Zongshen PEM Power Systems Inc. (TSX:ZPP) announced Thursday it has struck a deal with its sister company in China – Zongshen Power – to build 4,000 motorcycle repair shops in China.
Zongshen PEM and Zongshen Power manufactures motorcycles in China and sells them to markets in 90 countries, mostly in the developing world.
The motorcycles are widely sold in China, but most repairs are done by small, undercapitalized mom and pop shops. Few motorcycle dealers provide service and maintenance.
“The after-market service is fragmented,” Michael Cheung, vice-president of business development and investor relations for Zongshen PEM, told Business in Vancouver.
Having a chain of repair shops, which will be called Master Zuo, will make it easier for owners of Zongshen motorcycles to have repairs done while their bikes are still under warrantey, Cheung said.
Under the agreement struck with Zongshen Power, Zongshen PEM will contribute four million RMB and the sister company will contribute 16 million RMB (a total worth $3 million Canadian.)
“That’s really just to set up the corporate entity,” Cheung said.
He added Zongshen Power will likely raise the investment needed to build the 4,000 repair shops through the capital market.
Nelson Bennett