AFTER six years and millions of dollars spent on research and development, Malaga-based Automotive Technology Group is ready to take its Sprintex Supercharger systems to the global marketplace.
AFTER six years and millions of dollars spent on research and development, Malaga-based Automotive Technology Group is ready to take its Sprintex Supercharger systems to the global marketplace.
The company, which in 2003 was established as Automotive Components Pty Ltd, has patented a number of supercharger kits for the automotive and motorcycle markets, engaging in major development agreements with global giants such as Honda.
In a recent board reshuffle, former executive director Steven Apedaile was promoted to managing director, while former financial accountant for the State Energy Commission of WA, Richard O’Brien, joined the company as an independent non-executive director.
Under the new board, ATG has a focus on small petrol cars for the rapidly expanding Chinese market, four-wheel drive systems for the Middle East, US, Australia and South America, as well as motorcycle systems for Europe and the US.
Last week, the automotive technology company signed an $8 million agreement with Chinese group, Huachuang Zhenxin Automobile Technology Development Co, for the exclusive distribution of its Sprintex Supercharger products in China.
It signalled the ASX-listed ATG’s shift from an R&D technology company to a global manufacturer of supercharger systems.
Under the three-year deal, Huachuang will initially buy about 200 ATG supercharger kits a month, which will be developed in Perth and then delivered to China for final fitting and conversion to Chinese specifications.
Mr Apedaile said China was key to the company’s strategy and the trading partner had grown to become one of the world’s largest car manufacturers, producing more than 13 million units in 2009 and selling almost 3 million vehicles in the first two months of 2010.
“As we progress, we will transition towards the sale of superchargers alone to companies in the aftermarket that make their own systems,” Mr Apedaile told WA Business News.
“This will allow us to expand our sales without the need to develop or support more systems, which would require further expansion of our R&D and tech support base.”
Mr Apedaile said while India was developing differently to China, the automotive market in India was growing at a double-digit rate.
“We are keeping an open mind and avoiding pinning all of our hopes on one market,” he said.
In the longer term, ATG will expand its manufacturing capacity as demand increases by establishing two offshore manufacturing facilities in India, and Malaysia or the Middle East.
The location will depend on potential joint venture partnerships, availability of raw materials, sovereign risk, skilled labour, customer base, and the offshore location’s taxes.
Mr Apedaile said the first overseas facility would likely be a system assembly facility with two goals.
“The first is to reduce labour cost and the second is to operate closer to our major markets, reducing logistics costs,” he said.
“The second facility will be a supercharger manufacturing plant, again the intent being to reduce labour cost and save on logistics costs.”
Mr Apedaile said the second plant would be a medium capacity factory, allowing cost reduction for the aftermarket as ATG built capability towards the volumes required to satisfy an original equipment manufacturer (OEM) customer.
He said the aftermarket for ATG’s Sprintex Supercharger products was vital and allowed the technology company to operate a “good interim business” on its own terms, providing excellent margins and ensuring long-term profitability.
“It also gives us immediate and tangible cash flow and allows us to become profitable on our own time schedule as opposed to contending with both the investment required to build the capacity necessary for OEM contracts, and suffer the often long-winded and protracted negotiation and engineering cycles of OEM car manufacturers,” Mr Apedaile said.
