Microvast Holdings Inc

Microvast Holdings, Inc., an advanced battery technology company, is headquartered in Stafford, Texas, and publicly traded on the NASDAQ. We design, develop and manufacture battery components and systems primarily for electric commercial vehicles and utility-scale energy storage systems (“ESS”).

Founded in 2006, Microvast was built on a guiding principle that remains core to our mission today: to innovate lithium-ion battery design without relying on past technologies. We call this true innovation. We started without preconceived notions of lithium-ion battery creation, unlike many companies that repurposed legacy technologies for new markets like electric vehicles—a process we consider product development rather than true innovation. To understand this difference, is to understand what we have set out to achieve.

Our mission is to accelerate the adoption of electric vehicles and renewable energy through innovative battery technologies and solutions, driving the transition to a sustainable economy. Specifically, we aim to spearhead U.S. domestic battery production in what is a strategically vital sector and allowing over time for the reliance on supplies from overseas manufacturers to be reduced. We believe continuous investment in our technology and operations will deliver long-term targeted revenue and income growth.

Through a vertically integrated approach, we have developed proprietary technologies spanning the entire battery system, from basic cell materials (cathode, anode, electrolyte, separator) to cooling systems and software controls. Since our inception, we have primarily focused on developing new battery solutions for the transportation industry which requires batteries that are ultra-fast charging, high energy density, long-lasting and safe.

In the future, in addition to expanding our production of battery systems and battery components, we expect to increase our focus on producing ESS solutions to support the shift to electrification, with the goal of becoming a leading global ESS solution provider to the energy market. This necessity stems from the premise that electric vehicles are truly green only if powered by green energy. Addressing this symbiotic relationship is at the heart of our research activities and we expect it will shape our strategies for the foreseeable future.

Our most recent innovation is our high-energy nickel manganese cobalt (“NMC”) 53.5 ampere-hour battery cell (the “53.5Ah”), whose performance characteristics make it an ideal solution for commercial vehicle and ESS applications. To bring this product to market we have made significant investments in capacity expansion in Huzhou, China. This facility employs fully-automated production equipment for the 53.5Ah cell, ensuring significant operating efficiencies.

We have also made significant investments in our capacity expansion in Clarksville, Tennessee and by the fourth quarter of 2023 had started to install certain sections of the production line. However, progress on certain third party construction workstreams as well as taking delivery and possession of further equipment started to be impacted toward the end of the fourth quarter due to the required funding to complete the project not being secured. We expect the 53.5Ah cell to be our dominant revenue driver for this next phase of our growth.

Since 2009, when we launched our first ultra-fast battery system, we have sold and delivered approximately 4,487.5 megawatt hours (“MWh”) of battery systems. Our revenue for the year ended December 31, 2023, increased $102.1 million to $306.6 million, a 50% increase compared to the year ended December 31, 2022. As of December 31, 2023, our battery systems had an order backlog of about $276.4 million (equivalent to approximately 1,637.9 MWh), with nearly 84%attributable to the U.S. and Europe. We expect to fulfill a majority of our backlog within 2024 and 2025.

Our Applications

Our three principal areas of focus for our business and future growth are electric commercial vehicles, utility-scale ESS and battery components.

Electric Commercial Vehicles

We design, develop and manufacture battery solutions for electric commercial vehicles such as light, medium and heavy-duty trucks, buses, trains, mining trucks, marine and port vehicles, automated guided and specialty vehicles. We focus on combining critical attributes for better performance, including ultra-fast charging capabilities, long lifespan, low total cost of ownership, high-energy density and high safety. Our battery systems’ ultra-fast charging capabilities enable electric commercial vehicles to charge in just 10 to 30 minutes to reach 80% to 95% capacity, allowing for continuous operation. Certain of our competitors’ batteries typically need to charge anywhere from 3 hours to overnight to reach full design capacity. Ultra-fast charging capability is a critical performance differentiator for applications that are in year-round 24/7 operation, such as those vehicles used in ports, airports, logistics, warehousing and other similar use cases.

Moreover, our battery systems’ lifespan matches the typical operational life of commercial vehicles, avoiding the substantial costs of battery replacement. In contrast, a majority of our competitors’ batteries need to be replaced on an average of 5 to 6 years, which is only half of the lifespan of our batteries.

We believe the high-energy density of our battery systems makes our products an ideal choice for light duty vans. By equipping sufficient energy onboard these mid-range delivery vehicles, our products are capable of optimizing the daily operational requirements for the commercial vehicle user.

In addition, fundamental to the purchasing decision of a commercial vehicle customer is an understanding of the total cost of ownership from deploying a particular battery solution and comparing that to competing powertrains, which have traditionally been internal combustion engines. The key variables influencing the total cost of ownership are system cost, cycle life and charging capability. Because of our industry-leading performance, especially on cycle life, we believe our battery systems are able to give commercial vehicle customers a superior total cost of ownership versus what would be achieved from competing systems.

The solutions we provide to customer vehicle original equipment manufacturers ("OEMs") are equipped with state-of-the-art BMS that we have developed internally. Our latest BMS for the commercial vehicle market will meet automotive functional safety “ISO 26262” and automotive cybersecurity “ISO 21434” standards. Microvast’s BMS 5.0 will also have built-in digital twin technology.

As the volume of our battery systems sold increases, our installed base grows correspondingly. To add value throughout our product's operational life, we are investing in service personnel and predictive and diagnostic software, enhancing our after-sales service and expanding our product offerings.

