Carbon Revolution set for growth on huge scale

AUSTRALIAN wheel manufacturer Carbon Revolution has set its sights on becoming a major supplier to the world’s vehicle manufacturers, with growth on a massive scale occurring at its Geelong production facilities to meet demand for its unique lightweight single-piece carbon-fibre wheels.

After publicly listing on November 29 and raising $30 million (along with a $60 million selldown by existing investors) with a market capitalisation of $331 million, Carbon Revolution now has the backing to forge ahead with the industrialisation and capital investment required to deliver on its near-term commitments under contracts it has in place with global automotive OEMs, among them Ford, Ferrari and Renault. 

The company has delivered 18,000 or so units in total from 2015, when it broke through the thick wall of OEM resistance with a supply contract for the Ford Shelby Mustang GT350R, through to last year’s IPO, but momentum is building. Quickly.

From 5700 units last financial year to a forecast annualised run rate of 32,000 by June 2020 based on existing contracts, by which time the company will be profitable for the first time, Carbon Revolution is yet to commence production for three other signed contracts with global OEMs including a freshly minted supply deal for an SUV.

No one inside or outside the company will confirm, but the latter is believed to be with Jaguar Land Rover, forged off the back of a successful campaign with Don Law Racing’s F-Type R at the 2015 Pikes Peak International Hill Climb and through strong ties with JLR Special Vehicle Operations’ engineering director Jamal Hameedi, who adopted the wheels for the GT350R in his previous role as Ford’s global performance vehicle chief engineer.

To get there, the Geelong facility’s footprint recently increased from 3000 to 10,000 square metres, the workforce has passed the 400 mark and the factory floor is fast becoming much busier with more automated production lines that Carbon Revolution chief executive Jake Dingle likens to a world-leading engine plant in terms of sophistication – though one where the Aussie firm has invented its own process steps and worked with other local companies to build bespoke machinery.

The bigger picture is one of more than 1000 employees in Geelong – even as efficiency improves through greater automation – and deeper supply into North America, Europe and Asia that could ultimately lead to additional production facilities in these markets.

“We haven’t got a 10,000-square-metre factory just to do 32,000 units per year,” Mr Dingle told GoAuto in an exclusive interview. “You look at the size of the global wheel market – it’s massive.

“We’re only really scratching the surface at the moment with premium and high-performance programs, we’ve signed our first SUV program, we’re on the performance hatch market as well as the sportscar market, so the opportunity is extremely large.

“Everything we do is for export – we’re not servicing the local market given that there is no longer any vehicle production locally.

“We’re not going to get to 430 million wheels a year, which is the total new-vehicle market, but the studies we’ve done indicate a decent-sized chunk of that as being addressable – way more than we’ll have capacity to service in the next handful of years.”

The company currently services the high-performance and luxury new-vehicle wheel market (estimated at 36-56 million wheels per annum) and beyond the short to medium term expects its products to be adopted across more mainstream segments.

As GoAuto reported in 2015, the annual capacity of the upgraded Geelong plant was initially expected to be at least 250,000 units, but during the redevelopment the company has beefed up its industrialisation program under former Tesla Motors manager of manufacturing engineering Luke Preston (see separate story) and is clearly shooting for much higher volume.

Mr Dingle said the company is focusing on new vehicle supply, rather than aftermarket, confident in the quality of their wheels and market appeal after successful partnerships – typically involving investment in each program from the OEM involved – with Ford (Mustang, GT), Ferrari (488, SF90) and Renault (Megane RS Trophy-R) that has opened the doors to other models within these brands and with alliance partners and rival manufacturers alike.

“You can already see from what’s in the public domain that there’s a cadence now of programs that are coming through within each OEM and there’s a cadence of new OEMs being added,” he said.

“And there’s a limited number of OEMs around the world, so from a management and an overhead point of view we’re focusing on establishing the ideal business model to be a leading Tier 1 global supplier into the automotive industry for a hi-tech product and technology like this.”

Among the obvious threats are competitive pressures and intellectual property rights, but a decade of hard graft has seen Carbon Revolution develop the science around the raw materials involved and invent complex tools and processes to create a sophisticated product that adds value to a vehicle in areas such as performance, efficiency and refinement.

This has been achieved with support from Deakin University (where it is based) as well as over $150 million of funding raised mainly from private sources but with some strong government support to supplement.

More than 40 patents, and others pending, also provide a useful buffer zone.

“The threat of somebody just coming out with a ready-baked version of this technology, we don’t see that,” Mr Dingle said.

“We have a pretty clear understanding of what’s going on in the market. We tend to behave as if we’ve always got someone on our shoulder, though, you have to – and you have to keep moving really fast.

