The agreement with Jonway is part of a multi-phase business plan ZAP is implementing to target the China electric vehicle market. ZAP chose the Jonway partnership in part because last year Jonway produced one of the first vehicles made in China to meet international standards of quality, including ISO 9000, China Compulsory Certification (CCC) and most recently passing certification for import to the European Union. The Taizhou-based automaker markets and sells vehicles in China through a network of more than 600 auto dealerships.

Jonway has the capacity to produce up to 50,000 vehicles per year currently at its facilities in Taizhou with capacity and support from the government to expand as the business scales.

Under the exclusive agreement, ZAP and Jonway take the electric drive systems designed by ZAP and integrate them into the reengineered EV SUV that will be produced by Jonway. ZAP will perform research and development of the core technology in Santa Rosa, California and license the technology for this partnership. ZAP and Jonway will jointly market and sell electric vehicles in China, North America and Europe to broaden market reach.

In 2009, China overtook the United States as the world’s largest automobile market with sales increasing 46 percent from 2008 to 13.6 million vehicles in 2009, according to the China Association of Automobile Manufacturers.

ZAP hopes to leverage a stimulus from the government for plug-in forms of transportation. The Chinese State Council General Office announced that it intends to raise its annual production capacity to 500,000 all-electric cars, hybrids and buses by the end of 2011. To stimulate the growth, China’s Economic Construction Department has put in place a 60,000 RMB, approximately US$8,800, manufacturers subsidy per electric vehicle produced and sold in China.

Zhejiang Jonway Auto is a subsidiary of Jonway Group, which has been a leader in the manufacturing of motorcycles, ATVs and related products for more than 20 years. In 2009, the company sold more than 120,000 vehicles internationally in the European Union and the United States and has a capacity to build up to 400,000 vehicles annually. The company recently began producing electric motorcycles and related vehicles. Jonway Group and its subsidiaries also produce motor parts, light building materials, air-compressors and plastic components while managing a portfolio of real estate holdings.

ZAP Hangzhou. In December 2009, ZAP and Holley Group—the world’s largest volume producer of electric power meters according to the Wenhui-Xinmin United Press Group—established a joint venture company in China with backing from venture capital firm Better World International to target the electric vehicle market in China.

Named ZAP Hangzhou, the new company plans to design and manufacture electric vehicles and develop infrastructure technology for the Chinese market. ZAP, Holley Group and Better World have entered a joint venture agreement, and officials state that ZAP has funded its initial capital requirements under the agreement.

Holley Group is an established enterprise in China and is the parent of Holley Metering Limited. Over the past 30 years Holley Metering helped pioneer electric power meters in China. Last year, Holley Metering sold more than 10 million units worldwide.

ZAP Hangzhou will combine ZAP’s intellectual property, electric vehicle technology and know-how with Holley’s experience in electric metering to develop electric vehicles and related technologies targeting the Chinese market. The companies plan to use their knowledge of the local Chinese market to target opportunities for electric vehicle growth within China’s vehicle fleets. As part of this relationship, ZAP Hangzhou plans to begin the installation of manufacturing operations at Holley’s Hangzhou facilities in the near future.

Better World International, Ltd., funded by Cathaya Funds Company, is a BVI company with headquarters in Hong Kong focused on infrastructure technology and services for electric vehicles. It is focused on joint partnerships with the power grid companies in China to build out the recharge station networks for the electric power infrastructure for electric vehicles, and on opportunities with companies that provide the core technologies to enhance electric power train conversion and support of fast charging stations.