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Wheel maker Carbon Revolution raises $50m to expand

This article originally appeared in Australian Financial Review

Geelong carbon fibre wheel maker Carbon Revolution is raising $50 million to expand production to 100,000 wheels a year by 2021.

The raising is the first stage of a two-part capital program that the company – which started in a Geelong garage a decade ago – expect will lead to a public float in late 2018. Melbourne stockbroker Evans and Partners is advising them.

Carbon Revolution is the kind of modern manufacturer that policymakers hope can fill the gap after the closure Ford, Holden and Toyota’s car assembly. Its home grown technology is finding a global market and its production is evolving from high tech to volume.

The company has won contracts to supply its world-leading lightweight carbon fibre wheels to Ford Motor Company for the $US450,000 ($600,000) Ford GT and $US63,000 Mustang Shelby GT350R sports cars.

The wheels have been on sale in the after market for luxury sports cars for five years but Chief executive Jake Dingle said Ford’s imprimatur had intensified interest from other large carmakers and bigger orders are in the pipeline.

“We are in mass production and the demand has been terrific – it has actually increased,” Mr Dingle told The Australian Financial Review from New York.

Mr Dingle said the new capital – equal to about 28 per cent of the expanded capital – is needed to boost production at the company’s Waurn Ponds facility to about 100,000 wheels a year by financial year 2021.

He expects strong demand for the shares from existing shareholders – which include company founders, Swiss alloy wheels giant Ronal and Melbourne “microcap” investor Acorn Capital – as well as international investors.

There are about 1000 Shelby GT350Rs on the road – the car was named Performance Car of the Year 2016 by US magazine Road and Track – and Ford is looking at increasing its initial Ford GT build of just 500 in the face of demand for 13 times that number.

Mr Dingle said larger contracts are in the pipeline as Ford and other makers eye the carbon fibre wheels for lower priced, larger volume makes – where cost, weight and fuel savings are paramount as pressure builds for environmental penalties.

He said more global carmakers are testing Carbon Revolution’s wheels. Much of the 100,000 production the company is aiming for by 2021 is already under contract “and the numbers keep going up”.

Some of the bigger programs in the pipeline are for up to 60,000 units of a single wheel, Mr Dingle said. The company will use the funds to continue the “industrialisation” its unique carbon fibre production technology and cut production costs.

Once production at Deakin University’s Waurn Ponds campus is at 100,000 to 200,000 “we’ll be doing real manufacturing here” and carbon revolution will employ more than 300 staff, three times today’s workforce, he said.

Slashing costs

“We have halved our costs over the past two years and we’ll be dramatically reducing costs in the next three to five years.” Mr Dingle said the company should reduce its direct costs by 30 – 35 per cent year on year until 2019.

That would make carbon fibre wheels cost competitive with top forged alloy wheels – before considering the significant weight advantages. High volume contracts could then justify building plants capable of producing up to a million units per year.

If that comes about Carbon Revolution plans to build large plants in North America and Europe in partnership with its Ronal, while maintaining itechnology development and more complex manufacturing operations in Australia. Global carmakers require volume suppliers to be close to their major markets.