RE: Here we go again.2 Oct 2020 16:04
China is further along to adopting hydrogen as a potentially green transport fuel than most of its peers. Investors
don't need to buy Chinese stocks to gain exposure.
While the rise and fall of U.S. truck startup Nikola transfixed Wall Street, China sharpened its own ambitions to
industrialize electric big rigs powered by hydrogen fuel cells. Last month, Beijing promised to spend $2.5 billion
in 10 cities over the next four years to improve the technology, demonstrate projects, scale up operations and
develop policies for refueling stations and green hydrogen.
Two likely beneficiaries in the West are Canada's Ballard Power Systems and a small U.K. company called Ceres
Power. They have teamed up with leading Chinese heavy-duty engine maker Weichai for different types of
hydrogen fuel-cell technology.
Ballard's proton-exchange membrane cells have powered big trucks over more than 50 million kilometers, the
equivalent of 31 million miles, nearly three-quarters of them in China. The company's joint venture with Weichai
recently opened a factory in Shandong Province that can produce 10,000 fuel-cell heavy-duty engines annually,
with room to expand.
The heart of Ballard's cells are made in Canada at a recently expanded facility. Gross margins hover around 20%,
but it promised at an investor day this week to cut production costs by 70% over the next four years by improving
the efficiency of product design and manufacturing and scaling up orders.
Weichai has joined with Ceres for solid-oxide fuel cells. Primarily used for stationary applications like data centers,
the London-listed company says its novel design can be used in transport. The Weichai partnership gives that
claim credibility, particularly as the Chinese company increased its equity stake in Ceres this year and is testing its
fuel cell as a range extender for its electric buses.
There are plenty of risks when investing in maturing technologies such as hydrogen fuel cells. Rival designs could
achieve a more rapid adoption, while relations could deteriorate between Beijing and the companies' home
nations. As Nikola has shown, investors are prone to getting ahead of reality.
Shares in both Ballard and Ceres have more than doubled this year, but that looks modest next to the quadrupling
of peers such as Doosan Fuel Cell and Plug Power. A focus on industrial partnerships rather than consumer
products has kept the Canadian and U.K. companies at the fringes of the stock market's electric-vehicle frenzy.
Joining with a Chinese company in a market that won't evolve entirely according to competitive forces should be
an advantage. Ballard and Ceres may be hydrogen stocks that can do more than roll downhill.
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