Zongshen PEM Power Systems Inc. ("ZPP" or the "Company") (TSX:ZPP) announces today that it has entered into a definitive agreement with Zongshen Industrial Group Co. Ltd. ("ZIG") and Hong Kong VAS International Development Limited ("HKVAS"), an investment entity controlled indirectly by ZIG, pursuant to which HKVAS has agreed to acquire all of the issued and outstanding common shares of ZPP (the "Shares") not owned by HKVAS or ZIG for C$0.60 per Share in cash.

The purchase price to be paid to ZPP's shareholders represents a 13.2% premium over the closing price of the Shares on the TSX on October 30, 2012, and an 37.5% premium over the 30 trading-day volume-weighted average share price. The transaction will be structured as a plan of arrangement under the Business Corporations Act (British Columbia) (the "Arrangement"). Pursuant to the terms of the Arrangement, all outstanding Shares not owned by HKVAS or ZIG will be transferred to HKVAS in exchange for a cash payment of C$0.60 per Share. The estimated transaction value for the Shares is approximately C$22 million, funded by HKVAS.

Holders of options to acquire the Shares ("Options") have agreed to surrender their Options for cancellation upon completion of the Arrangement.

Completion of the Arrangement is subject to, among other things, customary conditions, including approval of at least two-thirds of the votes cast by ZPP's shareholders in person or by proxy at the special shareholders' meeting to be held in December, 2012 (the "Meeting"), and the receipt of court and necessary regulatory approvals. The Arrangement is also subject to approval by a simple majority of votes cast in person or by proxy by the disinterested shareholders of ZPP, excluding certain votes outlined in Multilateral Instrument 61-101 - Protection of Minority Securityholders In Special Transactions. HKVAS and ZIG collectively hold approximately 63.5% of the outstanding Shares.

Recommendation of the Independent Directors of the Board of Directors of ZPP (the "Board")

An independent committee of the Board, after consulting with its financial and legal advisors, has unanimously determined that the Arrangement is fair to ZPP's shareholders and has unanimously resolved to recommend that ZPP's shareholders vote in favour of the Arrangement at the Meeting. Details of the terms and conditions of the Arrangement will be included in an information circular for the Meeting to be mailed to ZPP's shareholders. The Arrangement is expected to close shortly after the Meeting.

A copy of the arrangement agreement, the information circular and related documents will be filed with Canadian securities regulators and will be available 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 low-cost, high quality, environmentally friendly gas motorbikes, electric motorcycles, electric bicycles and other e-vehicles in China for the Chinese domestic and international markets. One of the largest shareholders of Zongshen PEM Power System is Zongshen Industrial Group, which is one of China's largest manufacturers and distributors of engines and power equipment.

Forward-looking Statements and Information

This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws and which are based on the expectations, estimates and projections of management of the parties as of the date of this news release unless otherwise stated. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking statements or information. More particularly and without limitation, this press release contains forward-looking statements and information concerning: the anticipated benefits of the Arrangement to the parties, their respective securityholders and certain of the countries in which ZPP operates; the timing and anticipated receipt of required regulatory, court, securityholder and any other third party approvals for the Arrangement; the ability of the parties to satisfy the other conditions to, and to complete, the Arrangement; and the anticipated timing of the meeting of ZPP's shareholders to consider the Arrangement and the closing of the Arrangement.

In respect of the forward-looking statements and information concerning the anticipated benefits and completion of the proposed Arrangement and the anticipated timing of the Meeting and for completion of the Arrangement, ZPP, HKVAS and ZIG have provided such in reliance on certain assumptions that they believe are reasonable at this time, including assumptions as to the time required to prepare and mail securityholder meeting materials, where applicable; the ability of the parties to receive, in a timely manner and on satisfactory terms, the necessary regulatory, court, securityholder, stock exchange and any other third party approvals for the Arrangement; the ability of the parties to satisfy, in a timely manner, the other conditions to the closing of the Arrangement; and other expectations and assumptions concerning the Arrangement. The anticipated dates provided may change for a number of reasons, including unforeseen delays in preparing securityholder meeting materials, where applicable, the inability to secure necessary securityholder, regulatory, court or any other third party approvals in the time assumed or the need for additional time to satisfy the other conditions to the completion of the Arrangement. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this press release.

Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. Risks and uncertainties inherent in the nature of the Arrangement include the failure of HKVAS, ZIG and ZPP to obtain necessary securityholder, where applicable, regulatory, court and any other third party approvals, or to otherwise satisfy the conditions to the completion of the Arrangement, in a timely manner, or at all. Failure to so obtain such approvals, or the failure of the parties to otherwise satisfy the conditions to or compete the Arrangement, may result in the Arrangement not being completed on the proposed terms, or at all. In addition, if the Arrangement is not completed, and ZPP continues as an independent entity, there are risks that the announcement of the Arrangement and the dedication of substantial resources of ZPP to the completion of Arrangement could have an impact on ZPP's current business relationships (including with future and prospective employees, customers, distributors, suppliers and partners) and could have a material adverse effect on the current and future operations, financial condition and prospects of ZPP.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on other factors that could affect the operations or financial results of the Company are included in reports on file with applicable securities regulatory authorities. The forward-looking statements and information contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the release.

Contacts: Zongshen PEM Power Systems Inc. Mr. Michael Cheung, Chief Financial Officer 1.604.687.7908 1.604.677.7008 (FAX)mcheung@zongshenpem.com Zongshen Industrial Group Mr Li Yao, Executive Vice President c/o Joyce Liang +86 23 6637-2815joyceliang@zongshen.cn