TAX.L Regulatory News (TAX)

16 November 2010

Eco City Vehicles PLC

("ECV" or "the Company")

ECV announces £1.5 million conditional share placing to drive growth

Eco City Vehicles, a developer and supplier of eco-friendly commercial vehicles and the London licensed Mercedes taxi, announces that it has raised £1,529,500 (before expenses) through a conditional placing of 32,200,000 ordinary shares at 4.75 pence per share (the "Placing") to invest in the growth of the business, address potentially significant export opportunities in the Middle East, and provide additional working capital.

Background to and reasons for the Placing

The placing is ECV's first fund raising since its flotation on AIM via a reverse takeover in October 2007. During this period, the Company's business has undergone a fundamental transformation, from a distributor and repair service outlet serving the London taxi market into a developer of modern, innovative and low emission vehicles. Working with its technology partner, One80 Limited ("One80"), and Mercedes Benz, ECV successfully co-developed and gained approval from the Public Carriage Office for London's premium new taxi, the Vito, launched in June 2008. The Vito has gained a significant market share of new licensed taxis in London that increased to approximately 27% in the first half of 2010.

The Board believes that the Company is now entering a new phase in its development, driven by increasing demand for the Vito taxi. As announced at the interim results on 28 September 2010, two Left Hand Drive (LHD) Vito prototypes were developed in response to international interest, including a request from a major Abu Dhabi based automotive distributor. These have since been delivered to Abu Dhabi, where the Government is investigating the possibility of introducing a superior vehicle to the Abu Dhabi taxi fleet. As a result, the distributor has expressed an interest for both parties to jointly introduce the Vito taxi into Abu Dhabi for the first time.

Following this expression of interest, the distributor, with close support from ECV has submitted a formal proposal to TransAD, the Abu Dhabi transport authority, for the supply of the Vito taxis. While there can be no guarantee that the proposal will be successful, the Company has been encouraged by the interest it has received. Further, now that the LHD Vito is ready for production the Company intends to pursue interest that it has received from other international parties. In the event of a firm order, these Vito taxis would be converted and supplied from ECV's second-stage manufacturing and assembly plant in Coventry, UK.

Use of proceeds

Funds raised from the Placing will be used principally for the following purposes:

·; Acquisition of a majority of the voting rights of One80 - the Company plans to increase its holding in One80 from 33% to 59% enabling it to consolidate the licence fees currently paid to One80 and secure a majority interest in One80, which owns the intellectual property rights to the Rear Wheel Steer technology used on the Vito taxi. The consideration for this stake is to be £640,000 in cash to be paid at completion of the acquisition and 12,800,000 ECV shares (to be issued following completion of the acquisition subject to the satisfaction of certain conditions and potential downwards adjustment following a statutory valuation and report under Section 593 of the Companies Act 2006). The ECV shares will be subject to lock-in and orderly marketing provisions. The stake is to be acquired from Jevon Thurston-Thorpe, who has 28 years experience in design and manufacturing in the motor industry. In the year to 31 December 2009 One80 made a loss of £120,121.

·; Develop LHD production - funds will be used to move the LHD Vito taxi into production

·; Marketing campaigns - funds will be used for marketing and sales campaigns to promote the Mercedes-Benz Vito taxi in order to gain further market share

·; Working capital - Funds will also be reserved to provide additional working capital to the existing business and the projects above

Current Trading

Trading at the Company has been in line with expectations since the interim results were reported on 28 September 2010. While market conditions remain challenging, the Vito taxi has continued to generate solid demand in the second half, with total unit sales since launch expected to reach the 1,000 milestone by the end of 2010. The Company has recently introduced low-rate finance deals and the Mercedes-Benz Agility package (Personal Contract Purchase, or PCP, finance) offers which have reduced the weekly outlay for taxi drivers purchasing a Mercedes-Benz Vito taxi.

The Mercedes-Benz Light Commercial Vehicle after-sales dealership has commenced trading recently and the Company expects this aspect of the business will form an increasing percentage of the after-sales work, providing a higher margin and incremental revenue to the parts and service divisions as well as providing Mercedes Benz assist services within central London.

Board changes

ECV is pleased to announce the appointment of Roger Melvyn Phillips as Non-Executive Director with effect from 12 November 2010. Roger brings a wealth of board-level commercial experience in the motor industry and more broadly, along with extensive experience in international businesses. Prior to joining ECV, Roger has served as Chief Executive Officer of Iveco Ford Ltd, Joint Managing Director of Leyland DAF Ltd and Managing Director of DAF Trucks GB Ltd.

