Zongshen PEM Power Systems Inc.

Zongshen PEM Power Systems Inc.

October 23, 2007 07:12 ET

Zongshen PEM Power Systems Inc. Announces Growth Strategy

- Electric bike and motorcycle ("e-bike") divisions to surpass 260,000 units in combined sales in 2008 - Acquisitions, Strategic Partnerships and R&D to diversify product offering and drive revenue growth and generate earnings

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 23, 2007) - Zongshen PEM Power Systems Inc. ("ZPP" or "the Company") (TSX VENTURE:ZPP), today announced its growth strategy. ZPP plans to leverage the resources of its major shareholder, Zongshen Industrial Group, to become a leading provider of alternate power systems and products, including electric vehicles, fuel cells, batteries and solar power products.

ZPP's growth will continue to be supported by its 49.5% shareholder, Zongshen Industrial Group ("Zongshen 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 alternate power systems and products. The Company 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.

E-bike Business

The first products to be commercialized are electric bikes and motorcycles ("e-bike"). 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 versus a total of over 50,000 units expected in 2007.

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. In addition, an increasing percentage of the Chinese population are looking to upgrade their modes of transportation and e-bikes, with prices that range from about C$200 to C$500, are affordable alternatives compared to cars and motorcycles.

The Chinese market is currently served by an estimated 2,000 e-bike manufacturing companies, the largest of which has an estimated 3% 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 3 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 world leading motorcycle manufacturers as joint venture partners.

The Company's initial line of e-bikes, called "Red Sea" are positioned in the top end of the market providing features and benefits similar to the best quality of e-bikes currently offered in China. In the first quarter of 2008, ZPP plans to launch a premium brand of e-bikes known as "Blue Sea" with enhanced battery technology, design and operating system. The Company believes that the Blue Sea e-bike products will offer a combination of features and benefits such as smaller batteries that deliver more power and drive time between charges, two wheel drive and more attractive styling, that will offer significant added value to the consumer and position ZPP as the leading provider of high-quality e-bikes. The Blue Sea products will include patented battery technology and design that is expected to allow ZPP to charge a premium price and generate improved margins.

"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," noted Mr. Yao Li, President of Zongshen PEM Power Systems Inc. "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."

Research & Development Projects:

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 fork lifts, solar power technologies and, as set out above, 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 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, 100,000 car engines, 3,000,000 units of motorcycle engines, 5,000,000 units of general purpose engines, and 200,000 units of mini-van 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.

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.

Contact Information

  • Zongshen PEM Power Systems Inc.
    Ali Mahdavi
    Vice President, Corporate Finance & Investor Relations
    (416) 962-3300 or 1-877-775-8734
    Email: amahdavi@genoa.ca