Good morning, everyone. Thank you for joining us today. Welcome to Microvast's first Investor Day as a public company. I'm Monica Gould, Investor Relations for Microvast. With me today to provide an update on the business, Yang Wu, Founder, Chairman, and CEO; Sascha Kelterborn, Chief Revenue Officer; Zach Ward, President of the Energy Division; Dr. Wenjuan Mattis, Chief Technology Officer; Craig Webster, Chief Financial Officer. I'm sorry, Shane Smith, Chief Operating Officer. A supplement of slide presentation is posted on our relations website. Of course, this presentation contains today's agenda and the key financial information and assumptions for our long-term outlook. Today's presentation is going to be about one hour in length, followed by a short break. We'll wrap up with a review of our financial to date and a Q&A session.
Wu will begin with an overview of the company and then pass it over to other members of the team to discuss our business segments, including commercial vehicles, energy storage, technology, manufacturing, and financials. Please do hold your questions until we get to the Q&A session. Before we begin, I'd like to direct your attention to our cautionary statement regarding forward-looking and non-GAAP financial information. Today's presentation contains forward-looking information. Important factors that may affect our future results, as well as more information on our forward-looking statements, are disclosed in our public filings. Forward-looking statements are based on our view of the business as of today, and Microvast undertakes no obligation to update any such information in light of new information or future events. During this presentation, we will be referring to non-GAAP financial measures, unless otherwise stated.
A description of the various items that are excluded, and reconciliations of GAAP to comparable non-GAAP financial measures are included in our investor materials. We are excited to share Microvast's long-term strategy and financial outlook. With that, I'd like to turn it over to Yang Wu to begin the presentation.
Yeah, feels good. Feel good to see everybody face to face, you know, after like three, four years on the screen. This is the first time I face, you know, to the investors, analysts, you know, they really feel good for today. You know, thanks, thank everybody for taking your time to join this event. You know, I like to tell you, Microvast will be a significant battery manufacturer in U.S. This is pretty sure, you know. The reason, the first, Microvast has a full spectrum of technologies, including a raw material, battery cell, battery pack, BMS, the controls, you know, everything we have in-house. We are fully vertically integrated technology company. Those technologies are not even laboratory-proven, and the famous laboratory-proven and field-proven. That's important. Field-proven is most important.
You can have a great technology on the laboratory, but when you move to the application, maybe it's different. The field-proven, this enable us to have a guts to put it in the massive production. Otherwise, we cannot, you know, move to the massive production. Secondly is, the Microvast team is super, you know, stable. The employees we have, you know, 2,500+ employees, and they, most of them, they stay with me a decades, and very loyal. You know, I'm very loyal to my employees as well. Whatever hiccup we have in the history, I never can any my employee out from a company. That's my promise. Whatever problem we have, you know, we stay together and as a team.
The solid team is the foundation of battery company, because battery, you know, it's from all process, you have to be very careful for safety. Another, you know, if we, you know, Craig Webster, my CFO, will tell you financially, we are, you know, they are self-sustained. You know, it's really good, you know, we really don't need much money from outside. We can move a roll off by ourself. Another reason is great opportunity for U.S. You know, IRA is a big boost. You know, IRA, everybody know is a really big boost. You know, it make, you know, business more profitable and make business easier. U.S. is the last one, you know, last mover for the electrification.
China was the first one, then Europe, and the U.S. is last one. I think U.S. government understand this situation, then this IRA really is going to, you know, make us catch up with other countries, other continents. You know, it feel great. You know, and another way is you will see Microvast will be profitable battery company. You know, battery company is hard to make money. Everybody know it, but we are going to make money. If you, I show you this product, everybody can see it? This product, you know, we developed, we tested four years in, you know, in the field, in the laboratory, and sent to third party, you know, for verification.
This product is fully mature, and this product is going to be our primary product, is maybe 80% of what we are gonna produce. The single products produced to, for all applications is best the way to you make a business. You know, you have much higher yield, and also your raw material, feed material, you purchase from the suppliers because you have larger volume. You don't change, you know, change around with your supplier. The supplier, you know, he's going to give us better price. To make it competitive, you know, you know, that's why this product will be our primary product for coming maybe three, four years, you know, before we, you know, we launch the next, great battery. We will have it.
This company, this product is going to take Microvast to be profitable. If you look back, and I'm not sure, you know, everybody know Microvast, the word Microvast come from. I can share with you a little bit of background, you know. I know it's not important in the, in the past, important, more important in the future, but I'd like to share you know, where we started this. I started this company in 2006. In November, I registered this company, November. After I sold my ex-company to Dow Chemical, Dow Chemical acquired my water membrane company, which is great technology as well. Microvast is my eighth company. I spent my whole life build a technology company. None of them gone, everyone is successful so far.
You know, we start from, really different with any other battery company. You look other battery companies, they have commodity battery before. They make a cell phone, laptop battery. Microvast start from scratch, only a dream. [audio distortion]
Yeah. Only a dream, I want to build battery companies, you know. In the beginning, when I hire people, you know, they ask me: "What you hire me for?" I say, "I don't know it." You know, I just want to make a battery. That's where we started. We start from nothing, which is good and bad. Good side, you know, where we start our business, and after a year, you know, settle down in 2017, you see, 2007, you don't see much, you know, activity in 2007 because we really didn't know, you know, what do we do. In 2008, I, you know, I threw, you know, analyze of a consumer behavior.
I came up with three fundamental category battery research, you know, orientation. The first is fast charging. I told my scientist that we need to make a battery charging, you know, less than 10 minutes, which was insane in 2008. Battery charge for six hours in that day. 10 minutes, you know, this is really a crazy idea, but we made that happen. I can tell you later, you know. The second, you know, because the fast charging is a fundamental, you know, the function to ensure the mobility, you can use your vehicle anytime, especially for commercial vehicle. A lot of commercial vehicles, they run 24/7, and they don't have time to charge. They cannot charge for six hours, five hours, four hours, you know, and, you know, keep idle.
Secondly is battery is so expensive, nobody afford to replace battery in the middle of a vehicle life. Any vehicle, if you want to replace battery, you never sell your secondhand car. Your secondhand car is gonna less than your battery cost. Third one is the high safety. You know, battery, really, we need to improve the safety significantly and make it much safer, even safer than today's, you know, the gasoline car. That was the target I gave to my, you know, the research team. After this foundation build up, then we're going to work on the energy density. You know, that's why I made, you know, the tree Dr. Mattis is gonna show you later, you know. With that, you know, we.
With that approach, you know, we figure out, you know, we focused on it, you know. I decided to focus on the commercial vehicle, you know, from 2015, from that year. You know why come, you know, I try to focus on the commercial vehicle in a EV industry? Because the commercial vehicle, if you compare with the passenger car, commercial vehicle require much, much better battery. That requires like 4x longer life. Commercial vehicle, you chase like 1 million mile mileage, the passenger car, you know, 200,000, 300,000 miles, you're going to get rid of a car, you know. Commercial vehicle runs, you know, almost nonstop. Other big reason is the CO2 emission. All the purpose we build electrification to cut down CO2 emission.
A commercial vehicle, you know, have 20x, if you calculate, CO2 emissions than passenger car. They use 20 hours a day. Your passenger car, you drive one hour a day or two hours a day, and they have a much bigger engine, you know. So the, to cut down the big, you know, polluter, that's a, that's a priority, you know, for our, you know, mission. That's why we focus on commercial vehicle. Commercial vehicle, you know, since the companies can, you know, commercial vehicle OEMs, they are relatively smaller. They, they are not like a size, like a big, you know, the, you know, passenger car companies. They're really, they're not able to establish the battery manufacturing by themselves.... That's why we focus on this, and then we go focus on ESS.
You know, I told my guys, you know, battery, you know, the EV is not really, it's not a clean energy. EV is not a, you know, the environmental friendly, to be honest. EV can produce because your electricity come from fossil fuel, and electricity come from all the, you know, the CO2 producer. Your EV is just to sweep the garbage to somebody else. Fundamentally, you still need to resolve the energy source, and that's why, you know, we plan, you know, we plan ahead to get into the ESS business. Fortunately, we already established MEVCO in U.S. You know, it started in U.S. from last year, and that did a great work. We landed a big contract last year.
Another thing I want to tell everyone, you know, is Microvast, you know, they become a vertical integration company. We didn't plan to become a vertical integration company. You know, we just looking, researching on the highest technology for the electrification. Those technologies require special material, require all the, you know, the modification for the material, and requires development for, you know, for the applications, new development, and eventually made us to be a vertical integration. Later we found out vertical integration is really a big benefit. Oh, I always forgot to flip.
Okay. No worry. Sorry.
Vertical integration, you know, they give you ability to develop the next generation battery much faster because you have all kinds of development in-house. You don't have the liability, responsibility pushed around by suppliers.
You don't know it, you know? That's why, you know, it give us much better development cycle. Also, you know, when this company goes big, you know, in the revenue, we make everything by ourself, and it make much more economic. We contain all the profit, you know, the profit chain inside, you know, into our, you know, portfolio. This is really good. I don't want to say too much on this page. This is all numbers. You know, you can read it. Let number talk. Number can talk by itself. Right now, we got, like, we, you know, got a 30,000 more vehicles running on 34 countries. I go to next page to show you what we promised the, our, you know, the public, what we have done.
If you look this, you know, the slide, and only, you know, the revenue we behind our, you know, the revenue really behind our, you know, the projection. One year behind. The reason why you're behind is nobody expected Omicron, you know, Omicron came. Nobody expect that. You know, everybody think that the, you know, COVID-19, that's it's over, you know. Omicron come, and China was controlled so tight and, you know, also, you know, we have a lot of hurdles for the everybody know the, for the chip shortage and, as well as the shipping, you know, the problem. You know, you cannot even ship out, you know, last year, ship out your goods. That's why, you know, our revenue is a year behind.
But we're going to catch up, you know, this year. You know, we're almost like last year, you know, the projection. Another, you know, the little bit shortage is our commercialize or, you know, the raw materials. That's a little bit behind. This page give you the total market, you know, from EV market and, you know, ESS market U.S. You know, this page is going to tell you what we are going to do in the United States. We will continue to build commercial vehicle, ESS, battery cell, battery pack, battery container, all system continue to expand, you know, to 2030. You know, we plan to expand to 25 GWh . We believe, you know, it's going to be a significant player in this country.
