VANCOUVER, Apr 29, 2008 (Canada NewsWire via COMTEX News Network) ----

 << - Unit sales ahead of guidance for 2007 - 60,130 units sold in first year of production - Revenues amount to
   $16.1 million versus nil in fiscal 2006 - Fourth quarter revenues increased by 44 percent compared to previous quarter >>
   

TSX Venture Exchange: ZPP

VANCOUVER, April 29 /CNW/ - Zongshen PEM Power Systems Inc. ("ZPP" or "the Company") (TSXV:ZPP), today announced its financial results for the three and twelve-month periods ended December 31, 2007. All currency amounts referred to in this news release are in Canadian dollars unless stated otherwise.

The Company commenced production and sales of e-bikes in the first quarter of 2007 and had no revenues in 2006. Accordingly, most financial comparisons are on a consecutive quarter basis.

During the first quarter of 2007, ZPP launched its e-bike business, comprising the manufacturing and sale of premium electric bicycles and electric motorcycles ("e-bikes") to the Chinese market and select export markets. While the focus is on electric vehicles, the Company also manufactures small gas bikes (less than 35 cc). In its first year of commercial production, ZPP sold 60,130 e-bike units in China, including more than 12,000 small gas bikes, and more than 50 percent export sales. In 2007, the e-bike business generated $16.1 million in revenues, compared to nil in 2006. The Company's China operations generated a profit of $359,735, which was offset by stock based compensation expense, foreign exchange loss, and Canadian office expenses resulting in a consolidated loss of $1.7 million for the year ended December 31, 2007. The Company expects to generate strong growth in net income for 2008, due to estimated sales of 260,000 e-bike units and increasing margins.

The Company is leveraging the resources of its major shareholder, the Zongshen Industrial Group to be a leading provider of alternative power system products. The Zongshen Industrial Group is a major manufacturer of gas motors and related products, and is one of China's largest gas motorcycle producers, with a leading brand for performance and quality.

"ZPP was able to enter the e-bike business and exceed its first year target of 50,000 units with limited capital expenditure by taking full advantage of the design expertise, manufacturing technology and supply chain established by Zongshen Industrial Group with its 15-year track record of quality and performance in the motorcycle business," noted Zongshen Zuo, Chairman and CEO of Zongshen PEM Power Systems Inc. "In 2007, we built a strong foundation and introduced our e-bikes to Zongshen Industrial Group's 5,000 dealers and distributors in China and certain export markets. With our order book at 152,000 units, from more than 1,100 dealers and distributors in China, including 22,000 units for export, and most of the year ahead of us, we look forward to reporting our growth and successes in 2008 to you."

Business Highlights for 2007

Master Support Agreement signed with Zongshen Industrial Group - During the fourth quarter, the Company entered into a memorandum of understanding ("MOU") with Zongshen Industrial Group ("Zongshen Group") pursuant to which Zongshen Group has agreed to conduct all alternative power source business through ZPP, including all products and services related to electric vehicles, fuel cells, solar power and wind power, and to not compete with ZPP in such businesses. As part of the MOU, Zongshen Industrial Group has agreed to introduce the Company and its products to its network of distributors and dealers and provide certain services to ZPP including design, engineering and production on a cost basis. ZPP will also have the right to use the Zongshen brand in perpetuity with no license fees, as long as the Zongshen Industrial Group is ZPP's largest shareholder. In return, the Company agreed to grant Zongshen Group the right to participate in all future equity financings, such that Zongshen Group shall be able to maintain a minimum 25 percent interest in ZPP on a fully diluted basis.

Raised approximately $40 million to fund growth - On November 14, 2007, the Company completed a brokered private placement through the issuance of 11.5 million common shares at $3.06 per share, for gross proceeds of $35.2 million. On July 17, 2007, the Company completed a non-brokered private placement of 9 million shares at $0.57 per unit for gross proceeds of $5.1 million. Each unit consists of one common share and one-half of one share purchase warrant, with each whole warrant entitling the holder to acquire one additional common share at an exercise price of $0.89 per common share for a period of 18 months.

ZPP announces 2007 and 2008 growth strategy and outlook - On October 23, 2007 the Company announced that it is focused on growing the e-bike unit sales to 50,000 units in 2007, and 260,000 units in 2008. Further, the Company will pursue partnership and acquisition opportunities to complement ZPP's strong organic growth profile. The Company sold more than 60,000 e-bike units in 2007, exceeding its target unit sales by more than 20 percent.

