Zongshen PEM Power Systems Inc. Launches its Premium Blue Sea E-Bikes in China

    -   Approximately 1,000 Zongshen dealers attend the official product

    -   Red Sea sales exceed 60,000 units in 2007

    TSX Venture Exchange: ZPP

    VANCOUVER, Jan. 17 /CNW/ - Zongshen PEM Power Systems Inc. ("ZPP" or "the
Company") (TSXV:ZPP), is pleased to announce the launch of its Blue Sea
e-bikes, attended by 1,000 Zongshen branded dealers and distributors at the
headquarters of its largest shareholder, Zongshen Industrial Group, in
Chongqing, China.
    The Company's initial line of e-bikes, called Red Sea were launched in
early 2007, and 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. The Blue Sea e-bikes are a premium e-bikes with enhanced battery
technology, design and operating system. The Company believes that the Blue
Sea e-bike products 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 offer significant added value to
the consumer and position ZPP as the leading provider of high-quality e-bikes.
The Blue Sea products include patented battery technology and design that is
expected to allow ZPP to charge a premium price and generate improved margins.
    The first three models of the Blue Sea e-bike line were launched at the
annual sales conference for the 1,000 exclusive Zongshen branded dealers and
distributors, where the Zongshen Industrial Group also introduced its new 2008
gas motorcycle models, clothes and accessories. The Blue Sea e-bikes will also
be introduced to the approximately 4,000 additional dealers and distributors
that sell Zongshen Industrial Group's gas motorcycles and accessories. ZPP
plans to broaden the Blue Sea e-bike line by launching at least 10 models in
    "We are very pleased that orders for over 11,000 Blue Sea e-bikes were
placed on the first day of our launch," noted Mr. Yao Li, President and CEO of
Zongshen PEM Power Systems Inc. "We are well positioned to be a leader in
China for e-bikes, with two years of extensive market research used to develop
a premium e-bike line with value add features that customers told us they
wanted, gross proceeds of over $35 million from the bought deal financing that
closed in November 2007, and the recently signed Master Support Agreement with
the Zongshen Industrial Group that provides ZPP access to our major
shareholder's 5,000 dealers and distributors, production and design expertise,
technology and brand."
    The Company is also pleased to report Red Sea e-bike unit sales of
approximately 29,608 during the fourth quarter of 2007, representing 63%
growth compared with the third quarter of 2007. Total unit sales for fiscal
2007 are estimated to be over 60,000 compared with the previously stated
guidance of 50,000 units. (See press release issued January 7, 2008)

                  YTD 2007      Q4 2007      Q3 2007     Q2 2007     Q1 2007
    Units Sold      60,130       29,608       18,168       5,896       6,458

    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 $200 to
$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 the Zongshen Industrial Group. With production capacity in
excess of 2 million motorcycles and 4 million motorcycle engines and some
5,000 dealers and distributors in China, The Zongshen Industrial Group has
established itself as a leading brand for motorcycles in China and the region,
attracting leading international manufacturers as joint-venture partners.
    On January 7, 2008, Zongshen Industrial Group and ZPP announced the
signing of a Master Support Agreement whereby the Zongshen Industrial Group
will not compete with ZPP, and 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.
    The first products to be commercialized are electric bikes and
motorcycles ("e-bikes"). 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 60,000 units in 2007.

    About Zongshen PEM Power Systems Inc.

    Zongshen PEM Power Systems Inc. is a public company trading under the
symbol ZPP on the TSX Venture 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 news release 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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