In the same time, we will develop our raw material and the cathode, anode, separator, not anode, electrolyte. You know, the separator, everybody, you know, already know the story. You know, the separator is DOE. I don't want to talk too much. This separator is really great for, you know, the people's safety. It's not only products for Microvast, it's a product for everyone use EV, for everyone use lithium battery. It's a product for the industry, for, you know, for every consumer. You don't see, you know, you don't see we, you know, where is the anode? We don't have an anode. You know why, Microvast, you know, we have everything else, we don't have anode? Because we believe lithium metal will be the best anode in the coming road. You don't need to develop it.
Lithium metal, you only need to apply it. You know, that's why we do not have anode in our technology portfolio. You don't see it. Everybody wondering, you know. You got everything else. You know, I believe, you know, with those technologies, you know, we will be significant player, and, you know, I'm pretty sure. Thank you.
Thanks, Mr. Wu. Good morning, everybody. This is my slide, and I will give you a quick overview about commercial vehicles, the market, the market trends, the development, and I will give you, at the end, a very important highlight, because I wanted to keep my promises in Q1, as I said in my earnings call, and I will mention it in my last one. You really have to watch, right? You have all the presentations, you know exactly what's upcoming. As Mr. Wu already said, numbers talk. Yeah, for me, numbers talk, and customers, right, that's the most important evaluation of technology. We are today based in took more than 34 countries commercial vehicles in operation. I think this is a quite resource diversification globally already where Microvast is active.
The market into between 2022 and 2030, these are classical numbers you get from all out of your studies, 24 million electric commercial vehicles TAM over that period. We will have roughly a TAM in 2030 of about 510 GWh. It's incredible. For sure, we will need to have by far more production than what we can see today already, and Mr. Wu already talked about that he will increase the production capacity in due time. We have more than 12 years vehicle operation time. We are not only talking about laboratory data, we're talking really about fleet data, about data which is coming from various geographical regions, different temperatures, very cold, very hot, very humid.
We know exactly how a battery has to function in a commercial vehicle operation, which in the extreme phase can be 24/7. We have more than 30,000 battery systems deployed since 2011. We deliver not only battery systems, but we deliver cell model and packs, we have really stopped counting that. We will move ahead with revenue numbers in the future. We are serving more than 10 different market applications. What does market applications mean? Just to give you an idea, because pictures tell more about product than if I talk about, if I show you that this is the IVECO eDaily. Most common use commercial vehicle application outside the U.S. The oldest live commercial vehicle, which you will find in the market, was established 1970s, already in Europe. This one, we deliver the battery.
I think I'm really proud on that because our R&D team around Dr. Mattis did an incredibly good job by developing that 52 Ah , which I will show you later. London buses. I think most of you have driven in London on the double-deck buses from Wrightbus. Really proud of that, because it's a hybrid bus application, close to 18 kWh , and it's running 24/7 with LTO technology. Our LTO technology can reach up to 20,000 full cycles, which you will not find a lot in the market at all. Then you see the totally different aspect, medium, heavy-duty trucks. I took the extreme picture. It's a mining truck application, and even this is served by Microvast batteries. Then you have specialty commercial vehicles. You see here one of our customers.
It's a classical harbor application, no time for charging. It's also 24/7 operation. The customers of ours are relying on our battery technology in order really to perform their task on their side. We need to make sure with our team, with our technology, cooperations, with everything around, that this battery system is functioning. I will not go too much into details of that, I put it in my slides because then you have something we can talk about. We can talk about the different things. At the end, it's from BNEF, you know that. What is I think is very important is that the market for electric applications, commercial applications, is growing with 39% CAGR. This is extremely supported by government initiatives. As Mr. Wu already mentioned, IRA.
In Europe Fit for 55 Green Deal. All these important innovations will help to come up with fossil-free alternative energy solutions. One will be battery, which is very important. Another one will be fuel cell, but it's also with a battery. For us, it's not a competition, it's actually an add-on in the market. You will for sure have certain e-fuel applications. For certain areas, they probably will play a role, but mainly it will be batteries-driven. If it's a full electric, a hybrid or a fuel cell, everything needs a battery. And the right battery chemistry. This is what is the key about Microvast is focusing on commercial vehicle applications. We do know the RFIs, RFQs of our customers, and we are not selling a mass market battery, as Mr. Wu mentioned at the beginning.
We're dedicating our business on commercial vehicles, so we need to know. We know actually the drive cycle of our customers, and for that, we do adapt the battery for their needs. This is done by our R&D team around Dr. Mattis. Mr. Wu already showed you the cell, and I mean, this is the newest product, right? Putting an operation by Shane Smith, our COO, it shows you here the comparison, where did we start? We started with the 21 Ah, and then we did a further development because we listened to our customer and we saw the market, what are the market needs, and came up with a new technology called 53.5 Ah. Long cycle life, more than 5,000 cycles, fast charging capable. All our battery cells are fast charging capable.
This helps for the future. Right now, you don't have enough fast charging stations, There's more and more fast charging stations you will have globally. You can still use our technology. You have fast charging already integrated in your vehicle. Others needs to switch because they don't have the fast charging capability integrated into their cell. Very important aspect. We have good safety and thermal management system, because safety plays one of the biggest important roles in the company. With this technology, we are lowering the total cost of ownership. We are helping our customers to get more sustainable because we have long cycle life. It's built to last the vehicle life. That's the most important here, which I would like to mention. Coming to that, just giving you a quick overview.
I like the marketing slides because it gives you a quick bullet point. This is the classic bus application. You see it already with our customers, like IVECO and others. Minutes to 80% charge, 30 minutes. 175 W by Kg on cell, on pack level. It's market leading. For sure, there are always others upcoming, yeah. They're developing them, and but we will try always to be market leading. More than 5,000 cycles. It's very difficult and tough to find somebody who reaches more than 5,000 cycles based on the overall pack energy density. Lifetime. Everybody is talking about 1 million miles, right? This system can reach, without any problems, 1 million miles. We didn't announce this.
Others announced it, but this technology is good for that, and we have real lifetime data because our technology department did a great job on that. This is when you dedicate your technical towards commercial vehicle, and you listen to your fleet customers. That's it. Our 52 Ah, and I put it in here because it's one of our big runners for the eDaily for the eDaily right now, which is IVECO using for the light commercial vehicle. Minutes to 80% charge, 24 minutes. Again, fast charging capability. Cycle, long cycle life, more than 2,500 full cycles. Classical RFI, RFQ in the automotive industry is 1,500 cycles for a mass market product. You see the difference dedicated to commercial vehicle applications. Also here, long lifetime mileage, way above 200,000 miles.
Pictures talk, as I said, right? As Mr. Wu mentioned, we had a small hiccup last year due to the fact that COVID was still there, supply chain issues, chip shortage, all that kind of things. We had project delays of our customers. Even if we would have been ready, we couldn't deliver because the market was not ready in certain areas because we had the hiccups on the supply chain. Now the SOP started. Remember last year, IAA Hanover, IVECO announced the SOP of the eDaily. First 200 units are reordered. We have more than 3,500 units ordered by Iveco Bus. The electrification is moving quickly ahead, and as Mr. Wu said, the next runner after China is right now Europe. The next afterwards will be the U.S.
They will compete against each other with IRA Fit for 55 Ah and Green Deal, 100%, but at the end of the day, we will get more sustainable. European customer, we've received more than 300 units just in the short term. These are dedicated for U.S. and Europe. Our customers from Europe are moving to the U.S., and they're happy that we will localize now with in Clarksville. Shane Smith, my colleague, he will talk more about that as well. They want to use by building American cells. But they already know the technology, 53.5 Ah is an example here. They want to move it over to the U.S.
Peter Matthey, important logistic handling, company, still family-owned. They order more than 100 units for the U.S. as well as for the European business, dedicated to logistic handling, airport terminal tractors, all these kinds of things. It's not mass market, but it's specialized technology where the customer is relying on battery technology at the end. A couple of things which I will later announce, probably in Q3 or Q4, when it comes to the earning calls, but this is an application which will go into the classical cooling trailer application. When you're in a black territory, you unhook your trailer, and you need to cool it further on, so they will use our battery for that as well. Some further proof points, and I think that's very important to our laboratory data, street data, and everybody's happy in the, about that.
London, as I already mentioned, this is still the biggest hybrid diesel bus fleet in Europe, more than 1,000 units. They all operate with Microvast batteries. So far driven 62 million miles annually. Annually, right? 24/7 operations on all their main lines. This is a very unique project, and the Microvast batteries are dedicated for that. Transport for London loves them. They will use once more their battery because the vehicle lifetime will be over in a couple of years. After that, this hybrid bus fleet will, in Europe, move also to full electric and fuel cells. Netherlands, this was, in 2018, the biggest electric bus fleet in Europe, and it's still one of the largest for one dedicated route.
It's going from Amsterdam Airport to Amsterdam downtown city, and it has more than 100 units, and it's operating 24/7. It drives annually, 19 billion miles. Very interesting here, perhaps, it is driven by 169 by our battery pack, and this is fast charged during the stops by pantograph, always for 10 minutes, and then it's moving on another 50 kilometers. The battery itself can run up to 100 kilometers. It's just to make this secure that in case the charging station is not working, the bus can always reach the next charging station. It's dedicated, really, this route is already dedicated to future e-applications for commercial operations. This actually is the most important slide everybody would see, and I'm going to keep my promise.
As I said, in 2021, we had $486.7 million backlog, and we grew it 38%. Right now, we have $672.6 million backlog, and I think all the team can be very proud of that because it was a team effort to get that things done. We increased our backlog dramatically just in this short time because technology is talking. 53.5 Ah cells in other applications were tested by a lot of big customers, and they gave their proof of concept for that, and they are now starting to order. Here you see a couple of them, and I think this and the latest backlogs are coming dedicated from the bus side and from special vehicle side. This is actually. Let me look at this.
Technology is here, customers are approving it, backlog is increasing, that's the way we want to move for ahead. I think it's now starting in the U.S., because what I have to say, part of the backlog is also our first PO for Plaxio. Not only Europe, not only Asia, it is also for the U.S. already. I think at that point, bringing cell technology to U.S., it was the right, it's the right time now. Yes, I know that my colleagues are doing everything to get Plaxio operational because our customers are waiting also for Made in America batteries. With that, I will pass it on to Zach, because he has a lot of good stories to talk about as well on the ESS, U.S. side. Thanks a lot for spending the time today with us.
