Tritium is For Sale

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“A Future Made in Australia” is a $22.7 billion Federal government investment over the next decade with a noble goal: “maximising the economic and industrial benefits of the move to net zero and securing Australia’s place in a changing global economic and strategic landscape.”

In layman’s terms: The world needs to change the things that are made and the way they make them in order to be carbon neutral by 2050. Australia will be left behind if it doesn’t work out how to transition to a low-carbon economy, and so needs to invest strategically to enable this.

We’re revisiting Tritium this week because it is exactly the type of business that should have been part of “A Future Made in Australia” … except it failed.

 A brief history of manufacturing in Australia

Here’s a quick 2-minute explanation of the role Manufacturing has played in Australia’s history – we only need 2 minutes because Australia is such a young country! Its colonies federated in 1901, at which time Manufacturing held a smaller share of the economy (in terms of output, employment and investment) than Agriculture.

Technological advances meant Australia’s manufacturing sector grew but at the same time made agriculture more efficient, causing a demographic shift in employment AND location. Basically people migrated from the country to the city, and by the second half of the 20th century Manufacturing had overtaken Agriculture in terms of Economic Output, Employment, and Investment.

Australian Manufacturing reached it’s peak in the 1990s, around the same time that Agriculture’s share of Exports dropped. Basically by the late 1990s Australia’s economy was dominated by Mining and Services (and primarily Financial Services).

This pattern of manufacturing is not unique to Australia – it’s a common feature of richer countries. It means that we essentially outsource mass market manufacturing to countries that can do it more efficiently (and cheaply). Instead, we focus on innovation – generating ideas for new products that then go through the cycle of small-scale manufacturing then, when the products go mass-market, that manufacturing shifts offshore.

It’s essentially the circle of life, for toasters.

Tritium: one of Australia’s innovation success stories (and failures)

Tritium has been making robust, weatherproof DC fast chargers for Electric Vehicles since 2012. It went international 5 years later and listed on the NASDAQW in 2022 … but not before securing $290m worth of funding in 2021 that gave it a whopping Double-Unicorn valuation – USD 2.2 billion! This valuation was based on the rapid growth rates of the EV charging industry – just like petrol stations over the past 100 years.

The big problem for Tritium was scale. While a $2.2b valuation sounds really great, it’s a paper valuation only. The listing was supposed to make it easier for Tritium to access the capital it needed to expand rapidly in a market that was growing so fast that 20% Compound Annual Growth Rate was forecast for the next two decades.

But the company didn’t list in a “normal” way. It merged with a SPAC (Special Purpose Acquisition Vehicle) named “Decarbonization Plus Acquisition Corporation II” (DCRN). Listing via a SPAC is easier but allows a business to sidestep heavy scrutiny from investors that it would receive when listing by itself.

(sidenote: SPAC Mania is dead)

It’s apparent now that Tritium’s SPAC structure gave it all the costs and compliance burdens of a stock market listing without any of the benefits, namely access to capital.

And if your business needs to grow at 20% per year, it needs capital – and a lot of it.

Tritium burned through their $390m funding like my kids consume chocolate at Easter:

• January 2022 – NASDAQ listing.
• February 2022 – President Biden opens Tritium’s new factory in Tennessee, capable of producing 30,000 EV charging units annually.
• Late 2022 – Tritium claims to be the number 2 producer of chargers outside China.
• August 2023 – NASDAQ warning notice as Tritium’s share price drops (and stays) below $1.
• Late 2023 – the Queensland Investment Corporation refuses to give Tritium a $90m capital injection.
• Also late 2023 – the Australian Federal Government’s National Reconstruction Fund, and the Clean Energy Finance Corporation both refuse to fund Tritium.
• Even later 2023 – Tritium announces it’s Australian factory will close.
• November 2023 – Tritium begins talking with KPMG’s restructuring arm.
• Also November 2023 – Taiwan’s Lite-On Technology conducted due diligence but did not purchase any Tritium shares.
• April 2024 – KPMG appointed Administrators of Tritium.

Who can / will buy Tritium?

It’s pretty clear that Tritium cannot trade out of its Administration – because it still lacks the capital required to do so.  That’s why KPMG is shopping it around, looking for a buyer. But who would buy it?

Here are a few worthy contenders:

• ABB, a Swiss-based technology company that offers a range of DC fast chargers up to 350kW.
• Kempower, a Finnish company that manufactures DC fast chargers up to 600kW.
• BTC Power, a Chinese manufacturer of DC fast chargers up to 360kW.
• Efacec, a Portuguese company that produces DC fast chargers up to 320kW.
• Delta Electronics, a Taiwanese company offering DC fast chargers up to 200kW.

And that list doesn’t even include Tesla, which has been doing an outstanding job of trying to make its Superchargers the North American standard for charging technology.

What would a successful buyer actually get?

The winner of any bidding contest run by KPMG will receive three things:

1. IP and Staff – Tritium is a world leader in DC Fast Charging tech.
2. Manufacturing capacity – that 30,000 unit factory in Tennessee, plus the mothballed Brisbane factory (probably).
3. And finally, the order book. The company’s Revenue Guidance from January 2023 (when everything was really going pear-shaped) is actually a perfect TLDR for the entire Tritium saga:

In January 2023 Tritium had an order backlog that was 60% higher than it’s entire 2022 revenue, and not enough capital to actually deliver it.

Taking orders is easy. Delivering them when you don't have enough money to build the products is not - try it, and you'll run out of cash.

 And if they’re quick, the eventual buyer could also pick up an entire team of DC Fast charger engineers that Tesla has just sacked, to fill any gaps that Tritium may have after their own redundancies.

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👋 Hi, I'm the founder of Ascern Advisers. We provide Part Time CFOs for businesses with Growth Potential. DM me or email me at david@ascern.com.au if you want to chat.

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