The market potential for electric commercial vehicles is large because the global transportation sector is the second largest emitter of GHG’s, with commercial vehicles accounting for approximately a third of these emissions. This electric commercial vehicle opportunity encompasses all types of vehicles, including buses, light commercial vans, light, medium and heavy-duty trucks, mining equipment, port equipment and specialty vehicles. Microvast technologies are in operation in all these vehicle types.

The key benefits of our technologies are being recognized by leading commercial vehicle OEMs. Building upon the Industrial and Commercial Cooperation Agreement we entered into with Iveco Group in 2019, we are benefiting from the successful deployment of their light commercial vehicles (IVECO eDaily, which launched in Q4 of 2022) and also certain bus platforms, such as the Iveco Citybus, Intercity, Crossway and others which have been presented for multiple tenders in 2022 and 2023 using our battery technologies. A growing Iveco fleet on the market helps to secure our presence.

We are present in all the main global bus markets, such as the Asia & Pacific region, India and Europe working with the likes of FPT Industrial (part of the Iveco Group), SAFRA, Foton, Higer, JBM Group, Ashok Leyland and others.

In the port equipment sector, we continue to supply to Kalmar (one of the world’s leading OEMs in this segment), based on our existing long-term partnership agreement which is scheduled to run until 2026. Additionally, we are working on strengthening our position in the market for terminal tractors by serving customers like Gaussin and Trepel both in the American and European markets. Our engagement with mining truck OEMs such as XCMG, LGMG and others continues to develop promisingly.

We have identified the marine market as an additional application for our battery systems. Accordingly, we were recently selected by Evoy to electrify small leisure boats marking our entry into the marine segment in Europe. We believe the railway market also presents potential attractive possibilities for our technologies.

Utility-Scale ESS

The goal of eliminating greenhouse gas (“GHG”) emissions from the commercial vehicle sector is most impactful if the energy source for these vehicles is also non-polluting. Renewable energy sources, such as solar energy, require storage, and therefore we believe that energy storage is currently the foundation for all electrification.

In October 2022, we announced the development of our new battery ESS solution to address this challenge. This utility-scale ESS solution stores energy generated by solar, wind, or other energy sources and then dispatches the stored power to the grid when needed, such as during periods of peak electricity demand, a usage commonly referred to as “energy shifting”. Our ESS container incorporates our high-energy 53.5Ah cell technology.

Our current ESS product, the ME-4300, is designed to supply energy for up to 4 hours, which is currently in high demand for energy shifting applications, thereby increasing grid resilience, reliability, and performance while helping reduce GHG emissions. Subject to our ability to secure additional financing, we plan to manufacture battery cells and modules for the ESS container in our Clarksville, Tennessee facility beginning approximately eight months after we secure such financing. Further delays in funding or the inability to secure funding will cause further delays to the production start date of this facility.

On July 11, 2023, we completed the purchase of our new facility in Windsor, Colorado which provides nearly 100,000 square feet of space for assembling ESS containers, with ample room to add additional assembly capacity for our ESS business as needed and is expected to start deliveries of ESS containers in the second quarter of 2024.

Our ESS container features 4.3 MWh energy per 20-foot container and is easily transportable and deployable. Our higher energy density ESS allows energy storage developers to use fewer containers to reach the total rated energy design of an energy storage project. Using our ESS solution could reduce the number of containers needed by up to 30% to achieve a project’s total rated energy design.

We are currently developing a new ESS product which will be a short duration system, designed to supply energy for up to 2 hours. We expect to make the first deliveries of this system in the fourth quarter of 2024.

The BMS offered in our ESS container provides customers the ability to monitor the performance of the ESS and provides functionality that allows the BMS to fix operational problems inside each individual tray and optimize system performance. The BMS for our ESS container was designed and developed in the U.S. at our Windsor, Colorado facility, and with the BMS also being manufactured in the U.S., we believe this will help ensure the security and safety of the U.S. electric grid.

In December 2022, we were awarded a contract to supply a utility-scale 1.2 gigawatt hours (“GWh”) battery ESS project to a customer in the U.S. We have subsequently agreed with this customer to reduce the size of this contract. Our backlog was reduced to $276.4 million as of December 31, 2023 because we removed all the volumes from this contract until such time as we had reached a revised agreement with this customer, which was only concluded in the first quarter of 2024. First deliveries of our ESS containers to this customer, using 53.5Ah cells and trays manufactured in our Huzhou facility, are expected to commence in the second quarter of 2024.

Upon completion of our Phase 1A expansion at our Clarksville, Tennessee facility and Clarksville becoming operational, we anticipate sales of our ESS container will directly benefit from section 45X of the Inflation Reduction Act (the “IRA”), which provides a $45 per kilowatt-hour (kWh) tax credit. We believe our U.S. customers will also benefit from our cell and module production qualifying as domestic content which will enable them to increase their investment tax credit under the IRA from 30% to 40% of the total project cost.

We expect to be awarded additional ESS projects due to our technologies’ key benefits listed above. Further, global additions of energy storage in 2023 are estimated to have been 99 GWh and projected to grow at a 27% CAGR through 2030, with the U.S. and China being the leading individual markets (according to Bloomberg New Energy Finance (“BNEF”)). Our current focus is the U.S. market where it is estimated that 30 GWh of energy storage capacity was installed by the end of 2023. Based on research from BNEF, approximately 460 GWh of energy storage capacity will be added in the U.S. by 2030, with approximately 65% of this being for energy shifting applications, which is our target market.