Well, thank you, Sascha, for a great overview of the commercial vehicle market. There's definitely some exciting wins for some new platforms there, and expansion into new regions. I'm really excited to walk you through the ESS business. The energy storage business is going to enable all those new fleet coming online to actually charge with green power. Like we said, it doesn't help to electrify all these fleets if you're not electrifying and limiting the fossil fuels that charge all those fleets. I'm Zach Ward. I'm the President of the Microvast Energy Group. Our business is stationary energy storage. This is really a high-growth market at this time, and it's a real compliment to our commercial vehicle business. Commercial vehicle business is grows over you. With these platforms, they grow slowly over time.
They're very much backloaded in the way the revenue flows. The energy storage business is a real complement to that because it's all front-loaded, so it really allows us to increase our utilization, increase our supply chain, and it just enables us to get to that profitability much faster. If you see here, I'm going to walk you through some of the numbers. I'm sure everyone has seen these many, many times. These are all your Bloomberg numbers. Incredible growth, incredible demands. New record was set last year, 68% year-over-year growth. We added 35 GW h of stationary capacity. If you look at the TAM, it's exploding rapidly. We're now at 1.4 TWh or 1,400 GWh estimated by 2023.
If you look at the Americas region, you can see that the market's also really dominated by a key application, which is energy shifting. This is as we shift away from fossil generation, this is really the tool that gets us there, shifting that demand from to that from the off-peak to the peak demand. The Americas is now as of last the last report, now the largest market globally. It's good that we've surpassed China and EMEA and those regions. One of the big pushes here that we're seeing, that everyone's talked about, is the IRA. It's really lighting the market on fire here in the U.S. and creating the biggest market globally.
Projects can receive a 40% ITC investment tax credit if they utilize domestically sourced materials, and we're one of the only suppliers that are making those materials today. I'm gonna walk you a little bit through Microvast Energy. It's in a year and a half, we've come a long way. We were founded in the beginning of 2022. It was part of our public launch strategy. We've been fast and furious. We purchased a facility in Colorado. We expanded the team with some great new resources. We built an industry-leading ESS product based off of the 53.5 Ah cell. That has a proven track record, field experience, so it's a great launching off point for the energy storage stationary business.
Well, after we built this product, we took it to market, and then it's a very large project. The core, the core of the product is really a 20-foot container format. It's really, it utilizes the 53.5 Ah cell and module, so we're using the common product that Sascha went over in the commercial vehicle market, so we have that advantage of using that common product. It's 4.3 MWh per 20-foot container. It's also one of the leading energy densities of the entire market. As you can see from the customer response and securing so much business early on, you can see the benefits of that.
This product, some of the core values of this product is really much higher energy retention than a lot of the leading competitors. Definitely, the leading energy density versus the competition. This is a key thing that's often overlooked. It's not a big part of the system, but it's a very important part of the system from a cost standpoint, and that's the BMS. We've developed our BMS completely here in the U.S. to ensure grid security. That's been a concern for the last 10 years about how we secure our bulk delivery for our utility grid. That's all domestically developed and sourced. The other features of this product is it's used for transportation in a 20-foot shipping container kind of format.
That really enables a lot much simpler installation and maintenance. If you look at this 53.5 Ah cell, you see the performance is dramatic. In a four-hour system, we have over 10,000-hour cycle life. I wanted to highlight here the dramatic difference in energy density for market competitors. You can see the dramatic difference in some leading competitor technologies that are out there versus LMP, even other NMC formats. I think a lot of people overlook the key value of this by optimizing their products around their operations, or if they're, as a manufacturing agent, they also look to that low-cost labor market and optimize around a low-cost labor market.
When you're coming to the U.S. or the European Union, it's a very, very high labor market, very high construction costs. We've really tried to take a look at a holistic view of the market to make sure that we're optimizing the product for the total cost of involved with constructing a battery power plant. If you see this energy density difference, you know, if you boil it down to the most simplest block, you're installing fewer containers. If you have a 65% difference in number of containers, you're basically doubling the containers on the site. You're doubling the land, you're doubling the construction cost, you're doubling the long-term O&M cost. Every system has to be maintained, right?
Over that 20-year life of the battery power plant, you have to maintain twice as many of all those containers, cooling systems, everything that goes into the container. It's just pretty simple economics when you boil it down. If you look at the... I won't question to this, I'm sure you guys have all seen it, but it's a great-looking slide, so everybody wants to show it, right? This is the global TAM for energy storage. If you look at the market is primarily dominated by China and the U.S. As I said previously, the U.S. has taken now the first position ever in renewable energy and energy storage projects. We'll be with our first project is 1.2 GWh .
We'll be adding to that capacity very quickly. I think also, if you look at this graph, you really see the inflection point is 2023. It's right now. We're living in that inflection point where you really see that dramatic growth. This is the TAM, also from Bloomberg, which I'm sure you all have seen. This is, you know, this is also a great slide to show. If you look at that growth and that inflection point going from 13 GWh to 29 GWh , it's dramatic growth here, and it's all dominated by the U.S.
You know, America has really become the land of opportunity for energy storage, and it's really good having finally after clawing out our business for the last 10 years in Asia, competing against Asian competitors, we finally are enjoying home-field advantage. That part of this graph feels really good. This market's rapidly growing to a 50 GWh per year. If you look at the breakdown in the applications of this market, by next year, 70% will be energy shifting, and that's our core focus of our product line with our long-duration storage. One of our key messages here at this meeting today is really to talk about our growth strategy.
I was able to boil down the growth strategy into three phases, and it's really what we're executing today. The first phase is really to build that beachhead in the U.S. market, to have home-field advantage. Shane is putting together an amazing factory, here in Clarksville, and it happens to be the largest market globally and the highest value market as well. It's a great place for our launching off point. The second phase of our growth will be to expand our technology portfolio to offer turnkey battery power plants. That's moving up the value chain and really taking a wider position in the power plant. The third phase is really to expand globally. Once we've added more capacity, we can expand into those global markets.
We have established facilities in, throughout EMEA and throughout Asia Pacific. We can utilize all that infrastructure, service fleets, sales teams, local offices, trading companies. We have access to that whole network to take that basically, that foundation that we built and just move it all over the globe. I'd like to highlight some of the success deployments that we have. Pretty exciting. Our first project, which is under contract last year and some in our backlog, is a 1.2 GWh project. It's a 300 MW fo ur-hour system. It'll be deployed here in the United States, and it's going to start delivering in 2023, and complete delivery in 2024. It's one of the largest projects in the U.S. that's currently under construction.
We have also been awarded our second project, we're starting to build out that pipeline and that backlog into 2025. The second project is awarded. It is a 100 MW project, four-hour system. Again, it's a 400 MW capacity. It's in the United States, it'll start delivering in 2024. In summary, I really like to talk about what a huge growth opportunity that energy storage is offering Microvast. I talked a little about how it complements the business, that slow growth. As we roll out all these platforms, the platforms start building volume over eight years. This allows us to really front-load the utilization and the profit of the organization.
I've kind of boiled it down to six points here that really summarize why it's such a huge opportunity for Microvast, and it's an exciting time for Microvast as well. Right now, as you saw with our first launching off point with our energy storage system, the 4.3 MWh , we have the leading technology with our 53 Ah cell and module. We get to utilize that, which has a higher energy density, has a higher energy retention, and a higher round-trip efficiency. The second point is really to talk about execution. As we've demonstrated in a very short time, we're filling up the backlog and filling up that pipeline into 2025 already, so we're in full execution phase.
US presence, like I talked about, having that home-field advantage finally in the global market, is a big advantage. Manufacturing in the U.S. is a key value to all of our customers here. It enables them access to the IRA and enables them access to manufacturing credits, as well as the Investment Tax Credit that is the whole project. Key value for our customers is our U.S. presence. The fourth item is really talk about the government demand. The IRA has really set the market afire. I mean, you've all seen the every quarterly report that comes out, it continues to grow and grow and grow, and that demand is really insatiable right now, and there just isn't enough supply.
That puts us in a very strong position in the market. The next one is really to talk about innovation. It's not enough just to be good today. You have to be good tomorrow, right? You have to be working on those next-generation solutions. Our team, especially our development team, led by Dr. Mattis, has really been spending the last years working on that technology portfolio. We have those next exciting projects that are already in queue and ready to launch right behind this product. We're really excited that we have that runway of technology to carry us forward. I think the last point I'd really like to make is the right team. We've demonstrated our ability to bring a product to market, to secure business.
to develop the next generation leading technology and partner. That's really the important detail of Microvast, is the strength of our team. Thank you, everyone.
Good morning, everyone. Welcome to our Investor Day. Thank you, guys, for sharing with us your strategic insights in energy storage. As the Chief Technology Officer of Microvast, I am honored to have worked in this company for over 10 years. It's I take a great pride in our mission. Not only we advance the technology in energy storage, and also we contribute to the societal benefit. It's a privilege to work with a team of highly skilled researchers and engineers, guided by our visionary CEO, working with a team of the highly proficient team. With all these combined efforts, we have developed and manufactured remarkable technology and products that has marked on the market.
As a technology innovator, Microvast has established our leading position in 17 years with the three continents spanning. We have established the operational facilities with extensive R&D and also production and business unit. Technology Center is the home of over 780 researchers and engineers that in the specialty of chemistry, physics, electrical engineering, mechanical engineering, etc. We have created an extensive portfolio of the patents and patent applications of the 626 that have a substantial hold on the key materials, cells, modules, pack, battery management system, thermal control, high voltage control box, etc.
With this vertical integration and our contribution to the technology advancement in the electrification, we have been rewarded by the recognition and the financial package from both the U.S. government and the Germany government. Since 2006, Microvast has identified these three fundamental criteria of the lithium battery that kind of needs for the widespread into the EV adoption, which is the fast charging, safety, and the long cycle life. Safety, without saying, it's crucial for the passengers and also for the car makers and the battery makers. Fast charging equals e-mobility, so that's fundamental from the vehicles, and also that can give us a faster return in the investment in the charging infrastructure.
As for the long cycle life, the battery cycle life should be extending last as long as the car body. For this one, also enable the secondhand EV market to really create a competitive product comparing with the combustion engine car. With all of these three fundamental criteria ensured by increasing energy density of the cathode material, anode material, and working on the maximizing the cell design, module pack design, we keep increasing the energy density of our products. With the deep and healthy roots, we can flourish this energy tree. Starting from our first generation products, internally, we have increased the energy density to above 300 W/k g.
