Santa Rosa's electric vehicle retailer Zap has agreed to acquire 51 percent of a Chinese car manufacturer for $29 million, the company announced Thursday.

Zap signed a merger agreement with Zhejiang Jonway Automobile Co. Ltd., a wholly owned subsidiary of Jonway Group. The boards of the two companies signed the agreement July 2.

The combined company will be called Zap Jonway.

Zap's board chairwoman characterized the agreement as a chance to provide her company with needed manufacturing ability and access to China's market at a time when that country is pushing to reduce its carbon emissions.

"We all know that Zap has been lacking in manufacturing and sales," said Priscilla Lu, who became chair of the board almost a year ago. About that time Cathaya Funds, of which Lu is a general partner, agreed to invest up to $25 million in the 16-year-old company.

"I'm the first to tell people it will change," Lu said. Such change involves "focusing on revenue and deliveries of real products," she said. The agreement with Zap Jonway will provide "all of the capabilities and the knowhow to make that happen."

Lu, who has a doctorate in electrical engineering and computer science, said China has agreed to cut carbon emissions by 2020. The government there has agreed to give subsidies worth more than $17,000 for each electric vehicle sold there for use as a taxi. Zap Jonway hopes to sell such vehicles.

Zap's strengths — innovation and design — will provide key ingredients, she said.

Lu said she already has begun discussions with those who may be willing to provide the necessary capital for ZAP to pay for a majority interest in Jonway. "I will line up the necessary investors," she said.

Zap reported a net loss of nearly $10.7 million in 2009, following a loss of $9.8 million in 2008. First quarter losses this year were $3.2 million, compared to $2 million for the year before.

The company has posted one profitable year in its history.

Jonway Auto reported annual revenues of approximately $40 million last year and approximately $20 million for the first quarter of 2010, according to a Zap press release. The company has about 800 employees.

Jonway has a new plant in Zhejiang China that is producing gasoline-powered automobiles, Lu said.

The plant is currently manufacturing about 1,000 vehicles a month and has the capacity to produce up to 30,000 vehicles a year, according to the press release.

Jonway also has more than 80 factory direct dealerships and distributors in Europe and Egypt.

Zap also is acquiring international distribution rights to Jonway's automobile products for 31.5 million shares shares of ZAP common stock, valued for the purpose of the agreement at $1 a share, Lu said.

Zap has the right to acquire the remaining 49 percent of Jonway Auto by March 30, 2011.

Zap shares ended the day trading at 49 cents a share, an increase of nearly 9 percent.