Battery Components

As a vertically integrated battery company, we develop and own proprietary intellectual property and know-how relating to the design, development and manufacture of the four critical components of lithium-ion batteries, namely the cathode, anode, electrolyte and separator. This allows us to use these components in our products and market the individual components, such as the cathode or separator, to other lithium-ion battery companies or significant purchasers of lithium-ion batteries, like passenger car OEMs and consumer electronics manufacturers. We believe our most recent developments to the cathode and the separator have resulted in significant and unique proprietary intellectual property, including our full concentration gradient (“FCG”) cathode and polyaramid separator.

Our exclusive polyaramid separator, incorporating 26 patented technologies, offers significant safety advantages over traditional separators, with high mechanical and thermal stability minimizing thermo-induced changes. We believe our exclusive FCG cathode, which includes 33 patented technologies, offers a safer and more reliable solution that increases energy density and minimizes the use of cobalt in the cathode.

In October 2022, we were notified by the U.S. Department of Energy (“DOE”) that we had been selected, in collaboration with General Motors, to receive $200 million in grant funding as part of the DOE's Battery Materials Processing and Battery Manufacturing initiative pursuant to the recently enacted infrastructure law, subject to negotiation of specific terms and conditions. The grant funding was expected to support the construction of a new polyaramid separator manufacturing facility in Hopkinsville, Kentucky. On May 23, 2023 the DOE announced that it was declining to award the previously-announced $200 million grant to us. Notwithstanding the DOE’s decision, and subject to our ability to secure additional capital, we plan to continue making significant investments in the United States, including completing our battery manufacturing facility in Clarksville, Tennessee. We also remain committed to building a polyaramid separator manufacturing plant in the United States but intend to focus on our core business in the near term.

Our Technologies

Since 2008, our objectives and research have been focused on developing innovative battery technologies targeted to provide ultra-fast charging capabilities, long lifespan, high-energy density and safety. Some of the key highlights from our technology portfolio are:

Battery Cell Materials

•Polyaramid Separator-Our proprietary polyaramid separator is significantly more heat-stable than traditional polyethylene separators. Polyaramid is similar to Kevlar, the material that is used in bulletproof vests, and its excellent thermal properties (stable to nearly 300°C in the air) are well known, but we have developed proprietary techniques to form this material into ~10um thick, meters wide and hundreds of meters long porous separator material that is suited for lithium-ion batteries. The project manager from one of the big three OEMs has described this technology as “the greatest breakthrough in lithium-ion battery separator technology in 20 years.”

•LTO powder-Our lithium titanate oxide (LTO) powder enhances high power operation which is ideal for ultra-fast charging. It is a safer anode material due to its inherent stability with traditional lithium-ion electrolytes.

•FCG Cathode—Licensed from Argonne National Labs in 2017, our FCG cathode production now features significant, flexible manufacturing know-how, enabling cost-effective production compared to standard NMC materials. We have found that by controlling the concentration of metals within a particle, the material’s safety can be enhanced. This is because the gradient is a designer cathode, meaning the material design can be tailored for specific end uses and cells/customers can receive a unique material product tailored to their needs. This customization makes the technology well suited for ultra-fast charging and low-cost advanced lithium-ion cells. We believe this technology is especially well suited going forward for the development of materials that greatly reduce or eliminate cobalt from the cathode.

•Electrolyte- Our electrolyte formulation significantly reduces, and sometimes eliminates, the risk of lithium-ion cell fires. Reducing the flammability of lithium-ion cells is an important safety feature that we believe will become more valued as the market pushes towards ever higher, and hence less stable, energy density cells.

Cell Chemistry

•LTO—LTO is used in place of the typical graphite on the anode. LTO greatly enhances the lithium-ion cell’s safety and fast charge ability, at the cost of some energy density. As compared to a majority of our carbon anode competitors, our LTO cells boast a lifespan of up to 20 times longer than standard cells. Our LTO cells effectively mitigate cell gassing, a significant issue that degrades battery performance. By eliminating the gas generation during cycling, our cells can have a long lifespan.

•NMC—Applications requiring higher energy cell density today must be built using the layered metal oxide crystal structure (which includes NMC, nickel cobalt aluminum, and nickel cobalt manganese aluminum). Our cells based on this chemistry have excellent cycle performance, as demonstrated by our cells being able to complete thousands of constant current charge cycles before losing performance compared to cells produced by certain of our competitors, which we contribute to our better understanding of the various cell materials from our vertical integration structure. Through our control of the cathode and separator technologies, we expect our NMC cells will have a lower total cost of ownership and enhanced safety compared to many of our competitors’ products. Microvast cells using NMC technology have been third-party evaluated by various U.S. National Labs and by Technischer Überwachungsverein (Technical Inspection Association), confirming our claims to performance. The high energy 53.5Ah cell is our latest product offering from our long history of developing and manufacturing NMC cell technologies.

•LFP—One of the safest cathode options, lithium iron phosphate (“LFP”), is manufactured from lower-cost materials, making it more affordable than NMC cells, though this cost advantage can be influenced by the prevailing price of lithium, which is used in higher quantities in a LFP cell compared to a NMC cell. Our LFP cells were developed at the behest of a Chinese OEM, and we believe that our technology was selected over one of the biggest car companies in the world because our performance and price were superior. Our newly developed large size LFP battery cells (510AH) and ESS containers are planned to launch in July 2024. This newly designed ESS container will have approximately 5.5 MWh energy for a 20’ container.

