Carbon Revolution announced in November 2022 that it plans to list in North America through a merger with Twin Ridge Acquisition Corp. (NYSE: TRCA).
Carbon Revolution is a global technology company and Tier 1 OEM supplier that has successfully innovated, commercialized and industrialized high-performance, technically advanced lightweight carbon fiber wheels for the global automotive industry.
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How is Carbon Revolution’s technology applicable to the global shift to EVs?
Carbon Revolution is a tier one supplier to the global automotive industry. We’ve brought to market a single piece carbon fiber wheel which saves up to 50% of the weight of conventional aluminum wheels without compromising durability. We already have supply contracts in the market with Ford, Ferrari and General Motors, and there are others that are coming.
We’ve already put almost 70,000 wheels on the road. Wheels are part of the rotating unsprung mass of a vehicle that’s considered to be the most important place to reduce weight, because of the impact it has on the efficiency and the performance of a vehicle. So, saving up to 50% of the weight of wheels is really significant.
The first adoption of this technology has really been in the performance sector, where you’ve seen it on vehicles like the Corvette Z06 to improve performance. But as an efficiency technology, it has a real home in the EV space.
And that’s where we are now starting to see the most interest. A high proportion of our upcoming programs are now for EVs and for larger vehicles, because of the range extension it can deliver and other benefits for EVs.
We have a large backlog of projected sales from awarded OEM programs. It recently moved from about USD$330 million to over $460 million, and that will continue to climb. So that really indicates the demand for what we’re producing and underpins the scale-up that we have underway.
What are some of the tailwinds driving adoption of your wheels for EVs?
EVs are a lot heavier than ICE vehicles, and wheel sizes are getting a lot larger. We’ve gone from 15-inch wheels to some which are 23 or 24 inches. We can shave over 100 pounds of weight across a vehicle in these larger wheel sizes, and in an EV that can translate into 5-10% range extension.
With carbon fiber wheels you can provide much more efficient aerodynamic designs without weight penalty, which adds to the range extension because it enables greater efficiency at high speeds.
We can also make quieter wheels. Composite materials are more dampened than metals. In an EV, there’s no engine noise, so road noise becomes a lot more obvious. OEMs are reducing road noise by putting things inside tires or inside the body of EVs, which adds cost and weight. But our carbon fiber wheels can reduce road noise and weight.
There are also regulatory drivers. Some EVs are getting so heavy that they’re really pushing beyond regulatory weight limits that constrain the ability of OEMs to derive CAFE Credits for selling an EV. These Credits are very important for an OEM’s profitability. If we can save 100 lbs. from an EV that can be the difference between the OEM getting a credit or missing out, and it means saving weight from an EV without removing features or battery capacity.
Can you provide some details on the advantages of your manufacturing process and your scale?
We developed the manufacturing process and the product in parallel, and the process has been developed with high-volume in mind. This has been a very powerful way of developing and protecting intellectual property, and we’ve sold nearly 70,000 wheels from it.
The wheel market is enormous. There’s over 400 million wheels produced and put on new cars each year, and so we’re still scratching the surface of that.
Our wheels are a classic trickle-down technology: they started at a very premium performance level and they’re now making their way into less premium applications. We’ve continued to automate and industrialize our manufacturing processes, driving efficiency and ensuring that we bring our costs down as we grow and demand increases.
Our first Mega-line, which fully integrates our proprietary manufacturing processes with a state-of-the-art transportation system, is already producing wheels very successfully for our customers and is being filled out progressively in our Australian plant.
That forms a template for manufacturing in more strategic locations, in North America for example to supply larger contracts to our major North American customers. That enables us to further reduce costs, reduce the logistics costs and variable costs.
Who are your competitors and how do you distinguish yourselves from them?
This is a very large market with a lot of tailwinds for weight-saving technology, but there are significant barriers to entry. Other companies are working to do this, but currently our competitors are nowhere near us in scale. We’ve established a significant lead, and our aim is to sustain that into the future.
Our product and process technologies have been developed in parallel. We have over 90 granted and pending patents that protect our technology. We’ve invested well over $250 million to get us to this stage. So that’s a very significant amount of capital invested in this IP.
One key distinction is the relationships that we’ve developed through manufacturing a product for our OEM customers, at a level of quality that they’re comfortable with. It’s not easy to get these major global OEMs to switch to something completely new in a safety critical area of the vehicle. We have to pass the same validation requirements that aluminum wheels pass, and there’s strict quality and process requirements. Establishing those relationships is important and then provides us with a good position to grow. You’ll see with our customers there is a great deal of repeat business.
We do work on the basis that others are seriously working on trying to do this, so having the best products, delivering the most value to our end customers and having the most competitive cost base gives us a very strong and sustainable future competitive advantage.
Can you explain the reasoning behind the proposed merger with Twin Ridge and the plan to go public in the US? How is it playing out?
Over the last 12 to 24 months we’ve heard very clearly from our customers that they love this technology. They’re very comfortable with the technology and with our manufacturing processes. Now they have thrown out the challenge to expand from premium and very high-profile vehicles, that more niche part of the market, into more mainstream and disruptive applications.
They want to understand how a company that’s been founded and developed in Australia can then transition to a real-scale provider of a disruptive technology. We established processes to look for the right forms and the right sources of capital that’s ultimately led us to a US capital market strategy.
That explains the merger with Twin Ridge. They are moving our listing into North America to access the sort of markets that enable us to grow as quickly as our customers are really demanding to see us grow this technology, and to drive it further and further into a higher volume and more disruptive state.
North America is a very early and rapid adopter of our technology. Broadly speaking, providers of capital and related elements of the industry in the US really understand what we’re doing. We didn’t come into the process with a preconceived notion of how we were going to do it. By entering that process, it took us to ultimately looking at this merger. Twin Ridge is a very, very strong and credible partner to merge with and really understand what we are doing. And jointly, I think we’ve got very much a shared vision for what we aspire to do with the business. And what we’ve established now from our Australian base is just a fantastic springboard.