Even at that high energy density, we can still do 1 C charge, and the battery can be fully charged from 0% to 80% within 30 minutes, and this can cycle for 4,000 cycles between 0% to 100% SOC. Even to achieve that 4,000 cycles data, that cost us over a year, and that's the testing data in the pilot line, we're ready to move into the production line once the market justifies it. With this, the energy tree growing and the internal setting up the resources, Sascha has shared with you that the pack product we developed that has a rapid charging capability with the extended cycle life and also high safety, and yet at the peak energy density, that has created the competitive advantages for our OEM customers.
Also, that showed with the three criteria and elevated energy density, we are highly valued by the newly emerging ESS market in United States. Now we entered into this, embarking into the multi-year high growth with the HpCO-53.5 Ah cells. We extended our capacity, we entered into a new market. Mike, as for the starting with the battery pack, that is the heart of the electric vehicle. All the energy in the battery pack is coming from the cells, and the superb performance of the cells all resulting in this battery materials. From our success really deeply rooted into our commitment to this vertical integration, which give us the capabilities of manipulation all the way down to the material level. Microvast has created several unique products.
I would pronounce this the sovereign type of material, non-flammable electrolyte, and the famous polyaramid separator. With those materials, we created also all the three chemistry in lithium battery that's available in the market: LTO, LFP, high power NMC, high energy NMC, that is also recognized this by the third party and also in the field. All those are still perfect performance of the cells. I will talk more in my last, the next two-three slides. We have standardized our cell dimension and also standardized our module, and some pack also standardized, but we can also customize pack for our customers. With the standardization, that also reduces the cost, helps us to increase our purchasing power, and increase the quality control.
With this spectra of the vertical integration, we have created this comprehensive system that we have gained over 10 years of experience with development, manufacturing, and that ensures, from this end-to-end approach, that reduces our product to market cycle, that increases the efficiency and also reduces the cost and enhances the quality. Here is, from the 12 years ago, that we have deployed the four generation of products to the market. Such as the LTO, such as have been introduced this, we installed 1,500 pure electric buses back in 2011. Those buses are charged five times a day. By today, they have been through nearly 18,000 cycles, and they still maintain about 80% of the retention.
As for this 62 Ah cells, if we put that into the passenger vehicles, then we can install about 100 kWh energy in the vehicle, and that it can be fully charged 0% to 80% within 30 minutes, and it can cycle for over 3,000 cycles. With all of those numbers together, we already enabled the million miler. As for the higher energy density, the next product that is ready to bring as long as we get the justification from the market that I introduced earlier. This product also won us the R&D 100 Award back in 2019. That's like an Oscar award in this whole R&D development from academia to industry. We don't stop there.
We have been developing solid-state battery, lithium ion, sorry, lithium metal battery, that it can reach to the volumetric energy density of beyond 1,000 Wh/L , and also the high, high temperature cells that have been appreciated by a high-end, the sports car maker. As for all of those efforts, they're further technology, and then the earlier we need to start. As for the solid-state battery, we have been putting resources since 2018. There is so much more to tell you, but I have limited time. I will just have more exchange going on the Q&A session. As for this higher lab, for any product that you want to win the market, it's got to be a healthy all around winner.
Got to have the good energy density, both volumetrically and gravimetrically, with a good charging capabilities, fast charging capabilities, long cycle life, both at the cycling and the calendaring, and also the cost. With the three main products in our production line that has been standardized as for this size and also 52 Ah that, you know, media dimensions that account for the low flow application, and also same dimensions, and we're deploying this fast charging product that can reach 50, and it still, yes, can go about beyond the 12,000 cycles with the 48 Ah cells. For all of those applications, for example, that would help us to greatly reduce the total cost of ownership for our customer. Each 63.5 Ah cells are overdesigned for their application.
We can do, say, beyond the 5,000, 6,000, 8,000 cycles, depending on how you use it, and they only need 3,000, then that it can reduce the total energy load in the front. If they have the capabilities of giving it a boost of the energy during the operation of the day, then we can reduce the total energy installed in the beginning. For example, this car can be fully charged within 15 minutes, then with the loading, unloading the customers, or the passengers or the foods, then we could just install half of the energy as for the other chemistry, for example. Our LFP products also have a good development. I'm not going to show it here.
Yeah, talking about our key material, 2 material really stands out. The cathode material provides all the energy in the cells and also takes more than 50% of the cost in the cell. As for the current markets, NMC cathode material is the majority winner because of its high energy density and its long-lasting cycle life. The Full Concentration Gradient cathode material that Microvast produces, we have the 20 liter cubic reactor that can produce 600 tons of this cathode material since 2018, that has been applied into our products. Some have been running in the field. This material is different, vastly different from the what's offered in the market.
All the types of NMC material in the market right now is homogeneous. It has three transition metals in NMC, right? Nickel, manganese, and cobalt. Nickel offers the capacity, but it's not safe. Manganese offers no capacity, offers safety and the cheapest, but no capacity. The cobalt being scarce, expensive, but yet it's necessary because it offers stability and great performance. To make extensive of all of these good properties, we increase the nickel content, and yet accumulated more close to the core, and then having the manganese concentration higher on the surface so that it will keep the high energy density in the bulk and still yet increase the safety to reduce the reactions between cathode with the electrolyte. We only use cobalt where it's at most necessary.
With this strategy, we have developed the cathode material in the pilot line that the nickel content reach above 92%, cobalt content reduced to below 2%, and the rest is manganese. This cathode material offers nearly the maximum capacity of oxide layered material can offer, which is 240, and this one has reached 236 mA per gram. The cost is reduced because of the minimized cobalt content. The last but not the least is the polyaramid separator. This offers the great safety for all of our cell products that can be populated into the cells. Looking into the safety triggers that happens in the cells, there are external triggers and internal triggers.
How the external triggers, that would be mostly in abuse the condition, such as overcharge, over discharge, too high temperature, too low temperature, mechanical impact, et cetera. Those can be minimized or prevented by the cell design, module design, pack design, and also BMS. That will give us a gauge, a safety gauge, to prevent the external triggers. When the trigger is coming internally, coming from the impurity metals introduced to the cells from the materials and the cell production, then it becomes a cancer gene. Those cells would be qualified as good cells going out of the factory, but yet, sooner or later, the cancer gene could grow into a bigger problem, cause the internal shortage.
When this happens, if that is at a massive scale, that can cause the thermal runaway of a cell and more into a pack. This happens in the nanoseconds scale, which is beyond any electronics control we have in the vehicle. Even with redundant measures, it's hard to prevent it or control it when the thermal runaway happens. We have seen several recalls in this industry. The Microvast polyaramid separator grabbed this key issue, and we figured out a way to minimize this recall risk by creating a polymer that or separator that it can outlast the cathode material.
All the separator in the market right now are polyolefin-based, such as PE, has a melting temperature of 138, PP has a melting temperature of 168, and the polyaramid separator, that's the similar material as a bulletproof vest, has no melting temperature, and it's intrinsically non-flammable. As it demonstrated, we put the separator on the hot stage at 300 degrees Celsius for an hour, no shrinkage. This technology was invented and scaled up by Microvast. We have a pilot line that runs at 5 million sq meter per year, started in 2017, and also have produced the separator implemented into our cell products that has been running in the market. With this technology, the proven technology, tested by DOE Labs and also the three OEMs that we won the award.
Now, we are scaling up, as in the announcement, this 10 million square meter separator line as to further improve the speed, the efficiency, reduce the cost, and our goal is to sell these materials, FCG, the polyaramid separator, to the passenger vehicle cell makers, sorry, the consumer electronic cell makers. That's our way to penetrate into those two markets.
With that, I pass the stage to our Chief Operations Officer, Shane Smith, to show you how to transfer technology to product.
Thank you, Dr. Mattis. My name is Shane Smith, and I am in operations. Of course, when I think of operations, used to be a nuclear engineer on a submarine, and it was more power, more power! Now, I'm in operations 25 years later, I've got this energy storage team, commercial vehicle team, Sascha and Zach, more cells, more cells. It's just kinda like a snap back into the past, and that's my job and role doing now. We have three manufacturing facilities on three different continents. You can see, one of the key messages I wanna highlight here is manufacturing battery cells, modules into packs, it's not new to Microvast. Matter of fact, they've been doing it since 2010, with over 2,000 people building battery cells. It's a very complicated process.
Getting a battery cell from a lab all the way to something that can be cost-effective and reliable, high quality in the field, is very challenging. What I get the advantage of is leveraging all that skill set that has been taking place for over a decade, and then able to push the accelerator, because basically, of this 7 GWh , we're putting 4 GWh of that capacity in 2023. You can almost say, "Hey, guys, where you been? Why are you finally going? Why is it things are really happening for you now?" It takes a long time to develop all these battery components, these battery cells, get it in the field, get feedback to make sure it works.
When you finally all got it, and then you make a really good product, like this one, that works in two different types of markets: energy storage and commercial vehicle, we all get the benefit from harvesting this great technology, and time, and innovation, and investment that's been taking place for so long. That's what I'm here to do, is to now turn it in to excellent financial success. Basically, Microvast's global footprint overlays how electrification market has expanded over time. If you wanted to sell a battery in 2010, you had to be in China market. It was the primary market at the time, therefore, we built our first manufacturing facility in Huzhou, China, and have been delivering batteries, incrementally increasing the number of lines over time.
The primary one I'm talking to you about today is actually Microvast's third manufacturing line, the most automated, the most innovative line we've ever deployed in Microvast's history. From China, the market went to Europe. Europe was the next region where electrification started to take hold. How did Microvast respond? "Hey, we need a manufacturing facility right outside of Berlin, Germany." It was a module pack line. Maybe last, but not forgotten, here comes the United States. As Zach said, energy storage, number one in the market, pretty strong in that area, and here comes commercial vehicles, the same business that we've been doing for a long time. What did we do? We picked Clarksville, Tennessee. A lot of people. I live in Nashville, you said, "Okay, you picked your backyard." It didn't work out like that.
We looked all the way across the country, but Tennessee Valley Authority, TVA, that power, it can also be green, 100% hydro, and its last of the federal utilities, is one of the most cost-effective, stable sources of power from electrical point of view you could have for a plant. It was very relevant, and why a lot of electric companies are moving to the TVA area. One of the things the form factor of what we're building is very relevant. I know it has a number here, 53.5 Ah. I don't look at it that much like that, I look at it as the form factor. This 4 GWh of capacity we're putting online, builds this form factor. It's one of the largest battery cells we've ever built here at Microvast.
