Zongshen PEM Power Systems Inc. Announces Closing of Acquisition of Two
Wheeled Gas Motorcycle Business

TSX:ZPP

VANCOUVER, July 5 /CNW/ - Zongshen PEM Power Systems Inc. ("ZPP" or the "Company") (TSX: ZPP) announced today that it has closed the acquisition (the "Acquisition") of the two-wheeled gas motorcycle business (the "Motorcycle Business") from Hong Kong VAS International Development Limited (the "Vendor") closed on July 2, 2010.

RMB 165,399,000 ($25,339,186) of the RMB 441,064,000 ($67,571,162) cash portion of the purchase price was paid to the Vendor on closing, with the remaining RMB 275,665,000 ($42,231,976) to be paid 18 months following closing, pursuant to a promissory note to be issued by the Company to the Vendor on closing.

In addition 34,776,548 common shares in the capital of the Company were issued to the Vendor on closing and an additional 34,776,548 common shares were issued in the Vendor's name and delivered to an escrow agent to be held in escrow (the "Escrow Shares") for release, in whole or in part, pursuant to the terms of the vendor earn-out agreement entered into between the Company and the Vendor on closing.

As announced by the Company on June 2, 2010, the Company has also agreed to pay HKVAS net cash of RMB 7,190,000 ($1,101,511) as a result of exclusion of certain one time gains from the 2009 net income for the Motorcycle Business that are being set off against certain dividends being forfeited by HKVAS.

Based on the agreed upon RMB:$ exchange rate and the deemed issue price for the common shares, the purchase price paid on closing and the maximum vendor earn-out payable through the release of the Escrow Shares equal approximately 6 and 2 times the 2009 net income for the Motorcycle Business respectively (subject to an exclusion for certain one time gains).

As such, Zongshen Industrial Group Co., Ltd. ("ZIG"), the Company's largest shareholder and strategic partner and a related entity of the Vendor, now beneficially owns, controls or directs, directly or indirectly through the Vendor, an aggregate of 62,637,976 common shares (or 63.45% of the Company's outstanding common shares) upon closing, and up to 97,414,524 common shares (or 72.97% of the Company's outstanding common shares assuming no other common share issuances) if all of the Escrow Shares are eventually released to the Vendor.

Through the Acquisition the Company has acquired a leading Chinese motorcycle business in the world's largest growth market, which the Company believes will provide a strong manufacturing, technology and distribution platform for its existing electric motorcycle business. The Acquisition will also further align the interests of ZPP and ZIG.

Details of the Acquisition, including a formal valuation of the Business prepared in accordance with Multilateral Instrument 61-101, were included in the management proxy circular of ZPP dated May 10, 2010 and the Letter to Shareholders dated June 1, 2010 which are available under the Company's profile on SEDAR at www.sedar.com.

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 electric and gas motorcycles and electric bicycles 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 motorcycles, engines, and power equipment.

For further information: Frank Chen, Zongshen PEM Power Systems Inc., Chief Financial Officer, 604-687-7908, [email protected]