Hydrogen and fuel cell technology taking off, Ballard aims for $130 billion heavy and medium duty vehicles market

Ballard just hosted a 5-hour analyst day with no breaks and there was a lot to unpack in terms of how the company intends to apply fuel cells in the bus, truck, trains and even marine sectors. But the key message was the huge expanding fuel cell and hydrogen market applications – specifically the Heavy and Medium Duty vehicles market estimated at $130 billion in the next 10 years.

First, let’s start with what happened last week. Ballard executives and a panel of clean energy experts delivered presentations and perspectives, as well as answering investors’ questions, all of which underscored Ballard’s position in the fast-growing hydrogen and fuel cell marketplace, with the company’s focus on electrification of Heavy- and Medium-Duty Motive applications. They talked about Ballard’s strategic plan – including 3 key market opportunities for them, China, Europe and California – as well as progress across a number of commercial, technology and operational fronts.

While you may not want to listen to the entire 5-hour call or read through the entire 184-page presentation, The Digest has culled the best highlights for you and you can access “Hydrogen and Fuel Cells: The Digest’s 2020 Multi-Slide Guide to Ballard” here.

And if you aren’t’ already familiar with how promising hydrogen and fuel cells are for the world, check out the U.S. Department of Energy’s “5 Fast Facts about Hydrogen and Fuel Cells” which covers things like hydrogen being the most abundant element on earth, how fuel cells can be used to power a huge variety of applications and be grid-independent, and more. You can also find the latest on the DOE’s involvement in Hydrogen and Fuel Cell Technology here.

Now back to Ballard and why this is all so fascinating…

Ballard’s latest launches

Here are some of the latest announcements from the company on product launches and collaboration agreements that are shooting them forward in the fuel cell market:

• Launch of FCwave Fuel Cell Module – September 8: Launch of the fuel cell industry’s first module designed for primary propulsion power in marine vessels. This fuel cell product is a 200-kilowatt modular unit that can be scaled in series up to the multi-megawatt power level.
• Launch of FCgen-HPS High-Power Density Fuel Cell Stack – September 14: Launch of a high-performance, zero-emission, proton exchange membrane (PEM) fuel cell stack, to provide propulsion for a range of Light-, Medium- and Heavy-Duty vehicles in an industry-leading volumetric high-power density of 4.3 kilowatts per liter (4.3 kW/L).
• Agreement to Collaborate with MAHLE – September 28: Announcement of an agreement to collaborate with MAHLE, a leading international development partner and Tier 1 supplier to the commercial vehicle and automotive industry, on the development and commercialization of zero-emission fuel cell systems to provide primary propulsion power in various classes of commercial trucks.
• 6x Expansion in MEA Production Capacity – September 28: Announcement of the expansion of manufacturing capacity for production of proprietary membrane electrode assemblies, or MEAs – a critical component of every fuel cell – 6x by early 2021 at Ballard’s headquarter facility in Vancouver, making this facility the largest fuel cell MEA production operation globally for commercial vehicles.

How big is the pie?

The Ballard call and presentation shared some fascinating market numbers. For example, they noted the heavy and medium duty motive market to be over $130 billion in the next 10 years for engines in China, Europe and North America – their 3 key market areas right now. They broke that number down a bit more with $100 billion in trucks, $14 billion in buses, $13 billion in marine and $4 billion in rail/trains. Oh, and they noted a $30 billion fuel cell engine market for off highway vehicles too. No matter how you look at it, those are no small numbers.

Ok, so how much of this giant pie is Ballard’s? Ballard assumed and projected they’d have a 20% fuel cell market penetration which would mean this whole thing is a $26 billion market opportunity for them. Wowzers!

One analyst noted that “A fuel cell market of this scale will require production of 1 million MW of fuel cells per year, reflecting a 1,000x growth opportunity from today. Management expects the $26 billion fuel cell HMD motive market to translate to a $5.2 billion revenue opportunity for Ballard in 2030, assuming Ballard retains a 20% fuel cell market share.”

Lookin’ good Ballard, lookin’ good!

Analyst Commentary

Jeffrey Osborne, a prominent equity analyst, said there was a secular shift in heavy duty fuel cell applications and had this to say about Ballard:

“We came away from the 5-hour analyst day with no breaks impressed with the progress Ballard has made and anticipates making in the future around cost reductions, which will unlock new applications. Certainly policy in Europe, China and California is moving to support hydrogen for heavy duty/high horsepower applications. Ballard appears very well positioned in China given its 49% ownership in the Weichai JV that will help further penetrate trucks and buses in the region. We like the setup for China, but anticipate that to be the most price aggressive and lowest margin region for Ballard in the years ahead. The MAHLE development and strategic partnership shows the power of the Ballard reach; however, we were hoping for more “meat on the bone” on how Ballard will penetrate Europe where the market is ultra competitive with many existing partnerships (Alstom/Cummins, CNH/Nikola, Daimler/Volvo, etc.) Europe is throwing around a lot of money at hydrogen as part of COVID-19 stimulus. We believe any M&A BLDP is pursuing should be focused on this region with aim of broadening out beyond their strength in bus. The 2030 “financial vision” appears achievable in our view and the margin commentary is largely aligned with what PLUG is achieving today in its product segment with GM over 30% and a 20%+ EBITDA margin as part of their ’24 guidance.”

You can read the entire analyst report about Ballard and the huge market opportunity here.

Bottom Line

Ok so Ballard’s plans are impressive, the market numbers are huge, but stay tuned to hear more from others on hydrogen and fuel cells as the hottest thing since sliced bread. Just check out what other related news came out in the past week – Shell published a 25-page shipping decarbonization report that highlighted hydrogen and fuel cells as a winner, winner, chicken dinner, saying “Shell will seek to advance its research in this area, as hydrogen is projected to benefit from build-out across other industry and transport sectors, making it potentially more cost competitive than alternative zero-emissions fuels,” and “We believe liquid hydrogen to be advantaged over other potential zero-emissions fuels for shipping, therefore giving a higher likelihood of success.”

And look at Honda’s announcement just a few days ago that they will withdraw from Formula One as an engine supplier so they can focus more of its R&D towards “areas of future power unit and energy technologies, including fuel cell vehicle (FCV) and battery EV (BEV) technologies, which will be the core of carbon-free technologies.” Why? To facilitate their “realization of carbon neutrality by 2050.” And we imagine many more will be doing the same in trying to hit the re-set button.