ECV also announces the resignation of Guy Saxton from the board with effect from 12 November 2010. The Board would like to thank Guy for his contribution to ECV.

Commenting on the Placing, Peter DaCosta, Chief Executive of ECV, said: "We have made great strides in developing the business since we floated. The Vito taxi continues to gain traction and we are becoming increasingly confident of opening up significant new markets abroad. The funds provided by this placing will give us the resources to take full advantage of our growth opportunities."

"I would like to thank Guy for his support and guidance in the Company's development. I would also like to welcome Roger as a Non-Executive Director whose experience in the automotive industry will be invaluable as we grow."

Terms of the Placing

The Placing comprises a placing of 32,200,000 ordinary shares in the Company (the "Placing Shares"), which are expected to be admitted to trading on AIM on 19 November 2010 ("Admission"). All the Placing Shares have been placed at 4.75 pence per share (the "Placing Price") with existing institutional shareholders and new investors. The Placing will raise proceeds of £1,529,500 before expenses for the Company. The Placing Price of 4.75 pence per share represents a discount of approximately 28 per cent. to the closing price of 6.625 pence per ordinary share on 15 November 2010 (being the last business day prior to this announcement). Under the terms of the placing agreement, Numis, as agent for the Company, has agreed to use its reasonable endeavours to procure placees for the Placing Shares at the Placing Price. The Placing Shares will represent approximately 9.6 per cent. of the enlarged share capital of the Company. The new ordinary shares will be in registered form and capable of being held in certificated form or uncertificated form in CREST.

The Placing is conditional, inter alia, upon the placing agreement becoming unconditional, and admission of the Placing Shares to trading on AIM becoming effective by not later than 8.00 a.m on 19 November 2010. The Placing is not being underwritten.

The placing agreement also contains certain warranties given by the Company in favour of Numis as to certain matters relating to the Company and its business. In addition, the Company has given certain undertakings to Numis and has agreed to indemnify Numis in relation to certain liabilities it may incur in respect of the Placing. Numis has the right to terminate the placing agreement in certain circumstances prior to Admission including inter alia, (i) for certain force majeure events or other events involving certain material adverse changes or prospective material adverse changes relating to the ECV group or (ii) in the event of a breach of the warranties or other obligations of the Company set out in the placing agreement. The Company has agreed to pay to Numis a placing commission together with certain costs and expenses incurred in connection with the Placing.

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that Admission will become effective and that trading in the New Shares will commence on AIM at 8.00 a.m. on 19 November 2010. The Placing Shares will, when issued and fully paid, rank pari passu in all respects with the existing ordinary shares, including the right to receive any dividend or other distribution declared, made or paid after Admission.

Related Party transaction

As announced at the interim results on 28 September 2010, on 11 March this year the Company informed The London Stock Exchange that the existence of some previously undisclosed related party transactions had come to light. Although these have not had any adverse impact on ECV's cash or on current trading, an investigation is under way into how these transactions occurred. The reports relating to this investigation, initiated by ECV, have been produced and are being reviewed. The results of the investigation will be announced to the market as soon as possible.

Roger Melvyn Phillips (61)

Mr Phillips held the following directorships in the five years prior to this appointment:

Axiom Properties & Investments Limited

Bryn Limited

Daraglide Estates Limited (put into voluntary creditors' liquidation 11/03/2010)

Green Montana Ltd

Henley Asset Management Limited

Marlow Asset Management Limited

SPE (Berwick Street) Limited

SPE (Aldwych) Limited

SPE (Greenwich) Limited

SPE Holdings Limited

SPE (Irving Street) Limited

SPE (Villiers Street) Limited

SPE (Woolwich) Limited

SPE (Victoria) Limited

SPE (Strand) Limited

Mr Phillips remains a director of Green Montana Ltd.

There are no further disclosures to be made in accordance with Schedule 2(g) of the AIM Rules.

Additionally, as required by AIM Rule 17 and Schedule 2 Annex III, the Company has updated information relating to directors of the Company on its website at:

http://www.ecocityvehicles.com/index.php/directors

Enquiries:

Numis Securities Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority and is a member of the London Stock Exchange, is the Company's nominated adviser and broker for the purposes of the AIM Rules. Numis Securities Limited is acting exclusively for the Company and will not be responsible to any other person for providing the protections afforded to customers of each of them nor for providing advice in relation to the contents of this announcement or any other matter referred to herein.

The distribution of this announcement in jurisdictions other than the UK may be restricted by law and therefore persons into whose possession this document comes should inform themselves about and observe any of those restrictions. Any failure to comply with any of those restrictions may constitute a violation of the securities laws of any such jurisdiction.