ZAP Renegotiates Smart Car Agreement

SANTA ROSA, Calif.--Aug. 30, 2006--Automotive pioneer ZAP (NYSE Arca:ZP) announced today that the Company has renegotiated its agreement with Smart Automobile LLC for the Smart Car that was originally signed in April of 2004. The original agreement, which was no longer being relied on by either ZAP or Smart Automobile, contained obligations that remained a liability on the Company's books.

As reported in ZAP's recent unaudited quarterly results for the second quarter, the license agreement with Smart Automobile had a liability of $7.05 million and an asset valuation of the license representing $2.31 million. Management believes that in its quarterly report for the three months ending September 30, 2006, the net effect of this renegotiation should result in a one-time gain to shareholder equity. Management further believes that the effect of this one-time gain will enable ZAP to regain compliance with the NYSE Arca shareholder equity listing requirements. However, the staff of the NYSE Arca will make the final determination regarding ZAP's listing status and the acceptance of its business plan. The Company was asked to submit a plan by September 15, 2006 to show how it will meet full compliance with the NYSE Arca continued listing requirements no later than 18 months from the date of the original notice of August 23, 2006. ZAP plans to present its plan prior to September 15, 2006.

This negotiation supercedes all previous license and other distribution or asset agreements between ZAP and Smart Automobile, but does not affect ZAP's ability to purchase Smart Cars from Smart Automobile, nor the exclusive distribution right from Smart Automobile to ZAP provided for in other agreements, nor the transfer of DOT intellectual property rights. As part of the renegotiated terms, it was also agreed that ZAP would grant Smart Automobile 50,000 warrants at $1.75 per share for every 100 Smart Cars delivered.

ZAP is continuing its lawsuit against DaimlerChrysler and other entities as filed on October 28, 2005 in the Los Angeles Superior Court. The lawsuit details a series of anti-competitive tactics, aimed at defaming ZAP and disrupting its third-party business relationships.

ZAP management says that it has proven its automotive business plan for micro-cars would work in the United States and other entities are trying to take advantage of its pioneering work. ZAP has since created exclusive relationships with other automotive manufacturers in both China and Brazil. Micro electric vehicles from China are now in production and being distributed in the US by ZAP licensed dealers. These all-electric vehicles combined with ZAP's other electric transportation are already generating revenue for the Company. A prototype of a new ethanol-gas vehicle from Brazil has also been delivered to ZAP, aimed for distribution in 2008. ZAP is seeking other manufacturers and retail dealers to expand its distribution.

About ZAP

ZAP has been a leader in advanced transportation technologies since 1994, delivering over 90,000 vehicles to consumers in more than 75 countries. ZAP is at the forefront of fuel-efficient transportation with new technologies including energy efficient gas systems, hydrogen, electric, fuel cell, ethanol, hybrid and other innovative power systems. The Smart Car Americanized by ZAP currently complies with regulatory requirements in all states except California and four other states. ZAP is not affiliated with, or authorized by, smart gmbh, the manufacturer of Smart automobiles, or the smartUSA division of Mercedes-Benz LLC, the exclusive authorized U.S. importer and distributor of those vehicles. For more information, visit http://www.zapworld.com.