Zongshen PEM Power Systems Inc. & Zongshen Industrial Group sign 10-year Master Support Agreement



    VANCOUVER, Jan. 7 /CNW/ - 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.

    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.





For further information:

For further information: Ali Mahdavi, Zongshen PEM Power Systems Inc.,
Vice President, Corporate Finance & Investor Relations, (416) 962-3300,
1-877-775-8734, amahdavi@zongshenpem.com

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ZONGSHEN PEM POWER SYSTEMS INC.

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