•Solid State Battery Development– Microvast is at the forefront of pioneering a revolutionary 100% solid-state battery technology, distinctively engineered without need of liquid electrolyte which are commonly used in the market (semi solid-state battery) to address resistance and interface issues. Our innovative approach leverages a completely solid framework, setting a new standard for energy storage solutions. Since embarking on this ambitious project in 2015, our dedicated R&D team has achieved significant milestones, securing over 20 patents in the process. This groundbreaking technology is a testament to our commitment to advancing sustainable and efficient energy sources.

Key Benefits of our Technology and Applications

Our technologies and battery systems offer several advantages:

•Tailored Battery Solutions. Our history of conducting research into lithium-ion batteries has allowed us to develop and commercialize a broad range of cell chemistries, including LTO, LFP, nickel manganese cobalt version 1 (“NMC-1”) and nickel manganese cobalt version 2 (“NMC-2”). This broad spectrum of lithium-ion cell technologies allows us to tailor our product offering to suit each customer’s needs. We are then able to take their preferred cell chemistry and integrate it into our modules and packs, which are designed to maximize the performance of each Microvast cell technology. As a result, we have battery solutions for any commercial vehicle application, including light, medium, and heavy-duty trucks, buses, trains, mining trucks, marine and port vehicles, automated guided and specialty vehicles. In some cases, BMS and installation may be provided to the customer. The BMS monitors the battery, improving the safety and thermal control, which enhances the battery system's lifespan and cost-efficiency.

•Ultra-Fast Charging Capability. Depending on the selected battery chemistry, we can offer battery solutions that can be fully charged in as little as 10 to 30 minutes, significantly faster than commonly used battery systems. The ultra-fast charging capabilities of our battery systems significantly enhance electric vehicle mobility, and we believe our solutions have the potential to accelerate consumer adoption of electric vehicles. Our latest-generation LTO cells can be fully charged within 10 minutes while providing an energy density of up to 180 watt-hours per liter (“Wh/l”) and 95 watt-hours per kilogram (“Wh/kg”). These ultra-fast charging capabilities and long battery life can meet the diverse vehicle design requirements of our OEM customers. Our NMC-2 products can be fully charged within 30 minutes, providing higher energy density of more than 220Wh/kg. Ultra-fast charging capabilities are a critical performance criterion for our commercial vehicle business while cells with higher energy densities are important to both electric commercial vehicle and ESS customers.

•Long Battery Lifespan. We can offer battery solutions with a lifespan of between 2,500 and 20,000 full charge/discharge cycles. The longer battery lifespan enables our battery systems’ useful life to match the life of the vehicles or energy storage projects in which our systems are installed, avoiding the need to replace the battery and thereby lowering our customers’ total cost of ownership. For example, our LTO batteries retain 90% of their initial capacity after approximately 10,300 full charge/discharge cycles, according to a test report produced by the Warwick Manufacturing Group, an academic department at the University of Warwick in the United Kingdom (the “U.K.”).

•Enhanced Margin of Safety. Drawing from an intellectual property library that took over a decade to develop, we work to increase the margin of safety of our products, beginning with the initial design and continuing through the use of carefully selected battery components. We believe our LTO battery is inherently safer than other battery chemistries, due to its thermal stability, ability to operate in a broad range of temperatures, and a lower risk of internal short circuits and fire-related hazards. For products demanding higher energy densities, our in-house manufactured battery components, polyaramid separator, non-flammable electrolyte and FCG cathode individually or collectively are being implemented in certain current and future products to improve product safety. Our in-depth knowledge of how these battery components interact with each other in the battery cell is utilized in the design and development of our products, enhancing our product margins.

Our Strategies

Our strategic objective is to generate long-term value for stakeholders, focusing on:

•Expanding our Energy Storage System (ESS) and electric commercial vehicle capabilities to address energy transition needs with a wide array of battery technologies for clean and renewable energy sources. Our growth strategy includes leveraging our technology and industry expertise to gain market share and play a key part in decarbonization and mitigating climate change. We plan to globally expand our Energy Storage System (ESS) solutions and services. So far, we have primarily sold our battery solutions to OEMs for use in electric commercial vehicles and other specialty vehicles, and our plan is to keep innovating our battery technologies to provide improved battery performance for commercial vehicle use cases. Operators and developers of renewable energy projects are showing considerable interest in our battery systems, including as energy storage for renewable energy generators and utility grids and for frequency regulation. The energy storage market offers significant growth potential, and we plan to focus our efforts in the near term on the development of our ESS container utilizing our 53.5Ah cell technology.

•Continue our focus on shifting operations to Europe and the U.S. Initially, customer demand for battery solutions for electric commercial vehicles was concentrated in the Asia & Pacific regions. As customer demand for our products and services has grown in Europe and the U.S., we have expanded to meet these growth opportunities for our battery technologies. We expect the demand for our products to continue to grow in these markets partly due to regulatory incentives created by the IRA in the U.S. and the E.U. Green Deal and E.U. Fit for 55. In 2021, we completed a 170,000 square foot module and pack manufacturing facility near Berlin, Germany which is now running in three shifts to meet the growing demand. Such installation is well prepared to meet upcoming battery regulations in Europe requiring an increased localization. Our U.S. investment, amounting to hundreds of millions of dollars, includes our 2 GWh battery cell and module facility in Tennessee which, subject to additional funding, we estimate could be operational beginning approximately eight months after we secure such funding, an R&D facility in Florida, and an ESS operations facility in Colorado. Additionally, we continue to invest in our existing operations in the Asia & Pacific region and our efforts to grow our business in that region as well.

