High-performance wheel maker to leave home in race to thrive

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The difficulty of getting financial backing in Australia to spread its wings globally is driving Geelong-based carbon fibre wheel innovator, Carbon Revolution, to head to the US.

ASX-listed Carbon Revolution makes lightweight carbon wheels for high-performance brands like Ferrari, GM’s Chevrolet Corvette and the Ford GT Supercar from a 10,000 square metre facility about an hour’s drive from Melbourne.

Jake Dingle inside Carbon Revolution’s factory.Credit:

It’s getting ready to list its manufacturing business on the NASDAQ exchange in the United States, forced to seek out greener pastures and investors willing to back its growth plans.

The company – the world’s only high-performance, high-volume carbon wheel maker – is a rare Australian manufacturing success story. Carbon Revolution rose from the ashes of the local auto industry’s decimation between 2013 and 2017, when Australia’s major carmakers – Ford, Holden and Toyota – shut their manufacturing plants and turned to importing vehicles.

The lack of a “deep market” that can provide financial backing for emerging physical technology companies in Australia is partly behind the move to list offshore, said Carbon Revolution’s chief executive Jack Dingle.

Corvette Z06 carbon fibre wheels on the production line at Carbon Revolution’s Geelong factory.Credit:

Other innovative manufacturing start-ups have faced similar funding difficulties.

Electric vehicle company SEA-Electric struggled for a decade to deal with Australia’s policy vacuum and funding issues before fleeing to the more fertile ground in the US, where it recently signed five to 10-year contracts with Toyota subsidiary, Hino, and Sweden’s Volvo to supply thousands of its drivetrain units.

“Australia was a very tough, tough place to survive. We wouldn’t have survived if we had stayed. It’s as simple as that,” SEA’s founder Tony Fairweather said last month.

“There are a lot of good ideas in Australia, a lot of very capable people, and many technologies are developed here, but, typically, they’ve gone offshore at an earlier stage than where we are at. We’re not offshoring our technology, we’re just sourcing capital from where it’s available,” Dingle said.

Carbon Revolution has a market capitalisation of $32 million, a minnow by today’s standards. The company maintains it’s in the early stages of a typical adoption curve for new technology in the auto industry where innovation is usually rolled out at the luxury end of the market before making its way mainstream.

Innovations like front disk brakes, fuel injection and even air conditioning were once exclusive to premium cars. Now they’re ubiquitous.

Last week, Carbon Revolution secured $US60 million in debt funding through PIUS Limited, a subsidiary of American global insurance broker and risk manager Arthur J. Gallagher & Co, that it will use to restructure existing debt, fund further expansion and for working capital.

However, Dingle said the company has always held long-term aspirations to set up manufacturing sites closer to its key US and European customers. “We expect to maintain a meaningful amount of manufacturing here. It’s just that the capital is not available to support growth beyond that,” he said.

“We’ve always said we will manufacture offshore, as we earn the right to.”

Carbon Revolution progressed from making single wheel prototypes to designing and manufacturing high-performing rims over a period of 15 years. This year it commissioned a $50 million “mega-line” assembly that automates much of the wheel production process, from combining raw materials to injected resin moulding, which it hopes will boost production and sales from about 13,000 wheel rims a year to around 90,000.

Jake Dingle with the team from General Motors Specialty Vehicles.Credit:

“There’s a number of fairly complex sub assemblies that are made in the process, that sit to the side and then are introduced along the way. It’s a sophisticated process,” Dingle said.

The company’s manufacturing processes are designed to be done in such a way that they can be automated and scaled up, with robots custom designed for the company’s needs.

“When you walk through our factory today, you see large numbers of big robots doing things that previously were done in a very manual way,” he said. “Unlike vehicle manufacturing, where there are a lot of plants around the world, this is the first one making carbon fibre wheels at scale.”

The company is seeking to disrupt the aluminium wheel making sector, but is now also looking at electric vehicles as a growth option.

The increased weight of electric cars, particularly in North America where large SUVs are popular, coupled with the desire to extend the vehicle’s range has “amplified” the need for “bolt-on” weight saving measures like carbon wheels, Dingle said. “Range has become a huge, very competitive element of vehicles.”

At this stage, the company has no competitors making similar mass-produced carbon wheels. “We are between five and 10 years ahead. I’d be naive to think that we will have a monopoly position. As it becomes more attractive, there is more incentive for others to get in,” Dingle said, although critical safety issues and the company’s existing customer relations are likely to prove significant barriers to entry for competitors.

The company is racing to finalise a “special purpose acquisition company” merger with Twin Ridge Acquisition Corp in August that will allow it to list on the NASDAQ exchange. Once complete, its shares will be delisted in Australia.

But the wheel maker will face issues if the merger doesn’t go ahead.

A clause in its new debt contract stipulates that failure to complete the merger by the end of August is classed as a default under which repayments of the loans principle and interest, as well as other fees, are triggered.

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