The advantage is that you can pack so much energy in this, so when you make one, you're adding to your capacity and utilizing it very efficiently. I've spent three of my last seven months here in Huzhou, China, putting this new 2 GWh online. Happy to say, it's up and running, and ramping. Building these cells, again, back to my opening, more cells, more cells. Every cell we build, we have a customer for it. I can't build enough of them to fulfill a backlog that's almost $700 million. I hope you get that message. This isn't about, can Microvast win business? Can they get qualification? Can they execute? Can the operations team deliver all the demand that we have been expressed to us through purchase orders?
Coming from the semiconductor industry, a lot of times we make big investment, and we'd say, "Well, we think this customer is gonna buy it." Or, you know, "Maybe we have some opportunity, look at the market growth." In this case, we've got homes for all these batteries we can build all the way through 2024. That's a lot of visibility for something that you're bringing online. That was successfully happening. I'll show you here, you'll see a video here in a minute. We actually built enough building to hold 12 GWh. Even though we have two of this new capacity, we can go all the way to 12 as we secure more and more business in the Asia region. Supply chain, that's always something very important.
One of the advantages of Microvast in its long tenure, is that long-term relationships have been built over time. Matter of fact, I've visited all our key raw materials manufacturers. The relationships are deeper than what I've invested in. Actually, our team, as Mr. Wu said, have been in place for a long time. Well known, well-established, and really, they're now being rewarded with this significant increase in capacity and volume that we're now doing. They're more than happy to say, "Hey, we've stood with you through the thick and thin. We're happy to engage in you with these long-term contracts and reap the benefits of what Microvast has been able to do." Changing gears a little bit, got this plant up and running.
Because we were able to standardize the manufacturing process all the way down to the equipment suppliers, optimizing this process, our goal is to do what we did in Huzhou even faster in Clarksville. Because we have been optimizing the machine, the process, the yield, trying to get that going, which takes a while when you start a new process. Now, in Clarksville, we're making changes to the equipment. It's now that we had to do in Huzhou to get that running. It's now being put on boats. Through June, July, August, September, all the equipment's coming into Clarksville. You'll see some pictures. Right now, it's just a building with utilities, with the equipment on the way.
That is a great advantage of being able to send U.S. employees over to China, and then they come back, see, after learning how the process works, how things are running. We have our China team able to come over to the U.S., saying, "Hey, I just did this. This equipment looks the same way. We just need to make these changes, this optimization, and we've already see how this is gonna work." It's very nice to have two different facilities, even though on two different continents, leveraging the same manufacturing process. Again, the same thing is true of Huzhou, and Clarksville. Make the battery. We got a home for it. Making them in Q4, we're gonna validate the quality of it and then ship them to customers.
In terms of maximizing utilization for these two plants, of this new capacity, will be fully utilized all the way through 2024. That's a significant advantage of what we just put in place. Finally, the supply chain. We do make some a couple of minor BOM modifications by the location of where it's manufactured in order for the tariffs perspective, but at the end of the day, the supplier base is very, very similar. What we're just telling them is, "Hey, you know, we ordered 3,000 tons for our China plant. We need 6,000 tons when you add Clarksville." We're able to build off of that and leverage with a common supply base. Those are the words of the operation story.
We can ask questions when we get to the question. I want to now show you a couple of videos of first starting out with Huzhou, where I've spent a lot of time, and what we were able to launch and build. I'll get this going. Go back, this whole campus existed before we expanded. We took the money from our PIPE investment in July 2021, and we built this area from here all the way down here. This is a 12 GWh building, and a 2 GWh line just runs across the back. That's a whole finished good warehouse. This is raw material, and this is the utility plant. It is a huge aspect and footprint of our existing campus there.
All right, now I want to spend just a couple of minutes just showing you where Clarksville is on the construction side. The building is in the construction phase, so the equipment you just saw is what we're moving into Clarksville. We purchased an existing building, so we had to do some adds. This is what that is. That right there is the slurry mixing building. Remember, we start from the powder, the cathode and the anode, and we make a slurry, and then it goes on an aluminum or copper, and we put that slurry on the top and then create the cell development part period. This is all the outside part of the cell. This is where that inside, that new mixing building that we just added on, all completed.
This is 2 GWh w ith the capability in the same building, all this space, you can put 4 GWh . Why is that important? The Inflation Reduction Act, you can make $80 million off 2, you can make $160 million off tax incentives off of 4. If you have the same building and just all the cooling systems in place, got to use some switch box, switchboards and a little bit of transformers, and we're off and running, adding the same equipment and building more. It's an exciting story. On the same campus, it's 85 acres, I can add 400,000 sq ft, and I'm building a substation that'll be ready in 2024 to do 8 GWh here in the U.S. on the same property by adding one additional building.
Again, we can go from 2 GWh- 4 GWh just by adding equipment with a little bit of utility, add a building, 400,000 sq ft on the same land, have all the power in place and reserved with the TVA. That's important with all the companies moving down into the region we are, that electrical capacity is already reserved. If you hear excitement in my voice, it is exciting. All we got to do is make it, and we can sell it. Appreciate your time.
We're gonna just take a quick break, a few minutes if anybody needs, and we'll return with the CFO section.
Thanks to everyone for coming today. I think most of you know who I am. It's been a little bit virtual for a few years, so it's actually good to meet a few of you in person. I know you're super busy, lots of companies to cover. I think we've got a lot to tell you about Microvast. Actually, my job gets a bit easier because these numbers, it all comes from my colleagues, too. If I look at a revenue CAGR, it's because of what Sascha and Zach are doing. Based on that, we're seeing this route through to about a 50%+ to 2027. This is what we call the fast growth phase, right? Fast growth phase underpinned by the 53.5 Ah cell.
As we do that, over that period, we're seeing our way to a 20%+ growth margin target. Some of the something, as Shane said, is a real focus on the operation side. As we're scaling the business, and you'll start to see some of that this year, as we add a large amount of capacity, grow the revenue, that we can manage that OpEx, and we'll bring that down, and you'll see a slide of that later on. The proof point of are we in this fast growth phase? This is not even the right number anymore. Fast growth phase of 23, first year, we were at 486, $7.7 million backlog. That's now $671 million, I've not even included Zach's contract that he told you about.
What that tells us is that, as Shane mentioned, we're gonna have this utilization very high in both plants that we've brought on, and that's Huzhou and Clarksville. That's utilization that we've never had the chance to do before because we've just been making so many different cell types. In 2022, we had to make nine different cell types to get to our revenue number. The very nice thing about utilization in Clarksville is that becomes a lead through to the IRA credit that we can obtain for our business. You'll see later on, how it's gonna really help us finance the business as we go forward. As some of you all know, we have zero leverage in the U.S. on this asset base that we're increasing.
Two years ago, the big story for the merger and the PIPE was to take the money. We had the technology, it was already proven at that point, and we had to bring it to, like, industrialization levels now, capacity. As Shane said, the two we got out was in Huzhou. That's done. There's no more CapEx to spend. We have a project finance facility that's got some dollars left to undraw, and that means final payments that we've got to contractors and equipment money. Clarksville One A, it's in a significant construction phase. It's the main thing, as Shane said, it's exactly the same line. There is a learning experience when you bring on capacity in Huzhou first, you take that into Clarksville, and that gets into a $1 billion revenue potential already on lines that are gonna be well utilized.
As I say, the only really main difference, and this will be a material difference in economics, is Clarksville does benefit from the IRA credit. We give you a little bit more detail on what's happening at the Huzhou level here. It's really that utilization and contracted from what Sascha and Zach have said. With the $500 million revenue potential already for Huzhou, we're at 75% contracted on what's available. These are the customers we're talking about, and it really pushes this diversification into Europe, underpinned by customers like Iveco, Karsan, MAFI , TREPEL, Kalmar. Really think about Huzhou as that is a manufacturing base to meet this huge demand in Europe and Asia Pacific. As I mentioned before, the CapEx investment is complete, and the other proof point is, it's the clear adoption of the 53.5 Ah cell.
We told you two years ago that we'd be industrializing that, and it would be, like, our driver of our revenue over this next two to three years. I think that's a proof point for you. It's very same on Clarksville. Similar revenue potential. What we're seeing already on the 2024 utilization is we're looking already today, it's gonna be at least 70%. The customers underpinning that, again, it's European customers taking orders this year that have clearly got a big U.S. market as well. That's Karsan, MAFI, TREPEL, Iveco, Kalmar. It's also very significant for Zach's energy storage business. That is an NDA contract we don't disclose who the customer is. That is a firm contract.
They're paying us payments already, under that contract, and we also have commercial vehicle customers, as Sascha mentioned, first PO for commercial vehicle in the U.S. We've had the energy storage effectively PO for, like, six months. As we push through into this high utilization and then mature the plant, we'll see gross margin expansion and EBITDA margin expansion. The very unique thing, and I'll come onto it now, is clearly IRA. We summarized this here for you. I think a lot of you are familiar with the Act, and I think probably the specific section that applies to Microvast, which is Section 45 A. We just hit the highlight numbers here. You will get $35 a kWh if you manufacture cells.
You've got to sell them, you know, it's not just manufacture, you have to sell them. You get $10 a kW h for modules, in total, that's $45 a kWh . Shane is making cells and modules in Clarksville, that's $45 a kWh on everything that's produced. When we look at phase I-A, which is what we're bringing up first, that's an $80 million potential. Shane showed you the building. That building accommodates phase I-A and phase I-B , that gets you $160 million IRA potential. The IRA lasts for 10 years. It starts to taper off a little bit in 2030, and over that period of time, we foresee a potential tax credits of $1.5 billion-$2 billion.
The reason we can actually optimize those is because of this cell, the 53.5 Ah. Backlog feeds through to utilization. You read through to that is that we can actually access these credits. Two years ago, we told you that the opportunity for Microvast was Europe and the U.S. We're just showing you last year's numbers. We did $204.5 million. China, Asia Pacific, we're a big part of it, and that is, well, let's say nine different cell types to do that. We couldn't optimize utilization. This is our midpoint guidance for this year, $358 million. You'll see later on how our backlog number gives you confidence. We get that. From where our business is going is that EMEA and the U.S. are gonna be about 30% of our revenue going forward.
