The press conference for the second quarter delivered a number of results that allow a very optimistic outlook for the future of the company. Ballard is positioning itself perfectly in its most important markets: buses and trucks, rail vehicles, maritime transport and stationary energy. This involves optimizing the production processes of all important components, cost reductions (scaling), local-for-local strategies (supply chains in the specific countries where Ballard maintains production) and ramp-up in the various regions of the world in which the company operates. A few examples:

In buses, the Canadian company is ahead of the pack in the fuel cell segment with a formidable market share of still over 70 percent. Recently, the largest single global order came in from customer Solaris for 96 FC buses (52 of them for public transport company Rebus in Güstrow near Rostock). In the next two years, it’ll be an astounding 10,000 FC buses (Europe and USA), a large share of which is sure to be Ballard. The USA is just beginning to pick up speed in this regard, and Ballard sees itself well placed to accept larger orders from, among other, New Flyer (have market share of about 66 percent in transit buses). Individual orders from municipalities have now grown from units of 1, 2, 5 to 100 FC buses.

The China card

In China, a lot is finally happening at the government level regarding hydrogen (see above). The chance of a comprehensive funding program starting in 2024/25 is increasing. Will China do it in dribs and drabs or, similar to the US government with the Inflation Reduction Act, launch a mammoth hydrogen program (investment incentives, subsidies for H₂ production)? China could use hydrogen as a climate-friendly economic stimulus package for itself, given the current problems in the construction sector and with the infrastructure programs. In addition, new markets within electric transport can be established that could supplement or alternatively replace battery-electric ones, which would deliver a turbo boost to the world market for fuel cells.

For Ballard and its joint venture with Weichai (49:51), this allows a lot of possibility. CEO Randy MacEwen said: “We are believers in the long-term market opportunity for China. It is the largest market for production and use of hydrogen today and based on my recent visits there, I expect that to continue through 2030 – 2050. There is an enormous level of activity.”

Wisdom Motor sends 147 FC trucks to Australia

With Wisdom Motor – headquarters in province Fujian in China –Ballard has already started a strategic partnership in May 2022, which also includes the companies Templewater Group and Bravo Transportation (trucks and buses). Wisdom Motor in turn signed a cooperation agreement (MoU) with the Australian companies Pure Hydrogen and HDrive in November 2022, where Wisdom would supply over a five-year period 12,000 heavy-duty hydrogen-powered trucks (among them rubbish trucks).

Now, the first order has been completed, which entailed the delivery of 147 hydrogen-powered trash collection vehicles. Order value: 63 million USD. Supplier of the modules/stacks: The joint venture of Ballard and Weichai in China – exclusive even. Could this already mean that Ballard via the China JV is now supplying 2,400 FC modules per year here from this deal alone? The FC capacities of the JV currently correspond to 20,000 units per year, so this order is a very good start looking at the future.

Investments in China will be adjusted

Originally, Ballard wanted to establish its own MEA production with an investment volume of 130 million USD in China, among other things to counter import tariffs. This investment will be postponed for now, until there is clarity on the subsidy program. They are sticking to the plans, but don’t want to invest in land and all that until the FC market gets going there. However, they have concerning the supply chain all of the important connections already and can quickly act at the opportune time. To put it another way, this allows the interpretation that Ballard is first investing more in markets (USA, Europe) where the company expects to have better chances of winning orders in the near future. All this can also quickly be modified, however, if China accelerates its hydrogen strategy through subsidies and incentives.

Platform partnerships as a turbo

Ballard has been working for a long time on building so-called platform partnerships. This refers to customers who know how to use the fuel cell know-how (stacks & modules) for their own benefit and integrate this into their own hydrogen strategy, and acquire the FC modules exclusively from Ballard. They fully rely on Ballard in this regard and the company’s experience as well as the quality of its FC products. For Ballard, this means being able to deliver large quantities of modules/stacks to these partners in the future. In the bus sector, these are companies like Van Hool or Solaris, and with rail vehicles, Siemens Mobility and Stadler, to name a few examples. There could probably become 30 or more such partnerships, which means enormous and, above all, secure sales potential in the medium to long term.

Selection procedure of Ford speaks for Ballard

Ford Truck has decided, after comprehensive market analysis, to employ Ballard FC modules for its trucks of the F-MAX series. Two 120-kW FCmove XD modules be employed per truck. First, a letter of intent (LoI) was signed and the delivery of some modules for test purposes agreed on. From this will then come a large series. You can compare this with Bosch and Nikola, where Bosch supplies the FC modules.

This is an accolade for Ballard that underlines its expertise. Ford Truck builds, in addition to heavy trucks, many other vehicles such as construction vehicles and tractors that could in the future have Ballard inside. The truck production in Turkey is to be the first Ford site for this. Over 10,000 vehicles roll off the assembly line here every year.

Ford can itself install the Ballard modules perfectly on its own truck chassis, is the plan. It will surely take another year or two until, after test runs, the first large orders are given over to Ballard. The foundation, however, has now been laid. What would happen if Ballard were to supply 1,000, 5,000, 10,000 or more FC modules in a year – alone for this one platform partnership? According to Ballard: “As Ford’s fuel cell F-MAX truck platform matures, we anticipate this partnership to evolve into a long-term scaled-deployment-level module orders and supply arrangement.”

Canadian Pacific (CPKC) too has ordered for its production facility in Kansas City 20 FC modules for use in various locomotive types in order to gain experience from the test operation. They are also working together with railroad company CSX to make locomotives H₂-ready or break away from diesel operation. A very large order can come out of this. Further orders are expected further in the course of 2023.

Figures

The reported loss for Ballard lay, as expected, at minus 0.10 USD per share for the quarter. The order volume rose strongly in terms of value to 147.5 million USD and will continue to do so. In the bank still lies a good 815 million USD in liquid assets. The ratio of sales development between the first and second half of the year is described as 30:70 percent, so the current second half of the year promises positive surprises regarding this. Really exciting will then be 2024/25.

Summary: The calm in the share price development of Ballard should end in 2024 at the latest and lead to a gradual rise in the share price that finds its foundations in the rising number of orders for the FC products in all the various platform partnerships, markets and regions. A turbo could be China, when clarity on subsidization is created. Therefore: Buy and leave alone. No hasty reactions. Think about Facebook, Amazon and Google in the first years: There were only “logical” huge losses – until the business models started to soar – the shares as well.

Disclaimer

Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.

Author: Sven Jösting