Business Highlights Subsequent to Year End 2007

Signs Master Support Agreement with Zongshen Industrial Group - In January 2008, the Company signed the Master Support Agreement pursuant to the MOU described above. (see press release dated January 7, 2008)

Launch of Blue Sea - In January 2008, the Company launched a new premium e-bike model called Blue Sea, including enhanced battery technology. In April 2008, the Company announced the amalgamation of Red Sea and Blue Sea into one e-bike line marketed under the Zongshen brand, due to the increasing convergence of the quality and margins of these two product lines. In addition, the Company announced sales orders of 152,000 units of e-bikes for delivery in 2008. (see press release dated April 21, 2008)

New e-bike Facility - In April, 2008, ZPP commenced construction of an e-bike facility in Chongqing, China with initial capacity of 600,000 e-bike units per annum with a budget of $8 million. The facility is expected to be in production by March 2009, and can be expanded to 1.2 million e-bike units per annum for an investment of approximately $1.5 million. (see press release dated April 24, 2008)

Results of Operations

For the three-month period ended December 31, 2007, the Company reported revenues of $7.4 million versus nil in the corresponding quarter last year, and $5.2 million during the third quarter of 2007. Volume sales during the fourth quarter of 2007 totaled 29,608 units, an increase of 63 percent compared with 18,168 units in the third quarter of 2007.

For the twelve-month period ended December 31, 2007, revenues amounted to $16.1 million versus nil during the same period in 2006. The Company sold 60,130 e-bike units in 2007 - its first year of commercial production of e-bikes.

The Company expects e-bike sales to be characterized by strong seasonality, with less than 10 percent of sales revenues in the first quarter ending March 31, due to the Chinese New Year holiday and the consumer buying patterns in the China e-bike market. In the first quarter of 2008, the Company received sales orders of 152,000 e-bike units, mostly for delivery in the period from May to December 2008, which is the peak period for e-bike sales in China. The 152,000 units ordered include 22,000 for export markets.

Net loss during the fourth quarter of 2007 was $925,356 or $0.02 per share, versus $308,274 or $0.01 per share during the third quarter of 2007. The loss in the fourth quarter was largely due to stock-based compensation expense of approximately $1.2 million. The Company's adjusted operating loss (a non-GAAP measure excluding the impact of stock-based compensation) was $117,529 for the fourth quarter ended December 31, 2007, compared to an adjusted operating loss of $276,256 during the same period in 2006.

The Company had a loss of $1.7 million or $0.04 per share for the year ended December 31, 2007. The Company's adjusted operating loss for the year ended December 31, 2007 was $205,579, excluding the impact of stock-based compensation expense of $1.6 million, compared to $695,575 for fiscal 2006. The Company expects to generate strong growth in net earnings in 2008 and 2009 due to significant increases in revenues and margins from the e-bike business. Gross profit for 2007 amounted to $1.1 million compared to nil for 2006. Gross margin was 6.7 percent for the year and 6.8 percent in the fourth quarter.

Gross margin is expected to improve in 2008 due to increased capacity utilization and increased average selling price. The Company has been able to increase average selling price of its e-bikes due to improvements in styling and performance, while limiting cost increases due to the ability to leverage the human and technology resources, and buying power of the Zongshen Industrial Group.

At December 31, 2007, the Company had cash and cash equivalents amounting to $35.9 million, compared to $2.3 million at December 31, 2007. The increase in the Company's cash position largely relates to the completion of a private placement, which raised $40.3 million, offset by cash used to support operations.

Outlook

As of March 31, 2008 the Company had sales orders for delivery of 152,000 e-bikes, including 130,000 from 1,100 certified distributors in China and 22,000 for export. Based on the current sales orders and expressions of interest from distributors, the Company is confident that it will meet or exceed the sales guidance of 260,000 e-bikes for 2008.

ZPP will continue 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 major shareholder, 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 and development, production, marketing and distribution network.

The Company's two major goals for 2008:

 << - Electric bike and motorcycle divisions to surpass 260,000 units in sales in
   2008, generating strong revenue and earnings growth - Acquisitions, strategic partnerships and R&D to diversify product
   offering with a focus on e-bikes, battery technology and solar power >> 

About Zongshen PEM Power Systems Inc.

Zongshen PEM Power Systems Inc. is a public company trading under the symbol ZPP on the TSX 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. Zongshen Industrial Group employs in excess of 13,000 employees with assets in excess of RMB 8.4 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 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.

SOURCE: Zongshen Pem Power Systems Inc.

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

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