That actually gives us great planning as a business to do that. This is what we're talking about on backlog. This is a Q1 number, was $486.7 million. We've just taken that to $671 million, where we'll report that in Q2. That will go higher when we include Zach Ward's awarded contract. We don't include awarded contract into backlog. It's only what is contracted. That's our midpoint guidance, is $358 million. As we look forward into 2024, what we're telling you is that 2023 isn't the only high growth year, we're expecting multiple high growth years. When we look at 2024, we see a way that to be at 1.5x-2x year-over-year growth. Our confidence in that as a management team is down to backlog, and that backlog keeps on growing.
We always get this question about how we like fund our business. I think what we want to be very clear on, and you see it, is that this fast growth phase that we're in now to get that capacity is well-funded. The benefit of Clarksville and IRA credits is that we can monetize these credits to fund future expansions. Phase I- A, which is under control, as we showed you, that has a potential of $80 million credits. We're showing you that we have the utilization to get there. As we go forward, we also include prepayments from customers, and we get to a position where we're just self-funding capacity expansion at Clarksville. As we mentioned, the golden rule for our business is that we only expand if we have contracts. This is not the field of dreams type of stuff.
You've got to have, like, firm customer orders. Let me just point this out to you here. Like, to get on this high growth phase here, we're fully funded to do that. I think we're showing you based on our backlog and how we utilize it, we've got good confidence as a management team to get here. We're clearly putting things in place this year through Sascha and Zach to get into this fast growth phase in 2024. If you think about it, what we're talking about is really this cell is gonna get you all the way through to 2025, at least. It's all about the industrialization of that cell, and you're clearly seeing that from customer uptake.
The proof point for this year, and I'm sure you'll keep track of it for us, is that we think that this year, we're going to add 4 GWh of capacity this year. We're gonna grow revenue 70%-80%, but we think that the OpEx is only going to increase between 20%-30%. We believe we can keep on doing that year-over-year, so you'll have this curve of fast growth here and then the operating leverage coming down. How do we become profitable? We've really got the levers to do this. This is where we are today. We're actually gross margin positive already, 8.2%. We have a target to get through 20%+, at least 2025, 2026 timeframe. The levers to do that are really, it's industrialization.
What we mean by industrialization is a 53.5 Ah cell. We have one cell to dominate, like, our business in this fast growth phase. The customer orders are clearly there for that. Automation. Shane's bringing on fully automated lines for the first time. We were in semi-automation mode, like, the last five, six, seven years. The utilization. We're going to achieve utilizations on our capacity that we've not achieved before. What you get from us, is that you've got this ongoing commitment to innovation. We're not needing to spend R&D $ today to get into this. Our R&D spend has been incurred already for the 53.5 Ah. As I said earlier, this phase here, those capacity expansions get us there, and they're fully funded.
Really, I just bring it all together for you is that, what you're seeing from Microvast is, we're in a fast growth phase. It's all about proof points for us as a company. It's real. It's a real business with real technologies, and that comes through in the financials. The backlog is increasing, and it tells you that the 53.5 Ah is a winner. You'll get more technical know-how on that from Dr. Mattis on why that cell has got such good performance. CapEx, you can trust us with your money. Like, we take your capital, we turn that into productive capacity. That productive capacity has customers. Funding, we don't need any equity from anybody. Like, this capacity is coming online, and when you've got growing sales, when you've got a growing customer base, and they're locked in, you've got plenty of financing options.
We said we'd diversify the business. We're doing that. We're doing it by end market. We told you two years ago, we're getting to the energy storage market. Zach's done that. Like, he's done it, and he's got customers. We can scale this business, you're seeing that, and we've got a route to profitability. As I say, it's really about those levers I just mentioned. We industrialize the sale, we hit the utilization, we have automated lines, and we carry on innovating. I hand back to Yang Wu for closing remarks.
Thank you. Thank you all for your time. You know, yeah. I just want to say, you know, to confirm, you know, this company is going to raise up, and let's work together to make that happen. Thank you.
Great. With that, we'll have management come up to the front, and we'll be ready to take some of your questions. Looks like Colin is gonna go first.
Where? Do you...[crosstalk]
We all-[crosstalk]
Yes.[crosstalk]
We'll slide down there. Right here? This corner?
Yes, sitting or standing. You want to be in the front, so we'll be seen on the webcast.
Oh.
Right here?
Yeah. If I can just preempt one thing on the Q&A. You've probably all got a zillion questions on DOE and separator. We don't want today to be dominated by that, because as I just highlighted, that is not how we get to scale. It's a really important, and it still remains a really important technology for safety. You know, I think we made clear in our press release, the news from DOE came as a surprise to us. It wasn't anticipated, but as we've said, it really has no impact, like, on our business. We still have the technology. It's super exciting. It's really important for the industry because it enhances safety, but there's zero impact on our guidance this year. It doesn't impact our funding position. To scale the business, it's all about the 53.5 Ah technology.
It would have made some modest contribution to revenues in 2025, 2026, and it still may do that because this year we will be increasing the pilot line to 10 million sq meters. If you've got more questions, we can answer it. We just don't want today to be dominated by that one. I think, clearly, we've got so many exciting things to tell you about the company.
Okay. Colin?
Sure. Maybe this first one is for Shane. You know, just with the Huzhou facility, having ramped and basically doing a copy back in Clarksville, can you talk a little bit about how much you've de-risked that ramp in Clarksville and the ramp to, like, target builds and target scale? Like, how much you've been able to shorten the cycle time on that ramp?
Right. great question. That's why I spent so much time in China, so I could actually see it for myself, watch the progress, what were the challenges, what were the know-how. We actually had a communication channel with our equipment suppliers. We had about 200 of them on-site when we brought up the equipment. We had another group communicating back to the suppliers, where they actually manufacture the equipment, giving the feedback of what changes we made. We had to buy new tooling because we found that this would be a better portion of the process. We quickly feed that back to the supplier. They would then buy the tooling so that the Clarksville equipment could be modified. Same thing with software. You got to make some software changes on the fly, trying to get this optimized.
It probably took in the neighborhood of four to five months to try to bring that up, to get the process up to speed and ramping. We're still not at full capacity. We're just taking incremental approaches, because one of the things you want to constantly do when you start a new line is test your cycle life, is exactly like that of that you had from the R&D and pilot line, and the cycle life testing is just not fast, right? Cycle life, you're charging and discharging the cells. We can only do so many per week, so many per month, so that's why the feedback in terms of delay is about a month, four to six weeks after that. But the confidence is very high because the U.S. team was with me while we did that.
Those that weren't there are now, we have a team there now. We got another team going in June. They get to see a production line already operating, already programmed, set up, and then they go back home and say, "Okay, as soon as it lands, we're ready to do that." Additionally, the same supply group that brought on the line in Huzhou, the suppliers are going to fly to Clarksville. Our China expert industrial team's coming to Clarksville. Of course, we all saw that. I would like to believe that we would be able to cut the time in half of what we did in China to be able to bring this same form factor up and running.
Perfect. The second question is really about energy and power density. It may not be for you, Shane, it's for the organization. Just the leverage that you get from a CapEx perspective as well as for the customers seems really substantial. If you can talk about the interplay between the customer dialogues that you guys have, both on the transportation side as well as the stationary storage side, and how that feeds back into the R&D efforts to drive that energy and power density, which seems like it has a capital efficiency, you know, amplifying loop.
Hey, Colin, great question. I'll give you a quick answer because when we talk with our customers in general, we receive RFIs and RFQs. We take a look at that. When we have the in detail, more detailed talk, we get the real fleet data. It means, you know, what kind of drive cycles do they expect? What are the temperature conditions? All these kind of things. On that basis, the 53.5 Ah actually was developed by the tech team around Dr. Mattis.
We took all our experience from the past, which we had since we started a couple projects in China, a couple projects in Europe, and so on, we took all that into one box and said, "Okay, what is the optimized commercial vehicle cell? What should we have?" Right? With all that experience, different altitudes, different temperature ranges, different drive cycles, we developed the 52.5 Ah, and we said at the same time, "Okay, between the 52.5 Ah, we also need the 48 Ah cell," which Dr. Mattis mentioned, right? For different applications. This is right now the state of the art, and this is what our customers are buying right now. As we come to the next level, we receive the next RFIs, new RFQs, right?
They say, "Okay, we need a low-flow application. We need this. We have this black box design available." What is the next step? The next step in the future will be, okay, optimizing the cell, optimizing the chemistry in order to fulfill the next projects, which will happen in 2026, 2027, 2028 onwards, right. That's what we are doing, continuously, actually, for our customers. There's a very, very indeed dialogue between them. We're watching our competition, what they are doing, but we are dedicated mainly to commercial vehicles. This means we leave the mass market out on a side, you know, because this is more and more standardized. They want to have a standardized global cell on the mass market side, which is for classical automobiles.
We are dedicating us on the 24/7 operation, where really total cost of ownership plays the most important role. We are supporting that with our technology so that they get sustainable. You can only get sustainable if you have a long cycle life, right? If your cell can operate 24/7. These are the important factors, so we are supporting them on their way to become green. Yeah, that's what we're doing.
Great. The last one is for Kevin. You know, you've been in the industry for a long time, right? The choice to come to Microvast and develop a product on the cell, would love to understand your decision-making process and the leverage that you're seeing and the order of magnitude on demand.
It's heavy.
Kevin, I'm so sorry.
Exactly.
Would love to hear the, you know, just the decision-making process and then the order of magnitude of demand that you're seeing on that product, because I think it's not particularly well understood how deep the demand pool is.
Good, great question, Colin. Let me unpack that. I think on the demand side, as you see, everyone globally is executing the same initiative, so it's pulling on the same supply chain, right? Really, the demand far exceeds the supply at this point, which is really good in if you're a manufacturer. I think that answers that question. Everyone is positioned with the same problem. As you create more renewables into that market, wherever it is, either Australia, the U.S., European Union, China, you have to supply that during the peak demands of the grid.
The most cost-effective and the greenest way to do that is to move that energy from the off-peak, with a energy storage system to the on-peak...
The, the first part of your question was?
Why did you come here?
Oh, why did I come to Microvast?
Yeah.
Yeah, it was because of the opportunity. We compete with the same usual suspects when it comes to cell manufacturing. But when it comes to energy storage market, those suppliers typically aren't offering directly to the market. So that vertical integration is really the key to success in energy storage. It's just, it's a really simple problem. The market is full of these integrators that are buying cells from the same, from the same usual suspects. Then you have to take a dollar and wrap it around a ten-dollar bill, and the economics are just really difficult to do that when you look at project wraps and negotiations and securing that supply chain, it's the tail wagging the dog.
