AEC Enters Technical Agreement with Deutz Dalian

China, Beijing

AEC (China) Limited, Advanced Engine Component (AEC) Limited's
Beijing based wholly owned subsidiary, has signed a technical agreement
with FAW Dalian Diesel Engine Company Limited ("Dalian") to develop a
range of DEUTZ Dalian, Euro 3 emission, 7.1 litre, natural gas ("NG")
engines.

DEUTZ AG, one of the world’s leading independent manufacturers of
diesel and gas engines, and China First Auto Works Group Corporation
(FAW), one of the largest vehicle manufacturers in China, have formed a
joint venture to manufacture and sell heavy duty engines under the name
DEUTZ (Dalian) Engine Co Ltd (DEUTZ Dalian). DEUTZ Dalian has a newly
completed, state of the art, first phase engine plant in Dalian, a port
city in north east China, capable of producing 50,000 engines per
annum. The new site at Dalian is DEUTZ's largest production facility
other than its facility at Cologne, Germany.

The DEUTZ Dalian/AEC technical agreement requires AEC to provide
technical design assistance and adapt the AEC natural gas vehicle
system (NGVS) to enable the DEUTZ Dalian BF6M1013, 7.1 litre 260, 240
and 220 horse power diesel engines to run on NG.

AEC says in a release that the DEUTZ Dalian diesel engine is a
marque of the DEUTZ engine range and has incorporated all of DEUTZ
latest advanced technology in its design. The release also says the
DEUTZ Dalian/AEC NG engines will be at the top of the range for NG
engines. The engines will mainly be sold to DEUTZ customers in Asia and
also to the FAW group.

Planning and mapping of the BF6M1013 7.1 litre DEUTZ Dalian/AEC
NG engines is underway with testing to be conducted in January 2007.
Euro 3 certification is expected to be received in the first quarter
2007.

Signing of the DEUTZ Dalian technical agreement is a major
development for AEC. It also introduces the ACE NGVS and components
into engines in a size range not currently covered by ACE's existing
contracts with FAW and Weichai.