•Improve performance and reduce the total cost of ownership of our battery systems. The total cost of ownership is an important criterion for commercial electric vehicles and ESS customers. In order to maintain our market position, we intend to continue to invest in R&D of our battery technology and seek new innovations to further lower costs. For battery system solutions, this means continuing to develop new battery cells and modules and improving the energy densities of our existing batteries. Our R&D team is working to integrate new designs, technologies and materials into our cells to enhance performance and lower cost. One important strategy we have employed historically and will continue to focus on going forward is an emphasis on research related to advanced materials and their ability to enhance our products. We believe that improving the performance of the base components has the added advantage of making all of our battery solutions, ESS solutions and our battery components more attractive generally.

•Expand our manufacturing capacity to meet growing demand. With the construction and expansion of facilities and resources in the U.S., Europe and China, we expect our manufacturing facilities will be located in close proximity to our customers in each major region. We plan to prudently expand our manufacturing capacity to capture the large and growing market opportunity for electric vehicles and ESS solutions, especially in the U.S. and Europe. We strive to phase our capacity expansions according to ongoing assessments of product demand over the medium and long term as well as the availability of capital. As of December 31, 2023, our total annual manufacturing capacity stands at approximately 5 GWh. We plan to add an additional 2 GWh of new capacity through the Clarksville Phase 1A expansion, pending additional financing. We plan to achieve a total manufacturing capacity of 7 GWh and 11 GWh per year by December 31, 2024 and 2026, respectively, to support growing demand for our existing products.

Manufacturing Capacity

We measure our manufacturing capacity in GWh, which represents the energy capacity of all batteries produced for a single complete discharge, rather than the number of batteries we produce per year.

As of December 31, 2023, we had an annual manufacturing capacity of approximately 5 GWh cell, module and pack capacity, 600 tons per year of cathode capacity, 3,000 tons of electrolyte capacity and 5 million square meters of separator material capacity on a pilot line. All of this capacity currently originates from our Huzhou, China facility.

In Europe, we have a 170,000-square-foot module and pack manufacturing facility near Berlin, Germany which has been in production since 2021. We will continue to review investing in cell manufacturing capacity in Europe to comply with new E.U. regulations and in order to meet the anticipated increased demand for battery-operated solutions due to "green" policies.

In 2021, we purchased an existing building in Clarksville, Tennessee and began renovating it to support up to 2 GWh of cell, module and pack capacity, which we previously expected to be in production by the third quarter of 2023. Because of delays in securing additional financing, including our fund-raising process being negatively impacted by the loss of the DOE grant, toward the end of fourth quarter of 2023, progress with this project started to be impacted and certain construction work streams could not be progressed on the timeframes we had originally planned. This has resulted in further delays and costs. The proceeds from the Business Combination alone will not be sufficient to complete the Clarksville Phase 1A capacity expansion and meet our general working capital needs and we are seeking alternate sources of capital. Until financing is in place, this will limit our growth opportunities especially in the U.S. market where our customers desire products that meet their domestic content requirements. Also, we will be forgoing potential IRA credits until such time as the Clarksville Phase 1A expansion is in operation.

The Clarksville, Tennessee facility, once fully equipped, will be able to support up to 4 GWh of cell, module and pack capacity with the initial Phase 1A expansion being 2 GWh of capacity for the 53.5Ah cell technology. Upon completion, this facility will primarily serve U.S. customers. In addition, we believe there is sufficient acreage at the existing Tennessee facility to construct another building and further increase capacity by an additional 4 GWh, for a total of 8 GWh of future manufacturing capacity. Further, we expect the battery cells and battery modules produced in our Tennessee facility to be a direct beneficiary under section 45X of the IRA, which offers tax credits of $35 kWh for battery cells and $10 kWh for battery modules for a total of $45 kWh in tax credits.

In the third quarter of 2023, we successfully completed the 2 GWh cell, module and tray capacity expansion for our 53.5Ah cell technology in Huzhou, China. This Phase 3.1 expansion in Huzhou, China, was in full production of 53.5Ah cells and modules during the third quarter of 2023. We anticipate our new Huzhou facility will eventually support up to 12 GWh in manufacturing capacity, with the Phase 3.1 expansion being the first 2 GWh's of this capacity potential.

By the end of 2024 and depending on our ability to access additional capital, we expect our total battery manufacturing capacity to be approximately 7 GWh with 4 GWh of that devoted to fully automated lines to produce the high energy 53.5Ah cell. We are planning to increase our total battery manufacturing capacity to approximately 11 GWh per year by 2026 subject to demand for our products from customers and having the funding in place to complete such expansions.

Patents and Other Intellectual Property

Over 15 years, we have developed a comprehensive proprietary intellectual property portfolio. We possess patents, licenses and/or know-how covering the following proprietary material technologies:

•Separators—We have developed a high-thermal separator made of polyaramid polymer with a melting point above 300°C, which we believe will improve the safety of our batteries.

•FCG Cathode—In 2017, we licensed the FCG cathode process from Argonne National Labs. The FCG cathode is distinguished by its unique manufacture, where a clear and gradual gradient in the transition metal content can be observed during the analysis of a cathode particle.

