NVNXF: Creating a North American Supply Chain for the Lithium-ion Battery Industry

By M. Marin

OTC:NVNXF

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Novonix NVNXF is an integrated developer and supplier of high-performance materials, equipment and services for the global lithium-ion battery industry. Reflecting rising consumer adoption of electric vehicles (EVs) and installations of electric storage systems (ESS), among other factors, the need for lithium-ion batteries is expected to grow significantly. To benefit from this anticipated trend, the company's strategy is to create a North American source of competitively priced, high-quality synthetic anode material for the battery industry.

Through a series of initiatives, management has transformed the company from a legacy business of providing measurement equipment to battery manufacturers and others to one that supplies a range of value-added advanced battery materials and services and equipment to the global battery market. Novonix now has three key operating units: Novonix Anode Materials, Novonix Cathode Materials and the Novonix Battery Technology Solutions (BTS) divisions.

Initial Business Focus: EV and ESS Verticals

The company's two target niches within the battery space are the EV and ESS verticals. Each of these markets is expected to enjoy strong growth over the next several years that, in turn, will stimulate battery sales. Global EV penetration is relatively low, but growing rapidly, supported by initiatives from several governments and regulators in many markets. For instance, planned changes by the new U.S. administration have positive implications for EV sales, we believe. The administration hopes to extend the federal government subsidy of up to $7,500 towards the purchase of an EV and has also indicated that it intends to replace traditional internal combustion engine vehicles in the government's automotive fleet with EVs. At the same time, improving EV technology and battery charging infrastructure is expected to make EVs more attractive to consumers.

Advantages of Tennessee Facility

The company's strategy is to create a North American source of competitively priced, high-quality synthetic anode material for the battery industry. Towards this goal, Novonix began construction of an anode material plant in Chattanooga, Tennessee in 2018. Through a strategic alliance and R&D partially funded by a DOE grant, Novonix has developed specialized technology that enables the Tennessee facility to produce competitive, high-quality material that is a critical component of batteries. The market for this material currently is dominated by manufacturers in China, pointing to the need for a North American source.

Novonix's focus will be on ramping production capacity at this plant to increase the supply and sales of anode materials to meet the expected rise in battery sales. At the same time, the company intends to continue providing the testing services of its BTS division and leveraging its technology and growing patent portfolio for development of cathode materials.

While the BTS unit has an extensive existing customer base, Samsung SDI represents Novonix's first major customer on the materials side. NVX will supply Samsung SDI with 500 tons of material from the plant and expects Samsung likely will validate the high quality of the material and expand purchases, while Sanyo also intends to assess the material. In success, the company's products and services could form integral parts of creating a North American supply chain for growing production of lithium-ion batteries.

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