“And, look, there is a big market there. There is room for more than one player. Our aim is to have unequivocally the best product and to have the most industrialised, efficient processes for making the product that are not only efficient from a cost point of view but very efficient from a quality and control point of view to meet the needs of the automotive industry and ultimately the aerospace industry as well.

“There’s a benefit in running very fast but having a really clear perspective on what you need to achieve. Our customers are some of the most sophisticated companies in the world, the automotive supply chain is probably the most sophisticated supply chain in the world, and there is a high threshold to get in and to then stay in that. That alone is a very important barrier.”

Carbon Revolution’s chief technology officer, Brett Gass, added that the company was in a unique situation as the only carbon-fibre wheel supplier to have reach this point with major OEMs, pointing out that other car-makers have not had the same success with their own projects and partners.

“Big multibillion-dollar companies have had a go at this and launched a product and essentially pulled it back and failed,” he said.

“We are a global leader in that technology space and we’ve been there for a long time. Right now, there’s people trying but they haven’t got it done – go and see how many car manufacturers offer a single-piece carbon-fibre wheel.”

There is a limit to how much volume is ultimately produced out of Geelong, not only as automotive contracts grow but as the company diversifies into new automotive segments and adjacent markets such as aircraft/aerospace.

Earlier last year, for example, Carbon Revolution received a $2.4 million federal grant to design the world’s first carbon-fibre aircraft wheels, aimed initially at the Boeing CH-47F Chinook helicopter.

“We’re obviously being strategic and looking at how we best exploit the technology that we’ve developed,” Mr Dingle said.

“The range of possible applications all rely on variants of the same technology that we’ve developed, whether it’s EVs, hydrogen vehicles, whether it’s buses, transit vehicles. This is arguably the most sophisticated carbon-fibre composite component that’s being manufactured anywhere in the world, and we’re mass-producing it, so all the knowhow and technology and the tools that we’ve developed to do that are directly applicable for these other things.

“There are fantastic synergies and great opportunities to exploit it into other markets, it’s just there’s a certain amount of bandwidth and there’s a great set of economics coming out of expanding what we’re currently doing. You never get thanked for being distracted, either.”

The Carbon Rev chief sees the company’s one-piece carbon-fibre wheels as “classic example of a trickle-down technology” like fuel injection, disc brakes, air-conditioning and the automatic transmission, opening up the market in a similar way that alloys achieved over steel in the mid-1970s but with today’s car-makers operating in a vastly different environment.

“We obviously dramatically reduce the weight versus an aluminium wheel in a world where energy and range extension are probably far more important than they were back in the early days of aluminium wheels,” he said.

“The opportunity here is to continue to provide the very best, the very lightest, the highest performing wheels to the market that wants that, but then to use what we’ve learned to develop somewhat less sophisticated wheels still using carbon-fibre and all the technology we have developed, and being able to get to larger programs at a different cost.

“This product won’t sit in that ‘commodity’ zone but it will add significant value and it will stand on the value that it can add to future platforms like EVs and eventually freight and logistics fleets.”

As such, overseas expansion is expected at some point, but Mr Dingle said he was committed to keeping both R&D and a baseload of manufacturing activities at its Victorian headquarters.

“Maintaining R&D and the development of the technology here, but then expanding offshore beyond the maximum capacity of the Geelong plant to achieve scale and economics as things grow, is what we have in our future – but there’s still a lot of growth to get out of Geelong. We expect this plant to expand quite considerably,” he said.

“What we are doing here is extensive automation, which means we are not chasing low labour costs at the expense of being located near our customers.

“Automotive customers want a short supply chain for large-volume programs, so what we’ve done is focused on reducing costs through automation and the use of raw material, and how we use it, and that means that, yes, we can ultimately set up facilities in the markets that are producing high-volume programs – so you can think of the North American markets, European and into Asia.”

This all sounds a little incongruous in a meeting room in Waurn Ponds, a 20-minute drive from Ford Australia’s original factory site on the Princes Highway at Norlane, in Geelong’s northern suburbs.

But Deakin Uni’s version of Silicon Valley has a different outlook.

Asked to describe how he felt about the successful IPO, and where Carbon Revolution was now heading, Mr Dingle said: “It took a while for people to believe that you could do this from here. So the fact that we’ve had such a great response, and obviously the response since listing has been strong as well if you look at what’s happened to the market.

“We’re not watching the share price every five minutes; operationally, nothing’s changed: we’ve got a plan, we’re delivering on the plan and we’ve got a team of over 400 people who are now very, very focused on getting that done and very passionate about it, so none of that’s changed.

“Getting the listing done indicates that the country is now embracing what we’re doing, which is great.

“We’ve always been passionate about this being a great Australian company and look to the achievements of CSL and Cochlear as great benchmarks for what can be achieved. This is far more relevant than comparing us to the local automotive industry that has now closed.

“It’s better to compare us to other Australian advanced manufacturing physical technology companies that have created a global leadership position.”