December 2007

Dear Shareholders:

It's been quite a year for ZAP and I'm very excited about our progress. The past year has been especially formative in our long-term business plans, which I believe will set the stage for ZAP to make even further progress in 2008 with new relationships, several vehicle development projects and new technological breakthroughs. Here are some of our highlights from 2007:

1. Xebra – The goal for ZAP with the Xebra was to quickly and affordably introduce an innovative design that expands on the niche created by neighborhood electric cars and move them out into the city. With a top-speed of up to 40 MPH and a retail price just over $10,000, the Xebra has carved a unique category in the automotive world.and introduced the ZAP brand into the EV marketplace where there are virtually no mass-produced vehicles that can compete.
2. UPS – With the Xebra, ZAP has sparked interest with a Fortune 100 company by helping UPS pioneer a unique small parcel delivery service that helps them save money while using more environmentally-friendly vehicles. This has become an example that is raising awareness with large companies around the world about starting to integrate EVs into driving situations where they can perform better than conventional technologies. ZAP has also delivered vehicles to Coca-Cola and Domino's Pizza.
3. Xebra Range – Danish electric car scientists extended the range of the ZAP Xebra by five times to 152 miles using lithium-ion batteries and a proprietary battery management system. California's ZAP and Denmark's Lithium Balance plan to offer an upgrade for the ZAP Xebra pickup in the near future. Xebra owners looking for more range may have something to look forward to
4. Lotus Engineering – At the start of 2007, ZAP announced that it would be carrying out a feasibility study on a new generation of electric cars. At the National Automobile Dealers Association meeting in February 2007, ZAP and Lotus Engineering introduced a concept vehicle based on this study, outlining a four-wheel-motored crossover SUV with advanced batteries called the ZAP-X. Later in the year, ZAP revealed a vehicle using similar technology called the ZAP Alias, that would be available sooner than the ZAP-X at a targeted price of $30,000. We hope to update you on these plans as we get closer to their realization.
5. Youngman –Youngman Automotive Group in China will play a major role for ZAP in 2008 with the development of several electric and plug-in hybrid vehicles. Youngman is China's largest maker of luxury motor coaches and they also manufacture high-quality commercial trucks for European customers like NEOPLAN and MAN. Recently, Youngman was awarded a license to make automobiles and the company has been building new factories to accomplish this goal. Youngman also has a venture with Malaysian automaker Proton, which is the parent company to Lotus Engineering. Lotus Engineering is the leading supplier of automotive engineering services to Youngman.
6. Albert Lam – ZAP's technical capabilities have been expanded significantly with the appointment of Albert Lam to its Board of Directors. Mr. Lam is a veteran automotive and technology executive who joined the ZAP Board of Directors in October of 2007. He stepped down from his position as CEO of Lotus Engineering to pursue new business opportunities between Lotus, its parent company Proton, ZAP, and Youngman Automotive, one of its key clients in China. Mr. Lam was responsible for bringing these companies together for a joint venture to develop, manufacture and market electric and hybrid luxury coaches, buses, trucks and passenger cars. Mr. Lam has been named Chairman and CEO for the new joint venture company. Mr. Lam was CEO for Lotus Engineering when it conducted a feasibility study with ZAP to explore a new generation of electric vehicles using the new advances in technology.
7. Al-Yousuf Group - ZAP formalized a relationship in November with the Dubai-based trading conglomerate Al-Yousuf Group. Its subsidiary Al-Yousuf Motors is a leading vehicle manufacturer and importer in The Middle East under its subsidiary Al Yousuf Motors. Al-Yousuf Motors has an interest in distributing vehicles produced by the joint venture through ZAP into the growing Middle Eastern market and its principal, Mr. Eqbal Al-Yousuf has joined ZAP's Board of Directors.
8. Canadian Tire – ZAP's line of rechargeable battery systems for mobile electronics was given a tremendous boost this year with a commitment from one of Canada's largest retailers to introduce it to their customers. The Recharge-It-All line is an offshoot of our battery developments for electric cars. By creating greater economies of scale, we hope to bring the price of advanced batteries down to a point where they will be more cost-effective for widespread use in electric cars. Look for us to continue this push with our iZAP line in the early part of 2008.
9. International Distribution – ZAP has made several in-roads with entrepreneurs and businesses in different countries that want to introduce ZAP. Chile's largest power company Chilectra recently launched a distribution plan where they will offer their electric customers financing on the purchase of electric vehicles. ZAP is organizing other distribution in South America, Europe, The Middle East and Asia and hopes to announce further developments and orders in 2008.

For ZAP, 2008 will be a year of expanding our distribution and production to focus more on capitalizing on our leadership position in the consumer and fleet EV marketplace. I want to take this opportunity to thank everyone for your business, you’re your commitment and for your continued support. Together I think we can make 2008 a year of progress for ZAP.

Sincerely,

ZAP CEO Steve Schneider

Ride The Future!