Zongshen PEM Power Systems Inc. Provides Update on Acquisition of the Two
Wheeled Motorcycle Business

TSX:ZPP

VANCOUVER, June 14 /CNW/ - Zongshen PEM Power Systems Inc. ("ZPP" or the "Company") (TSX:ZPP), is pleased to provide an update on the acquisition of the two wheeled motorcycle business (the "Motorcycle Business", and the acquisition, the "Proposed Acquisition").

As announced by the Company on May 14, 2010 and disclosed in the Company's management information circular dated May 10, 2010, Chongqing Zongshen Group Import & Export Co., Ltd. ("Import & Export"), one of the subsidiaries comprising the Motorcycle Business, is a defendant together with Zongshen, Inc., Zongshen USA Holdings, Inc., Zuo Zongshen, Dexiu Yan and Ying Zuo (collectively, the "Defendants") to three separate actions in the State of Oregon pursuant to which the plaintiffs, Rubicon Global Ventures, Inc. and Z Motors, Inc. (collectively, the "Plaintiffs"), have obtained default judgments aggregating US$324 million (the "Oregon Litigation").

The Company is pleased to announce that the United States District Court for the District of Oregon (the "Oregon District Court") has since issued orders vacating all three default judgements relating to the Oregon Litigation. In addition, the orders of default against the Defendants in two of the actions comprising the Oregon Litigation have also been set aside. In the remaining action (for which default judgment in the amount of US$91 million has been vacated), the Oregon District Court has asked the parties (including Import & Export as one of the named Defendants) to provide additional briefing prior to July 30, 2010 in order to decide whether to set aside entries of default.

While it remains uncertain how long it will take to conclude the Oregon Litigation, the Oregon District Court has ordered the parties to the Oregon Litigation to submit to mediation prior to July 30, 2010. The Company continues to closely monitor the Oregon Litigation. It remains uncertain at this time if, when and how the Oregon Litigation will ultimately be concluded, and if so, at what cost to the Motorcycle Business and the Company, although Zongshen Industrial Group Co., Ltd. ("ZIG") has agreed to indemnify the Company for any liability arising from the Oregon Litigation. Shareholders should refer to the management information circular for these and other risk factors relating to the Proposed Acquisition and the Motorcycle Business.

The annual and special meeting of shareholders of the Company will be held on June 25, 2010, at which meeting shareholders will be asked to approve the Proposed Acquisition. Closing of the Proposed Acquisition is expected to occur on or about June 30, 2010.

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 is engaged in the commercialization of alternative 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 small gas motorbikes, 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 motorcycles, engines, and power equipment.

Forward Looking Information

Certain statements in this press release, including statements which may contain words such as "pro forma", "may", "could", "expects", "believes", "projects", "forecasts", "will", "anticipates", "plans", "estimates" or negative versions thereof and similar expressions, and statements related to matters that are not historical facts, are forward-looking statements. Such forward-looking statements are based on certain factors and assumptions and involve known and unknown risks and uncertainties which may cause the actual results, performances, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements.

These forward looking statements relate to, among other things, product plans, timing, content and pricing of products, market and industry expectations, the future of the alternative power and low emissions vehicle industries, general economic, business and political conditions, loss or addition of key employees, stock market volatility, changes in laws and regulations, the Company's ability to compete successfully, adapt to technological advances, changing industry standards, foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities, effective income tax rates and other factors.

All forward looking statements in this release are based on management's reasonable beliefs, intentions, and expectations with respect to future events and are subject to certain risks, uncertainties, and assumptions as of the date of this release. Some of these risks, uncertainties and factors include those disclosed herein and those disclosed under the heading "Risk Factors" in the Company's Annual Information Form dated March 25, 2010 and Management Information Circular dated May 10, 2010, both of which have been filed on SEDAR at www.sedar.com, including the impact or unanticipated impact of: the outcome of the Oregon litigation affecting the Motorcycle Business; the scope and content of the proposed amendment to the Company's Master Support Agreement with ZIG; current, pending and proposed legislative or regulatory developments in the jurisdictions where the Company operates, particularly in China; changes in tax laws; political conditions and developments; intensifying competition from established competitors and new entrants in the alternative power source and low emissions vehicle industries; technological change; changes in raw material and labour costs; changes in oil and other commodity prices; currency value fluctuations and changes in foreign exchange restrictions; changes in Chinese government support or restrictions on foreign investment; general economic conditions worldwide as well as in China; the Company's success in developing and introducing new products and services, expanding existing distribution channels, developing new distribution channels, realizing increased revenue from those channels; the closing of the proposed acquisition of the Motorcycle Business and the successful integration of the Motorcycle Business. This list is not exhaustive of the factors that may affect any of the Company's forward-looking statements. In light of the many risks and uncertainties that may cause future results to differ materially from those expected, the Company cannot give assurance that the forward looking statements contained in this release and the documents incorporated by reference herein will be realized. Forward looking statements are not guarantees of future performance. Except as required by applicable law, the Company assumes no obligation to update its forward-looking statements to reflect subsequent information or events.

Assumptions underlying our expectations regarding forward-looking statements or information contained in this release include, among others, that the default judgments from the Oregon litigation will be set aside and the Oregon litigation will eventually be resolved without liability to the Company; that the Company can continue to rely on the support of ZIG for its existing business and the Motorcycle Business proposed to be acquired; that the strength of the Zongshen brand will continue to be strong; that the Company will continue to be able to retain key personnel and attract and retain additional talent as required; that the Company's suppliers will continue to be able to provide raw materials and other key components on a timely basis and on reasonable terms; that the Company will be able to continue to protect its intellectual property; that the Company will continue to be able to access additional capital on reasonable terms and on a timely basis; that the Company will be able to establish and/or maintain relationships with key suppliers, customers and strategic partners; that the proposed acquisition of the Motorcycle Business will close; that the Motorcycle Business will be successfully integrated with the Company's existing business; and that the existing customers and suppliers of the Company and the Motorcycle Business will continue, and expand, their relationships with the Company after the Motorcycle Business is acquired by the Company.

In the event that any of these assumptions prove to be incorrect, or in the event that we are impacted by any of the risks identified above, we may not be able to continue our business as planned, or at all.

For further information: Ali Mahdavi, Zongshen PEM Power Systems Inc., Investor Relations, 1-416-962-3300, 1-877-775-8734, [email protected]