•Electrolytes—We have developed a high/low-temperature electrolyte that is stable at high temperatures (approximately 70°C) and can release approximately 70% of its energy at extremely cold temperatures (approximately -30°C) at a charge rate of 0 to 100% in one hour.

•LTO anode—Our proprietary LTO anode used for our electrodes compacts densely, leading to higher volumetric density while sustaining the ultra-fast charging properties of our batteries. It also allows our batteries to operate with less resistance by preventing the formation and/or degradation of solid-electrolyte interphase (a barrier formed between the electrolyte solution and electrode when the battery is charged) and limits the formation of dendrites. Dendrites reduce performance and increase the risk of short circuits and fire-related hazards. More importantly, our proprietary powder causes negligible volume expansion when the battery is charged and discharged. This provides our batteries with stability during recharges and extends the life of the battery.

•Anode—We are experimenting with and have developed various types of anode materials. For example, we have developed porous carbon-based anode materials allowing for a higher charging rate. The porous structure allows for faster transport of lithium-ions, contributing to the fast-charging properties of our batteries.

Our commercial success partly relies on securing and maintaining intellectual property protection for our designs and technology. Protecting our intellectual property is critical to our business, given that it's a key driver of profitability. To mitigate technology infringement risks in China, we compartmentalize know-how and trade secrets in the U.S., maintaining no IT connections for such information and data between our U.S. and China operations. We strive to protect both our current and future unpatented proprietary technologies. We believe that our success will depend, to a large extent, upon continued innovation and technological expertise. For a detailed discussion on intellectual property risks, refer to "Risk Factors - Risks Related to Our Intellectual Property."

We apply trademarks to our batteries, considering distinctive trademarks crucial for marketing. We have registered the Microvast mark, including our logo and other trademarks, in China, the U.S., and internationally, including the LpTO, LpCO, MpCO, HpCO and Clean City Transit marks.

Research and Development

Our R&D and engineering teams are dedicated to innovating new battery solutions and enhancing existing systems' performance. We design our battery systems by targeting specific performance metrics, including energy density, power density and specific power, charge rate capability, cycle life, through-put energy and various safety and abuse-tolerance metrics.

Our technology center is responsible for development of materials, cells, and packs, as well as FCG and polyaramid separator manufacturing, innovating new technologies, testing, simulation, analysis, and intellectual property management.

Our R&D efforts concentrate on enhancing energy density, power, lifespan, and safety of batteries by developing key materials, advancing high-energy cells and IT components, ensuring battery cell safety, creating new cell applications, scaling up processes, and refining electrical, mechanical, and thermal designs.

We believe that our ability to deliver higher performance batteries and battery systems depends on the rapid and effective transfer of the technology developed in our R&D laboratories into our high-volume manufacturing facilities. Therefore, we allocate part of our manufacturing capacity to pilot plants for structured experiments in manufacturing process development.

Our Huzhou, China manufacturing facility includes a 75,000 square foot research center. The center is equipped with a full range of scientific equipment for a material science research center, including an X-ray powder diffraction machine, scanning electron microscope, gas chromatograph/mass spectrometer cape, laser particle size analyzers, electrochemical comprehensive test analyzers and other scientific equipment.

In September 2016, we also set up a research center in Orlando, Florida to work on longer-term technology development. In October 2021, we expanded our presence in the greater Orlando area with the purchase of a 75,000 square foot facility, which is dedicated to R&D efforts.

Our R&D expenses totaled $34.4 million in 2021, $43.5 million in 2022 , and $45.0 million in 2023.

Sales and Marketing

Our products are marketed and sold through a direct sales force across three regions: Europe, Middle East and Africa; North and South America; and Asia & Pacific.

Electric Commercial Vehicles

We directly engage with electric vehicle and drivetrain manufacturers to highlight our technology and product benefits. Sales cycles differ by market segment and usually involve an extensive development and qualification period before commercial production. We expect the total time from customer introduction to commercial manufacturing will range from 2 to 4 years depending on the specific solution and market segment. For example, total time in the transportation market includes a customer’s preliminary technology review, which generally ranges from 3 to 9 months, followed by test and evaluation, which generally ranges from 12 to 18 months. We offer off-the-shelf packs that can significantly shorten our customers' time to market. Such off-the-shelf opportunities become more and more relevant for new market players of small and medium size whose prime objective is to disrupt the established markets especially in the light and medium duty vehicle sector by offering new vehicle concepts.

Utility-Scale ESS

Initially, we are concentrating our ESS sales and marketing on the utility-scale market for energy shifting in the U.S. Our marketing is focused on the launch of our ESS container, communicating the attributes of our product and technologies, and creating awareness for the Microvast brand in the energy sector.

Our sales cycle, involving a request for proposal process, typically spans 6 to 12 months from initiation to manufacturing. A key advantage of our ESS business is the shorter sales cycle, as project owners and developers face fewer testing requirements than those for electric vehicle batteries.

Battery Components

Our promotion of battery components begins with engaging R&D engineers from passenger car OEMs and consumer electronics manufacturers. We may provide select customers with material samples or prototypes for evaluation to facilitate component sales.

Materials

Every lithium-ion battery consists of an anode, cathode, electrolyte, and separator.

•Anode— Our anode is selected historically from LTO or graphite in our product cells. In the coming years, we anticipate that we will develop and market a new product that contains silicon or silicon oxide.