When I saw the opportunity with Microvast, our ability to take a cell directly to a container and have control of that supply chain and that vertical integration, I looked into the future, and I was like, "This is an unstoppable company.
Thanks so much.
Yeah. Hey, Zach, just, you know, while you're up there, I did have a question around energy storage. You know, clearly right now, your chemistry is not LFP. As we hear a lot, it looks like the market, you know, is really thinking ESS is gonna be more around LFP than NMC or other chemistries. Just kind of curious on your view around that, obviously it looks like Microvast is working on a LFP chemistry that probably will be ready to go as this evolves. Is the other way to think about it that, you know, energy storage means lots of different things to lots of different people. You have utility scale, you have energy storage and cell towers.
Really what I'm wondering is there do you see a bifurcation of the market where, hey, maybe it's in the area like the U.S., maybe 70% of it is LFP, but there's gonna be this area, just given the focus on the need for energy density in more tight areas, that allow Microvast to use its existing chemistry in energy storage?
Yeah, yeah. Great question. Yeah, the way that we like to view the market, it's, and all of our customers view the market, is the total cost involved to build, deploy, and operate a energy storage power plant. The LFPs that are mass-produced, especially that are sold to the passenger vehicle market, these are commodities, right? They are driving a lower price. As I said in my presentation, you really have to look at the whole ecosystem. I mean, deploying projects in the U.S., labor cost is very high. The performance of your energy retention is dramatic. If your battery cell degrades faster, which LFP has that characteristic, right?
That means you have to deploy that much more CapEx to have the same gameplay in your power plant over that 20-year period of time. It's a pretty easy equation for the developers to figure that out, and that's why you're seeing the uptake into our NMC product, even though there is this kind of swell of enthusiasm about these low-cost LFP cells. They just haven't quite got there yet. You can see when you add up all the construction costs, the long-term oven costs, the energy retention over that 20-year life cycle of that asset, it's just not there. The market is under tremendous demand. That supply, those products are getting into the market, whereas if there were more supply, they probably wouldn't have the success.
The market right now is split, really 40%, 60% between NMC and LFP technology. We have our placeholders for both of those technologies that we're commercializing, so we're ready to take that on. We try to really take that holistic approach in a battery plant, and that's really true for all the regions outside of China. If you look at the European Union, it's not easier to construct a power plant there as it is in the United States, as it is in other primary markets.
Okay. Question?
You talked about the ESS side, the fact that you're vertically integrated, gave you a advantage relative. I mean, can you help us quantify what the cost per megawatt hour advantage was in the projects that you won relative to other bidders that... Specifically around what that vertical integration did for you to win those bids?
Yeah, it's a little difficult to get specific about a project or a client. If you look at the cost of the cells going into the plant, it's roughly on the order of 50% of the total cost of the project. The other cost goes into your substation, your land, your construction costs, all the software and controls that go into the system. You can kind of look at a project and kind of get into that detail if you want, but we just can't speak specifics about cost per watt on projects.
Any rough percentage that you can share as to, you know, how much more competitive you were in that project?
Yeah, I think you can do the math on some of the energy densities you see, and you can see, just do the multiplication if you have 100 fewer containers for the same size project, what that ends up being on cost and maintenance over a 20-year life cycle. That long-term operation cost is really important because you're multiplying it times 20 years, plus the time value of money on that asset. If you can reduce the number of containers by 10%, by 30%, by 40%. In some cases, some of the integrators that are in the market, we're over 50% fewer containers. I think you can extrapolate that and really determine what that cost advantage is.
There are some incredibly confusing rules to come out of the Treasury Department around domestic content requirements and additional 10% savings? Do your sales help these customers qualify for those domestic extra 10%?
Yeah, everyone in the industry is unpacking that. It's only been out about a week now. We're unpacking that and doing all of our briefs and details and orders. We do anticipate to be compliant to the domestic content requirements of the ITC.
These two deals, the two projects that you've won, I know you can't tell us who it was, you're under NDA, but can you help us understand the profile of the customer?
Yeah, it's the classic global energy market. If any of these developers are working on all the wind projects, TV projects, globally, the market is pretty small, and that's why we don't want to be specific. If you look at the market, it's shrank a lot over the last 10 years when it comes to the renewable energy sector.
Thanks.
Amit?
How much of the backlog build is from new customers, Craig?
You mean, so, okay, so you're trying to get into the ESS commercial vehicles?
Yeah, just how you can break that down, you know?
Um-
How much of it is coming from customers you already have, and how much of it is from new relationships you're forming in the market?
Okay. I'd say split wise, it's around 50/50, right? ESS, commercial vehicle. Now, ESS we're acquiring, you know, this is on the back slide. We have two customers, right? We're acquiring two projects there. Commercial vehicle side, a lot of that's underpinned by European customers. Big part of that's gonna be obviously, Iveco, and you saw from what Sascha said, we're on multi-year contracts with them. That's gonna be across New Daily Electric, it's on the, on the Crossway bus platform, and then mid-duty applications. Overall, you have a lot more commercial vehicle customers than ESS, because those ESS projects are just so big. Does that answer your question?
Yes.
Pavel?
Thanks. 2 questions. First, can you just talk philosophically about pricing? You obviously spoke a lot about the distinct technology advantage, energy density, safety, and so on. On the flip side, you have, you don't have the scale that sort of the big, you know, Asian incumbents do. How do you think about pricing compared to the more kind of commodity lithium-ion products out there?
Okay. I'll try not to be too philosophical. You've got pricing, you've got really two distinct markets. You have commercial vehicles, you've got energy storage. As Zach said, energy storage is a market-driven price. The slight advantage in the U.S. right now is that those developers are getting a 30%-40% investment tax credit, that's lowering their effective price. As a business, what we need to be ready for, and it's not now, is that eventually those credits come down. The market's probably pricing ESS projects right now, $250-$300 a kWh, they're getting 30%-40% of that back. On commercial vehicle side, because it's a niche and unique product, we're not competing with passenger vehicle pricing. It's about the TCO.
The way we think about pricing on commercial vehicle side is TCO, and we're not driving our price down to what a passenger vehicle customer would offer, because they can't offer the same performance characteristics. Does that answer the first question?
Yeah. No, that's helpful. You didn't spend much time today talking about the Berlin factory. Obviously, smaller than either-
Yeah
... China or the U.S. How important is it for you to have a physical manufacturing footprint in Europe? Could there be some policies coming out of Brussels that will, you know, perhaps lead you to expand there?
Apologies to the Germans and Europeans for omitting them today. The so Germany right now, it's module and pack production. Probably, Sascha alluded to this, where the market's going, it's gonna be very regionalized, but you always have regionalized supply chains for OEMs in car manufacturing anyway. You had a very established European manufacturing base, mainly around Germany, classic ones, BMW, VW. You had that clearly in the US, and in Asia, you had it traditionally around Japan and Korea. The big difference is being that China, as Yang Wu said, moved into electric vehicles earlier, and that's why we were in China first. Where you get to, probably, Pavel, is very regionalized production, because you're gonna have to meet CO2 footprint. We're getting ready for that.
We have right now, Huzhou, which this year is global, meets the globe. As Clarksville comes online, Clarksville is going to be the Americas. What we need to be ready for is Green Deal and European incentives, is that they will also want localized production as well. We clearly have the customer base there. Hopefully, you saw that from what I said. Do you want a third question?
Absolutely. At the time of the stack, you mentioned hypothetically, you are open to getting into light-duty EVs and also consumer electronics.
Mm-hmm. Right? Kind of a distant.
Is that still on the table at some point, or is there just no need for that?
The consumer electronics is really around, like, separator applications.
Right.
Separator. We still have, if you think about Microvast, right now, we have the 53.5 Ah is about cell and module manufacturing, and that's what gets us to scale, and it's really important to get to scale quickly. Behind that, you're going into the cell component level. The separator part, we can use that across our own customers, but you also use that in passenger vehicles. We'd sell it to OEMs or their favorite battery supplier. That's how we would get into the passenger vehicle market. That'll be very similar for, like, cathode production as well. We don't want to go head-to-head at the cell level because those guys are at massive scale already. We want to be at scale for commercial vehicle and energy storage, behind that, we want to be at scale at, like, either cathode or separator.
It's always going to be the quickest way to scale for us is on our cell and module manufacturing, especially around 53.5 Ah.
Any other questions? Yeah.
You answered my question in reference to polyaramid, but for BMS, do you have any monetization opportunities there? Are those systems compatible with other batteries?
Which one is that?
The BMS, the battery management.
Do you want to handle that one, Wenjuan?
Sure, yeah. Yeah, the battery management system, it really need accurate and intelligent algorithms to be able to managing the whole pack and the contender in different working conditions. Variety of temperatures, different state of the charge, different state of health, and with the different demand for the power and also the charging patterns. To generate intelligent BMS, we need extensive inputting data. That, we have collected during the development of the cells, of the key materials, understanding how they would perform under different conditions, and how to give accurate estimation on the different SOX, right, the charge, health, and the power. Yeah, with the data implemented, we can still not yet pre-predict all of the conditions.
They've got to have some machine learning capabilities, the digital twin, and better to have a remote control that we can monitoring the operation. That would also offer, and what we have in our BMS is the cybersecurity, the functional safety that is required by this market. Yes, the BMS can be applied for other products, and so, yes, we need to do the extensive testing on the cells, and the BMS is not only part of it. For the cells and the module pack to deliver the highest performance as for the safety, power, and the cycle life, we need to ensure that the mechanical field, the thermal field, and the electrical field are as uniformly distributed across these products. The BMS can also help in maintaining that beyond the design of the products.
That controls the thermal control. The BMS we have works. We customize for our own products with different Chinese case beyond the generation.
Understood. Sticking to BMS and moving to Zach's field a little bit, the ESS systems, they will be grid interfacing. Do you have plans in the future to demand response kind of applications or any other applications?
Yeah, I can answer that question. Yeah, as I showed in some of my slides, you just see how the market is quickly getting shut down. You see, you know, next year, 73% of the market will be energy shifting. Really, when you look at what's left there, that's cut up into three or four different pieces. It's really not something that we're taking a look at right now. Those applications are niche, you know, we're really going after the large market, which is energy shifting.
Okay. just last one from me. The $676 million backlog, is that expected to be delivered within the next couple years, three years?
