least 10 percent, on its premium e-bikes. Accordingly, the Company believes that it will earn a full payback on its capital investment within 12-18 months of the completion of the new facility. After expansion of the new facility's capacity to 1.2 million units, the plant will be able to generate revenues of $480 million and net earnings of approximately $50 million, based on the current estimated prices and margins. ZPP has sufficient cash on hand to complete the construction of the plant and to expand it to 1.2 million units. The use of proceeds from the $35 million private placement closed in November 2007 included $7 million for construction of the new facility in Chongqing with an estimated initial capacity of 200,000 e-bike units. As set out above, the Company has increased the construction budget to $8 million and the initial capacity to 600,000 e-bike units.

"The significant demand from more than 1,100 dealer and distributors in China and our great progress in export markets resulted in our order book exceeding 152,000 e-bike units just in the first quarter of 2008 and provided us with tremendous confidence to move forward with the design and construction of a larger scale e-bike facility in Chongqing than we had previously planned," stated Zongshen Zuo, Chairman and CEO of Zongshen PEM Power Systems Inc. "The return on capital is extremely attractive for this new plant since our team has done an exceptional job to increase average selling prices and net margins. The new facility is designed such that annual capacity can be expanded to 1.2 million premium e-bike units, consistent with our strategy to be a leading provider at the top end of high quality e-bikes in China, while attracting strong interest from export markets."

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 8.4 billion Yuan. Zongshen Industrial Group implements the development strategy of related diversification within 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 units of motorcycles, 50,000 mini vans, 3,000,000 units of motorcycle engines, 5,000,000 units of general purpose engines, and 100,000 units of 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
1-416-962-3300
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.