•Cathode— For NMC, our existing products are made using commercially supplied materials, and our future cell products will utilize FCG when possible. For NMC-based cathodes, the sourcing and availability of cobalt is a key issue for many OEM buyers. As such, we are actively engaged in research to greatly reduce or eliminate the use of cobalt from our material stream. We have made LFP cells for a manufacturer of passenger electric vehicles in China and the raw materials for this cell are sourced from a commercial supplier.

•Electrolyte— Our current lithium-ion cells utilize liquid-based electrolyte formulations. We often purchase base solvents for carbonate-based electrolytes from commercial suppliers to leverage cost benefits of scale, blending them in-house to protect our proprietary formulations.

•Separator— The separator is another key material in our lithium-ion cells. While we have in the past used the industry norm polyethylene/polypropylene materials, we are now working so that in the future we will integrate as many cells as possible with our proprietary polyaramid technology. Additionally, we are leveraging our polyaramid expertise to develop a solid electrolyte battery system incorporating polyaramid material. If the solid electrolyte approach is successful, not only will it eliminate the use of liquid electrolytes, but it will also potentially enable new anode chemistries such as lithium metal, which is needed to reach cells with over 1,000 Wh/l energy densities.

Suppliers and Supply Arrangements

We source key electrode raw materials and various components exclusively from a select few third-party suppliers. Purchasing raw materials in bulk has enabled us to secure long-term supply agreements, improving cost and payment terms with suppliers. We have also increased the sources of supply for some of our key raw materials. Our suppliers may adjust prices based on fluctuations in benchmark prices for raw materials or their base metals. See “Risk Factors — Risks Related to our Business and Industry — We currently purchase certain key raw materials and components from third parties, some of which we only source from one supplier or from a limited number of suppliers.”

Customers

We have established various arrangements with leading global electric vehicle manufacturers to develop batteries and systems, primarily for the commercial vehicle market. Our battery systems are used in plug-in hybrid electric vehicles, battery electric vehicles and hybrid electric vehicles markets. In the electric commercial vehicle market, we typically engage in long-term supply or framework agreements without imposing minimum purchase obligations on the customer. Customers under these agreements issue purchase orders for specific quantities of battery systems, which serve as their contractual commitments.

We also enter contracts committing customers to defined volumes of battery systems, typical of the ESS market. In 2022, we entered into such an agreement to supply our container solution for an energy storage project co-located with a solar facility in the U.S. Deliveries under that contract are scheduled to commence in the second quarter of 2024, and when completed, the total project size is expected to be around 193.5MWh.

The sales cycle of our solutions and a relatively small customer base result in significant customer concentration. In 2023, our top five customers accounted for 48.6% of our revenue. See “Risk Factors — Risks Related to our Business and Industry — Our revenue heavily depends on a limited customer base, a trend likely to continue."

As of December 31, 2023, our battery systems had an order backlog worth approximately $276.4 million (about 1,637.9 MWh), with around 84% attributable to Europe and the U.S.. We expect to fulfill most of our backlog within 2024 and 2025.

Human Capital

As of December 31, 2023, we had 2,006 full-time employees and 955 independent contractors. Decisions and control, and our senior management, are centralized in the U.S. Our key human capital objectives in managing our business include attracting, developing and retaining top talent while integrating diversity, equity and inclusion principles and practices. We have built a team comprised of individuals with diverse backgrounds, skills and perspectives to produce better ideas and greater success in meeting the needs of our customers. Our results-oriented culture is committed to developing and delivering differentiated solutions at a faster rate than our competitors.

Our full-time employees receive competitive benefits packages. Additionally, our employees have opportunities to earn annual bonuses and eligible employees have the opportunity to participate in our equity-based compensation program. We believe our compensation programs allow us to attract and retain talented employees willing to grow with us.

We emphasize the importance of safety to all of our employees at all of our locations and operations. Our safety performance is measured, evaluated, and reported to leadership monthly. The foundations of our health and safety programs are based on global standards. To date, we have not experienced any work stoppages as a result of labor disputes, safety or health issues and we consider our employee relations to be good.

Competition

Competition in the battery industry is fierce and rapidly evolving. Our markets are influenced by changing technology trends, evolving customer needs, and frequent introductions of new technologies. We believe the primary competitive factors in our markets are:

•product performance, reliability and safety;

•integrated solutions;

•total cost of ownership;

•regional and industrial regulations;

•pricing and payment terms;

•balance sheet strength and access to financing;

•availability and pricing of raw materials;

•time to market for new technologies/chemistries; and

•manufacturing capabilities.

Our competitors range from large, established battery manufacturers to new companies focusing on developing battery technologies. Asian competitors from China, Japan, and South Korea dominate the global market, leveraging their operational scale for tactical pricing to maintain and increase market share. See “Risk Factors — Risks Related to our Business and Industry — We primarily produce and sell lithium-based battery systems. Should a viable alternative to lithium-based batteries emerge and gain market acceptance, it could significantly harm our business, financial health, and operational results. Furthermore, our failure to keep up with rapid technological changes and evolving industry standards within the lithium-based battery market may cause our products to become obsolete and less marketable, resulting in loss of market share to our competitors.”

