Fuel cell manufacturer Ballard Power Systems’ sales and revenue have been flat in 2021 despite expectations of growth this year, with a lack of policy clarity weighing on sales in its all-important Chinese market.

Ballard invested $87mn in its business in 2021– compared to revenue of $96mn in the twelve months to September. This included $20mn to expand production capacity at its British Columbia plant by six times and $67mn for its share of a newbuild factory in Shandong Province, China. The latter is a joint venture with Weichai Motors, the world’s largest diesel manufacturer, and has been described as the largest in the world for manufacturing proton-exchange membrane (PEM) fuel cells for heavy-duty hydrogen-powered vehicles.

An increasing number of financial analysts are downgrading Ballard and slashing their price targets. Some have even begun to question the company’s corporate strategy and whether or not it remains the leader in PEM fuel cell technology, contributing to falls in share price.

$42 – Ballard’s highest share price in 2021

During Ballard’s third-quarter earnings call on 9 November, the company’s president and CEO Randy MacEwen appeared less than decisive when asked when sales and revenue should see significant growth.

“I think the question is when will we see what’s the linkage between when the order book starts to materialise and then subsequently revenue,” said MacEwen. “A year is about right.” He went on to refer to the Chinese market as a “wildcard” during the call.

To learn more, Hydrogen Economist interviewed Craig Irwin, a financial analyst with Newport Beach, California-based Roth Capital Partners. Irwin was one of the first analysts to downgrade Ballard from ‘buy’ to ‘neutral’, while slashing his share price target from $32 to $15. The price is presently less than $13 per share, after hitting an almost 20-year high at over $42 in February.

Why did you downgrade Ballard’s shares last May?

Irwin: We downgraded because we saw significant challenges to near-term revenue growth. While not final, Shandong Province, where Weichai is based, has been left off the list of first Chinese fuel cell demonstration cities. That means it is likely Weichai and Ballard will have delayed access to the China fuel cell subsidies.

Do you think Ballard putting so much emphasis on the Chinese market has been a mistake?

Irwin: Ballard spent way too much time chasing expected subsidies in China, and hasn’t diversified or focused enough on unlocking [low-carbon fuel standard]-driven opportunities.

In that case, do you view Ballard’s focus on manufacturing just fuel cells as too narrow?

Irwin: Absolutely. PEM or alkaline electrolysers should be an important part of their portfolio. I disagree with Ballard management’s strategy of asking the oil and gas or compressed gas industries to roll out green hydrogen. If anything, legacy players are motivated to delay the transition to hydrogen as long as possible. This makes no sense. 

Some analysts believe the performance of Ballard’s fuel cell technology has fallen behind some of their competitors. Do you agree or disagree with this view?

Irwin: Ballard used to be the highest quality fuel cell company, but yes, many have caught up, and some of the more interesting recent tech innovations—like punched steel plates—have come from competitors. Ballard may be lagging, but that could change quickly given the rich talent pool at the company and recent increases in R&D spending. 

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Author: Vincent Lauerman