Zongshen PEM Power Systems Inc.
TSX : ZPP

Zongshen PEM Power Systems Inc.

June 01, 2011 09:00 ET

ZPP Updates on Company Initiatives and Reports First Quarter 2011 Shipments

VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 1, 2011) - Zongshen PEM Power Systems Inc. (TSX:ZPP) ("ZPP", or the "Company") is pleased to provide an update on Company initiatives and report that first quarter, 2011 unit shipments total 131,400 motorcycles and electric two wheelers.

Large Gas Bike

The first quarter, 2011 total large gas bike shipments were 125,600 units, a decrease of 5.4% from fourth quarter of 2010. The domestic and exports shipments were respectively 57.4% and 42.6% of total shipments which is consistent with fourth quarter of 2010.

Domestic Shipments

First quarter domestic shipments totaled 72,100 units, a decrease of 6.7% from fourth quarter of 2010. March's shipments totaled 32,800 units while the combined January and February shipments were 39,300 motorcycles.

Shipments improved in March in the first quarter partly due to the full implementation of a new emission standard for gas motorcycles in China. This emission standard was enacted in two phases. Starting July 1, 2010 motorcycle manufacturers were not permitted to produce motorcycles that did not meet this new emissions standard while dealers were granted eight more months till February 28, 2011 to sell motorcycles built under the old emissions regime. During the initial implementation phases of this new emission standard, industry and Company sales decreased as dealers were focused on selling existing inventory. However, over the longer term, the Company expects this emissions standard to create significant market share growth opportunities as many of the smaller manufacturers which together account for 50% of total industry volume, lack the necessary capital and technical expertise upgrade their facilities to produce emissions compliant motorcycles and as a result, will either exit the industry or be acquired by larger competitors.

The first quarter also marked the start of ZPP's 2011 brand initiative to create a strong unified brand image in China. The largest branding event was in February where the Company received China wide media coverage for setting up resting stations that serviced over 250,000 motorcycle riders homebound for Chinese New Year family reunion.

Export Shipments

ZPP exported a total of 53,500 motorcycles in the first quarter, 2011, a decrease of 3.4% from fourth quarter of 2010. ZPP has successfully secured distributors in Kenya, Cameron, Morocco, Tunisia, Egypt, and Mongolia, new markets targeted for 2011 and has begun selling in these markets.

The Company has also signed a management agreement in May, 2011 with Zongshen Industrial Group ("ZIG"), ZPP's largest shareholder, to manage ZIG's Thailand motorcycle joint venture ("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 managing this joint venture. The Thailand motorcycle market is estimated at 1.6 million units per annum with the Japanese manufacturers occupying most of the market. ZPP's Ryuka Zongshen motorcycle is the leading Chinese motorcycle brand in Thailand as its affordable and quality motorcycles are seen as viable alternatives to the more expensive Japanese brands. The Thailand JV is also ZPP's distributor and the Thailand JV's manufacturing facility which predominately is used to re-assemble ZPP motorcycles, which is shipped CKD[1] to Thailand, is being upgraded from 20,000 units per annum to 200,000 units per annum to meet the anticipated increase in demand.

1 CKD = Complete-Knocked-Down, motorcycles that are disassembled and shipped as kits.

Small Gas Motorcycles & Electric Two-Wheelers

Unit shipments of gas motorcycles remained consistent to the fourth quarter of 2010 at approximately 5,000 units. The sales of electric two-wheelers are seasonally slow in the first quarter because the bike's battery life is shortened by cold weather. Total electric two-wheeler unit shipments totaled 800 units, a decrease of 27% from fourth quarter of 2010.

"We are encouraged by our first quarter shipments in particular as March domestic shipments rebounded strongly after the full implementation of the new emissions regime. This also reaffirms our view that motorcycles will continue to be a very important transportation unit in China. As the industry changes to favor larger motorcycle manufacturers, we stand to reap the investments we have made in product quality and innovation," said Mr. Zuo Zongshen, CEO and Chairman of ZPP.

Shipment information

First Quarter, 2011
ChinaInternational
CBUCKD/SKDCBUCKD/SKDTotal
Large gas bikes72,100-16,30037,200125,600
Small gas bikes5,000---5,000
Electric bikes800---800
Total77,900-16,30037,200131,400
Fourth Quarter, 2010
ChinaInternational
CBUCKD/SKDCBUCKD/SKDTotal
Large gas bikes77,300-15,00040,400132,700
Small gas bikes5,000200--5,200
Electric bikes600-2003001,100
Total82,90020015,20040,700139,000

CBU = Complete Built Units; units are shipping in assembled form.
KD = The total of Complete Knocked Down and Semi Knocked Down units; units are shipped in completely or semi-complete disassembled kits.

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 $1.1 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
    mcheung@zongshenpem.com

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