tkMC Case: Market entry strategy in the lithium materials trade market

• A sales forecast for e-vehicles is shown in appendix 1.
• A 60W-h battery pack commonly used in e-vehicles contains the equivalent of 9.1kg of Lithium. We assume no dramatic improvement in the Lithium-ion battery tech in the upcoming years.
• The production of Lithium-ion batteries is a complex process, which is associated with scrapped Lithium. Moreover, a small portion of produced batteries requires a replacement covered by OEM guarantees. Additional demand for Lithium can be factored in as 10% of yearly base-line demand.
• tk ComT aims at stable 25% target market share for the period 2030-2035, and forecasts the Lithum sales price to its customers of €80,000 per ton.

• The volume of electric cars produced annually worldwide (see Appendix 1) is multiplied by the amount of lithium per vehicle in addition to the scrap (10%).
• This value (in 2030: 100 kilotons) is multiplied by the tkComT market share (assumption of 25%) to obtain the tkComT market share of lithium in kilotons.
• Multiplying this by the forecasted sales price of €80,000/tonne results in tkComT's market share in € million.

• An organic expansion into the Lithium trade market requires an initial investment in the MX infrastructure as well as in market development campaigns.
• The expected payback is considered in terms of business cash flow.
• NWC is proportional to sales volumes. For the period before 2030, tk ComT has the NWC of €1,6000 mn secured to build up the initial stocks.
• Relevant figures and formulas (if needed) are shown in appendix 2.

• The revenue equals the market share from task 1B.
• EBITDA is the multiplication of revenue by the profit margin, which is reduced by the overheads (see Appendix 2).
• The NWC (Net Working Capital) delta equals 20% of the difference between the revenues of the current year and the revenues of the previous year.
• The BCF (Business Cash Flow) is calculated as the addition of the EBITDA, the NWC delta and invest of the year.
• The cumulative BCF equals the addition of the cumulative BCF of the previous year and the BCF of the current year.
• In 2030, the cumulative BCF is calculated by the addition of the BCF in 2030 and the investment up to 2029 (€ 100 million) and therefore amounts to € 20 million.
• The amortization period equals the year from which the cumulative BCF is positive.

• Apart of an organic market penetration, tk ComT has an opportunity to acquire the company "LiCo GmbH"- a local trader specializing on rare-earth metals who has an established access to the Li trade market.
• The market exposure, the pricing, and the cash flow are similar to an "organic" market entry case. However, LiCo GmbH has an additional attractive business aspect, as it possesses an expertise to buy-back the scrapped Li-components from OEM customers, recycle them and re-sell the lower-grade Li with lower margin for other applications. This generates an additional cash flow for the business.
• Buy-back of Li-scrap from the OEM customers goes with 100% deferred payment. LiCo GmbH pays to OEMs only after the sales of the respective Li-scrap, which significantly decreases required NWC.
• The acquisition of LiCo GmbH as well as the enablement of the Li-recycle activities for full Li-turnover volume demands an additional investment from tk ComT.
• Relevant figures shown in appendix 3.

Conclusion: Acquisition of "LiCo GmbH" is a preferred option: both market penetration options indicate same payback period of 3 years, but LiCo GmbH promises higher cash flow in later years due to recycling of Li.

Alternative conclusion: Organic market entry is preferred due to lower cash commitment in the first years and lower risks.

Explanation: The amortization date can be determined by addition of all BCFs of LiCo GmbH (see Appendix 3). If the cumulative BCF is positive, this equals the amortization point. The amortization time for the organic market entry can be taken from the solution from task 2.

• Worldwide deposits of raw materials for EV-batteries are shown in appendix 4.