Zongshen PEM Power Systems Inc.

Zongshen PEM Power Systems Inc.

May 10, 2011 09:15 ET

ZPP Signs Contract to Manage ZIG's Thailand JV

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 10, 2011) - Zongshen PEM Power Systems Inc. ("ZPP" or the "Company") (TSX:ZPP) is pleased to report that the Company has signed a contract to provide management services for Zongshen Hongsi International Co. Ltd., a motorcycle joint venture based in Thailand ("Thailand JV"). ZPP will receive the higher of $150,000 per annum or 30 percent of the net increase in profits over 2010 profits for its management fees.

Thailand JV

Thailand JV was formed in 2009 between a wholly owned subsidiary of Zongshen Industrial Group ("ZIG"), which owns 90 percent of the Thailand JV, and a local partner that owns the remaining 10 percent. The Thailand JV is ZPP's exclusive Thai distributor and sells ZPP manufactured motorcycles under the Ryuka brand. The Thailand JV has its own manufacturing plant and the main use of this facility is to re-assemble ZPP motorcycles which arrive to Thailand in completely-knocked-down form. In 2010, the joint venture sold 13,500 motorcycles which were primarily ZPP made Ryuka motorcycles.

In addition to the Thailand JV, ZIG also has joint ventures with the Piaggio Group and a local partner in Brazil. Each of these JVs operates as independent corporate entities and has separate independent board of directors and management teams. Competition within these related entities and with ZPP is limited by geographic separation and/or restriction of motorcycle models offerings so the products do not compete directly.

Thailand JV Management Contract

Thailand JV will continue to have its operational management team and ZPP will provide management consulting services such as strategic planning and corporate development to the Thailand JV on behalf of ZIG.

ZPP will receive a minimum of $150,000 for the management services but will receive 30% of the 2011 net profit increase if this amount exceeds the minimum fees. The contract term is for one year and renewable on an annual basis.

Thailand Motorcycle Market

In 2010 approximately 1.6 million motorcycles were sold in Thailand and like China, the majority of the motorcycles sold are for commuting purposes. The Thailand motorcycle market is relatively concentrated with the Japanese motorcycle companies occupying most of the market.

ZPP's motorcycle business entered the Thai market in 2007 and its products are sold in more than 180 retailers across Thailand. Thailand is also ZPP's fifth largest export market where in 2010, the Company's motorcycle business sold a total of 12,600 units which represents a 15% increase from prior year. In addition, the average sale price of the motorcycles sold to Thailand is approximately 25% higher than the bikes sold in domestic Chinese market.

The ZPP made Ryuka has established itself as a value brand in Thailand – quality motorcycles that retail for about 20% less than a comparable Japanese motorcycle. The Company plans to build on the product advantage by working with local partners to expand its retail distribution network and increasing sales and marketing initiatives.

"We see a tremendous opportunity to grow our sales in Thailand because ZPP is able to offer quality, yet attractively priced motorcycles. The management contract will further enhance our cooperation with the Thailand JV and will facilitate our Thai market research and coordination of marketing efforts," said Mr. Zongshen Zuo, CEO and Chairman of ZPP.

About Zongshen Industrial Group

Zongshen Industrial Group ("ZIG") is one of China's largest private industrial conglomerates with more than 30 businesses that include motorcycle, engine, and light vehicle manufacturing and real estate. ZIG is the largest shareholder of ZPP and Chongqing Zongshen Power Machinery Co., Ltd. one of China's largest manufacturer and marketers of engines for use in motorcycles, three-wheeled motorcycles, power generators, lawn movers and light marine vessels that is traded on the Shenzhen stock exchange under the symbol: SZ001696 and has a $1.4 billion in market capitalization.

About Zongshen PEM Power Systems Inc.

Zongshen PEM Power Systems Inc. is a public company trading under the symbol ZPP on the Toronto Stock Exchange. The Company manufactures gas motorcycles, electric motorcycles, electric bicycles and other e-vehicles in China for the Chinese domestic and international markets. Zongshen PEM Power System's largest shareholder is Zongshen Industrial Group, one of China's largest manufacturers and distributors of engines and power equipment.

Contact Information

  • Zongshen PEM Power Systems Inc.
    Michael Cheung
    VP of Business Development & Investor Relations
    (604) 687-7908

    Zongshen PEM Power Systems Inc.
    Frank Chen
    Chief Financial Officer
    (604) 687-7908
    (604) 677-7008 (FAX)