The target company manufactures a key consumable used in the calcination process of precursor materials for cathodes in secondary batteries (precursors are powder forms of nickel, cobalt, manganese, etc., processed into cathode materials). The firm’s ceramic technology, historically applied to electronic components, underpins its planned entry into the cathode material business. To finance capacity expansions and operations, the target sought PE investment.
Assessing Market Potential, Competitive Position, Revenue Forecasts, and Investment Strategy
The due diligence focused on evaluating the outlook for domestic cathode producers—who are key customers of the target—as well as the demand growth potential for the target’s consumables and the company’s competitive strengths. Additionally, the project estimated medium- to long-term revenues, identified required capacity expansions, and offered guidance on optimizing domestic and overseas investments.
Cathode Demand Outlook and Consumable Requirements
The secondary battery industry is set for undeniable growth, with forecasts generally indicating ~20% annual growth through 2030. Domestic secondary battery and cathode producers enjoy global competitiveness, suggesting robust opportunities for the entire supply chain, including the target company.
The target’s revenues are expected to outpace overall cathode market growth due to its focus on high-nickel cathode materials, a rapidly expanding segment of ternary cathodes (batteries that incorporate three metals, typically lithium cobalt oxide plus manganese or aluminum). Detailed analyses of domestic supply and demand helped determine the extent of necessary capacity increases and reviewed competing players’ expansion plans.
IRA and LFP: Key Opportunities and Risks
The confirmation of the U.S. Inflation Reduction Act (IRA) during the diligence period prompted a reassessment of domestic cathode manufacturers’ investment plans. IRA compliance can alter procurement and localization strategies, affecting the target’s growth trajectory.
The team also examined the growth potential of LFP (lithium iron phosphate) cathodes—championed by Chinese battery manufacturers and garnering increasing attention from global EV makers (including Tesla). Although LFP cells have shorter ranges than ternary batteries, their cost advantages and safety profile could influence domestic cathode manufacturers’ investment strategies and, in turn, impact the target company.
Verifying the Target’s Late-Entrant Competitiveness and Market Share Prospects
As a new entrant, validating the target’s competitive positioning against established players was critical. Through discussions with competitors and potential customers, the due diligence assessed technology, pricing, and overseas expansion capabilities. Site visits and interviews revealed the target’s advanced automation lines and high-caliber human resources, suggesting strong global execution potential.
Drawing on Looxent’s extensive experience in EV and secondary battery projects, the team delivered informed assessments of industry conditions, competitive capabilities, and revenue forecasts. Insights from numerous manufacturing engagements facilitated in-depth evaluations of product and process technologies.
The target company manufactures a key consumable used in the calcination process of precursor materials for cathodes in secondary batteries (precursors are powder forms of nickel, cobalt, manganese, etc., processed into cathode materials). The firm’s ceramic technology, historically applied to electronic components, underpins its planned entry into the cathode material business. To finance capacity expansions and operations, the target sought PE investment.
Assessing Market Potential, Competitive Position, Revenue Forecasts, and Investment Strategy
The due diligence focused on evaluating the outlook for domestic cathode producers—who are key customers of the target—as well as the demand growth potential for the target’s consumables and the company’s competitive strengths. Additionally, the project estimated medium- to long-term revenues, identified required capacity expansions, and offered guidance on optimizing domestic and overseas investments.
Cathode Demand Outlook and Consumable Requirements
The secondary battery industry is set for undeniable growth, with forecasts generally indicating ~20% annual growth through 2030. Domestic secondary battery and cathode producers enjoy global competitiveness, suggesting robust opportunities for the entire supply chain, including the target company.
The target’s revenues are expected to outpace overall cathode market growth due to its focus on high-nickel cathode materials, a rapidly expanding segment of ternary cathodes (batteries that incorporate three metals, typically lithium cobalt oxide plus manganese or aluminum). Detailed analyses of domestic supply and demand helped determine the extent of necessary capacity increases and reviewed competing players’ expansion plans.
IRA and LFP: Key Opportunities and Risks
The confirmation of the U.S. Inflation Reduction Act (IRA) during the diligence period prompted a reassessment of domestic cathode manufacturers’ investment plans. IRA compliance can alter procurement and localization strategies, affecting the target’s growth trajectory.
The team also examined the growth potential of LFP (lithium iron phosphate) cathodes—championed by Chinese battery manufacturers and garnering increasing attention from global EV makers (including Tesla). Although LFP cells have shorter ranges than ternary batteries, their cost advantages and safety profile could influence domestic cathode manufacturers’ investment strategies and, in turn, impact the target company.
Verifying the Target’s Late-Entrant Competitiveness and Market Share Prospects
As a new entrant, validating the target’s competitive positioning against established players was critical. Through discussions with competitors and potential customers, the due diligence assessed technology, pricing, and overseas expansion capabilities. Site visits and interviews revealed the target’s advanced automation lines and high-caliber human resources, suggesting strong global execution potential.
Drawing on Looxent’s extensive experience in EV and secondary battery projects, the team delivered informed assessments of industry conditions, competitive capabilities, and revenue forecasts. Insights from numerous manufacturing engagements facilitated in-depth evaluations of product and process technologies.