Probably around 30% of that is gonna be delivered this year. That really underpins that midpoint guidance we have around $358 for this year. The vast majority is gonna be delivered in 2024. That's why we get the high utilization in Huzhou and in Clarksville. I think where we stand today is that even before, you know, Clarksville's cranking, that we're at least 70% optimization already. I think, if things carry on, and you see the background data from the guides on how quickly the market is growing, that our expectation is we're gonna be fully utilized in 2024.
As long as we have customer contracts, and that's what I said at the start, as long as we have the customer contract, then we'll start planning for additional capacity. You saw from Shane that that's a matter of adding another production line because Clarksville is ready for that. I think, you know, we explained really. It'll be even quicker. That will be then the third same line that we brought on.
You just bring it on quicker.
Is this capacity from one shift or multiple shifts?
It's three different shifts.
Okay.
You start a cell line, you have to operate it 24/7. Otherwise, you gotta clean out the slurry mixing portion. Module pack line, we do by shifts, but it's 24/7 operation on the cell.
Anyone else? Yep.
Yeah, Craig. You're talking about 20% plus gross margins in 2027. I think when you look at what the industry is doing, kind of low 20% gross margins. Just given what you guys can deliver with cycle life and some of the value of your technology, I'm curious how you think about the business long term. Can this be a 25%, 30% gross margin business? You know, if so, how can you get there?
Yeah, I think we'd like to be, because we're not in that commodity sector, the commodity, you know, we've stayed as Don said at the start, we deliberately stayed away from that market because it's scale, it's super competitive. We think that car OEMs are gonna, you know, take over that part of the production themselves. The commercial vehicles is, for us, it's higher ASP. The benefit for everybody will be clearly the effective margin impact, you know, from IRA. You will get margin expansion from that, certainly through to 2029, and maybe beyond. Probably as a minimum for us, it would be clearly, you wanna be beyond that 20, you know, 20%+ . Part of that is always having, like, the best in technology.
I think what you saw from Sascha today is the 53.5 Ah. When you look at applications for commercial vehicles, it's a really awesome technology. Awesome technology means, should always mean better pricing.
For sure. How does automation play into potential gross margin expansion from here? Can you talk about some of the improvements from the first line to, you know, your latest generation line going in? Is there a roadmap for, you know, further automation or improvements on the manufacturing side?
I mean, I'll quickly add, and then I'll pass it over to Shane. Where we see that is the automation is that right now, this year, we're having to use lines that could produce maybe three, four, or five different cell types. You can't have that full automation. Your stop-start production is quite manual, people being involved. You then flip to what Huzhou Phase 3.1 above Clarksville is, it's fully automated and dedicated to one product. The other part of that is then volume pricing, that because you've got one dominant product across two continents, you're going to volumes that we've never had before, and you get lower pricing. I'll pass over to Shane, because he can just talk through about some of the other read-throughs on automation as well.
I'd just prefer to talk headcount, because the regions, labor rates in different regions are different. We're about getting a 30% advantage in a reduction in headcount compared to a semi-automated line to a fully automated line. That's probably the biggest change. I know we keep talking about a number on a cell. Remember, from an operation, we don't care what the number is on the cell. We care about the form factor. Dr. Mattis' roadmap, given the time, this number would change a lot, and even the chemistry would be modified, but this cell is what is carrying us in the future, not just one product. There's a series of different numbers that can work.
Of course, there's always advantage if the part number is the same, which is true over probably through 2024, that this part number will be the primary one. The flexibility of the fully automated manufacturing line, she can change all kinds of types of chemistries and thicknesses of cathodes and make super competitive additional next generations that we don't have to. We can utilize the same lines.
Yeah, also the fully automation actually gives you 2% better yield, the production yield. That's the beauty of fully automation.
That's a lot. 2% yield, that's a lot of money. Yeah, that's net profit.
Full automation do not replace everyone on the lot. You also still yet need to have the quality control folks, such as our module line we are installing in Clarksville, 2.3 GWh. We only need less than 10 officers, you do need to implement the quality assurance, the quality control, also design.
Any other questions? Yep, go ahead, please.
Just stepping back and winning orders in the competitive landscape that you are playing in, or at least in the orders that you have won, who are your main competitors? If you have lost orders that we don't know about, who, then whom did you lose to?
I would not mention the ones which we have lost, right? This would be a shame, but there's always winning and losing. Yeah, but it's not a real losing, yeah? Sometimes the other one has perhaps a lower price, yeah, or he's buying a project. Sometimes he wants to have a less cycle life because he says, "You know, I don't need that cycle." Sometimes he has a different cost factor, right? Or we don't 100% reach the black box design if we sell a complete pack system. Sometimes he says, "Okay, I don't want to pay development costs if you do my customized pack." There's always winning and losing, right?
Unrealistic warranty.
Yeah, then we come to warranty topics as well, right? Some people expect that they get 15 years warranty. At a certain point, you cannot give that because you have to look at the liability risk as well, right? If you buy a gasoline car, you get three years, right? Everybody expects in the industry, it's a new industry, and that means the technology in a gasoline car is more than 120 years old, right? It's somewhere it came up from Asia, at the end of the day, that you today give six years, eight years or 10 years warranty. Some customers even expect 12 years. If you take a look at the technology itself on the battery side, it's not even 12 years old sometimes.
How can you predict how long will the cell last 15 years? How can you give a warranty for 15 years if you cannot predict it? You can do laboratory tests, but our data, which we presented, is based on laboratory as well as on field, right? It's real data. When we talk about 5,000 cycles, we do reach 5,000 cycles. It's not laboratory drawing a graph. No, it's a commitment. I think this is the big topic. The other thing is, sometimes you have global RFIs and RFQs, which expect to have local manufacturing in U.S., which we didn't have. Now we have.
Now it's a different game, ball game again, because at the end of the day, if you want to do in the future commercial vehicle project, you need to have an hub in Asia, you need to have an hub in Europe, and you need to have a hub in the U.S. On all these kind of topics, we are working right now, and we're getting them ready, and I think then we are set for the future, right? If I go today to customers, I'm not talking about projects which will happen in 2024, right, or mainly in 2025, because we are already in discussions about that long time, right? We are talking about future projects in 2026, 2027, 2028, 2029, 2030.
When the next vehicle, big vehicle volumes are upcoming, and they play for us a big role, right? We're talking to fleet customers, how can we optimize the total cost of ownership? We are trying to support them and giving them ideas, how can they optimize the whole fleet, right? These are the topics which play an important role. Then we are optimizing our sustainability topics, right? We are working very closely together with the Turks, TÜV SÜD, and in Germany, the authorities, in order to get the circular economy done. Yeah. Part of that will be ESS, right? Very important, second life, right? But also, this all takes a role. How do you recycle batteries later on, right?
You have a lot of recycling topics ongoing in Europe, in U.S., and this will be an important part in the future as well. You will use recycled material, which will go back into the cell process. You will reach a circular economy, and this is what we're working on as well. Yeah. The green aspect plays also a big role, right? Let me ask you this, Europe 55 Green Deal? Yes, it's an important factor. Yes, customers are requesting for the future to have localization also cell level in Europe done. We are working on that. As Craig said, and as soon as we have customer contracts, we will build, right?
And, and we have ongoing contracts, and as soon as the request is there, we can switch it, and Ken's team can then do the further steps of localization, right? It's just a process, though, and it's a step-by-step process. We started in Asia. We moved over with the part localization Europe. We moved over to full localization U.S., and then later on, we will go back, we'll go back to Europe. Europe and U.S. will be the main drivers of the company. We will not talk about it, but India, because India is also a huge market, a very important market. We have a lot of Indian customers, and we are helping them also to electrify their fleet, by just mentioning Escorts and JBM, right? Very important as well.
We will never forget about Asia, of the rest, also not about China, because they have a lot of customers which also need superior cell technology. The flexibility of our business model is when a customer comes to us, and we talk about that, some customers want to have cell, we sell cell. Some customers want to have a model, we sell the model, and they design their own pack. With other customers, we design their pack, they produce a pack on their own, or we help standardize packs, where we always make sure that they keep the same black box design and the same interfaces in order to optimize it, so it's easy to upgrade an existing pack, perhaps in two or three or four years' time. I'd be able to move it.
Any more questions? Yeah, Pavel.
One more quick one. Several of the commercial, let's say, material handling vehicles that you guys are supplying, Gaussin, Cargotec, are they looking at all at hydrogen fuel cells as a substitute for battery storage in these products? How much of a competitive dynamic is that?
Pavel, that's a good question. Hydrogen fuel cell is not a competition, right? They always need a battery. You have different aspects, how can you electrify or how can you make a complete logistics system more, more sustainable? One part is battery, the other is the fuel cell. You will have always different customers who expect from their manufacturer, different solutions, right? At the end of the day, a fuel cell always requires battery. A fully requires a battery. We are working on both sides, right? We are working with Gaussin, we are working with Kalmar and all the others to make their system more sustainable, more green, right? That's the main focus, cutting CO2 emissions, because in the harbor section, especially, you have a lot of CO2 emissions, right?
We are minimizing that, and we are helping them to get that more optimized. The very important thing is, we need to fulfill 24/7 occasions. Charging stations are a must in harbor areas as well, or in big logistic hubs. At that point, and it's upcoming, you will have also more ESS in that areas because they need to quickly charge. Battery technology, in general, will move ahead as soon as the utility network is set for that, you know. Europe is moving very quickly to become green, what they realize is the utility network is not set for that. They need to do also a lot of investment into fast charging stations, into energy storage systems, because they don't have enough electricity on hand, right?
The same thing you have in the U.S. It's a system which needs to be built up parallel, yeah? I will also support that in the U.S., and European Fit for 55 and Green Deal will support that in Europe. They will push it ahead, and they will make sure that you always have, in a certain area, close environments, right? Europe wants to have their raw material from Europe. U.S. wants to have their raw material, if possible, from the U.S., right, or friendship country. The same will happen with Europe. You will see more localization spots in the future. Than right now, you still have a lot of cells coming from Asia, this will change.
Asia will be for Asia, Europe will be more for Europe, and U.S. will be more for U.S.
Anyone else?
Any more questions?
Great, I think we're all set then. Thank you so much for coming.
Yeah.
Any final remarks, Mr. Wu?
Yeah, thank you. You know, today, I think, you know, we answered lots of questions, and the first time we introduced Microvast to the market comprehensively. Get market see us, and it's great. Thank you all for coming. Thanks.