Governmental Regulation and Environmental Compliance

Environmental, Heath and Safety Matters — Our China Facility

Our manufacturing activities in China are subject to the requirements of Chinese environmental laws and regulations on air emission, wastewater discharge, solid waste, noise and the generation, handling, storage, use, transportation and disposal of hazardous materials. Our Environmental Management system is certified to ISO 14001:2015 and our Occupational Health and Safety system is certified to ISO 45001:2018 certified. Our management systems help us to ensure we are in compliance with applicable environmental, health, and safety laws and regulations in all material aspects. We have built environmental treatment facilities concurrently with the construction of our manufacturing facilities, where the waste air, wastewater and waste solids we generate can be treated in accordance with the relevant requirements. We have outsourced the disposal of hazardous solid waste we generate to a third-party contractor in accordance with the relevant laws. We believe we have maintained pollutant emission levels at each of our facilities in material compliance with levels prescribed by the relevant governmental authorities.

Environmental , Health and Safety Matters — Our Germany Production Facility

Operations at our German facility are subject to a variety of environmental, health and safety regulations. Quality Management system is certified to IATF 16949:2016 and ISO 9001:2015. Our Environmental Management system is certified to ISO 14001:2015 and we are certified to the ISO 50001:2011 — Energy Management standard. We are working on certification to ISO 45001-2018— Occupational Health and Safety Management system. All our machines and production lines are delivered with Conformitè Europëenne, European Quality Standard label according to the Machinery Directive 2006/42/EC.

In transit, lithium-ion batteries are subject to rules governing the transportation of “dangerous goods.” We only use carriers that meet these requirements. We have policies and programs in place to help assure compliance with our obligations such as machine guarding, laser welding, hazardous material management and transportation. Furthermore, in order to obtain the existing building permits, we are obligated to perform environmental compliance and fire protection concept requirements under German regulations. All these standards and certificates are designed to comply with applicable government regulations and laws, as well as the standards of the automotive industry.

We train our employees and conduct internal audits of our operations to assess our fulfillment of these policies. As demonstrated in our pilot project for “Sustainable Battery Production” with TÜV SÜD Germany, the environment is very important to us.

Environmental, Health and Safety Matters — Our U.S. Production Facility

Federal, state, and local regulations impose significant environmental requirements on the manufacture, storage, transportation, and disposal of various components as used or will be used in our U.S battery cell manufacturing and ESS container assembly operations. As we continue to develop our operations in the U. S. we are following the guidelines of the international standards as we develop our Environmental and Occupational Health and Safety Management systems. Although we believe that our operations are in material compliance with current applicable environmental regulations, there can be no assurance that changes in such laws and regulations will not impose costly compliance requirements on us or otherwise subject us to future liabilities.

Moreover, federal, state, and local governments may enact additional regulations relating to the manufacture, storage, transportation, and disposal of components of advanced ESS. Compliance with such additional regulations could require us to devote significant time and resources and could adversely affect demand for our products.

General Environmental Matters

Currently, we face no admonitions, penalties, investigations, or inquiries from environmental regulators, nor are we involved in any legal proceedings as a defendant for violating environmental laws. We have no reason to anticipate any claims, actions, or proceedings against us related to environmental law that would materially affect our business, finances, or operations. See “Risk Factors — Risks Related to our Business and Industry — Compliance with environmental regulations can be expensive, and failure to comply with these regulations may result in monetary damages and fines, adverse publicity and have a material adverse effect on our business..”

Workers’ Health and Production Safety Compliance

We are subject to numerous laws and regulations related to the health of our employees and production safety of our facilities in each jurisdiction in which we operate.

These laws and regulations include in some jurisdictions a requirement to engage a qualified institution to make a safety evaluation report on its work safety conditions and to file such a safety evaluation report with the local work safety authority for the use of hazardous chemicals in our manufacturing process.

We are not currently subject to any admonitions, penalties, investigations or inquiries relating to workers’ health and production safety law or regulations, nor are we subject to any claims or legal proceedings to which we are named as a defendant for violation of any workers’ health and production safety law or regulation. We do not have any reasonable basis to believe that there are any threatened claims, actions or legal proceedings against us relating to any workers’ health and production safety law or regulation that would have a material adverse effect on our business, financial condition or results of operations. See “Risk Factors — Risks Related to our Business and Industry — We may fail to comply with certain health and production safety laws and regulations governing hazardous materials.”

Seasonality

We have historically experienced higher sales during our third and fourth fiscal quarters as compared to our first and second fiscal quarters. However, our limited operating history makes it difficult for us to judge the exact nature or extent of the seasonality of our business.

Corporate Information

Microvast, Inc. was initially incorporated in Texas in 2006, then re-incorporated as a Delaware corporation in December 2015. On July 23, 2021, Tuscan Holdings Corp. ("Tuscan") a Delaware corporation established in April 2016 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses) consummated the acquisition of Microvast, Inc. pursuant to an Agreement and Plan of Merger dated February 1, 2021, between Tuscan, Microvast, Inc. and TSCN Merger Sub Inc. (the “Business Combination”). Following the Business Combination, we changed our name from Tuscan to “Microvast Holdings, Inc.” Our principal executive offices are located at 12603 Southwest Freeway, Suite 300, Stafford, Texas 77477, and our telephone number is (281) 491-9505. Our website is https://microvast.com. The information posted on our website is not incorporated by reference into this Annual Report.

We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the U.S. Securities and Exchange Commission (“SEC”) in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K, amendments to those reports and our Proxy Statement for our annual meeting of stockholders. These filings are available for download free of charge on our investor relations website located athttps://ir.microvast.com/financials-filings/sec-filings. The SEC also maintains a website that contains reports, proxy statements, and other information about issuers that file electronically atwww.sec.gov.