Fuel cell vehicles set to profit in China truck market

JPMorgan’s Ellen Wu predicts that hydrogen fuel cell vehicles are poised to become a major player in China’s commercial truck market.

“Currently, fuel cell vehicles account for less than 5% of the commercial truck market in China and this could grow to about one-third of the total market share in 2050,” said Wu, ex-Japan ESG for Asia and Utility Research. The major firm told CNBC’s “Squawk Box Asia” on Monday.

Fuel cell electric vehicles run on electricity powered by hydrogen, which can be used to store and distribute energy derived from other sources. Hydrogen is a clean fuel and when it is consumed in a fuel cell, only water is produced.

Wu said fuel cell vehicles are a “very good option” for the commercial truck market, part of the reason their refueling time is only 10 to 15 minutes. They also have a travel range of about 800 km, about 50% to 100% above lithium battery electric vehicles.

Major automakers such as Toyota, Honda and BMW are tapping into the hydrogen fuel cell market.

According to a JPMorgan analyst, China is already pushing for promotion of fuel cell vehicles.

“NS [Chinese] The government is promoting something we call ‘city clusters’ so that there can be protestor cities telling success stories of how fuel cell vehicles are implemented in different parts of the country.”

“It’s also a policy that we saw being implemented about a decade ago, when the central government was trying to produce lithium battery electric vehicles. And we saw how successful it was.”

Beijing has said it would like to sell 20% of new cars as new energy vehicles by 2025. Competition in the domestic electric vehicle sector is fierce, with Tesla competing against the likes of domestic players such as Nio and Xpeng.

China’s climate goals

According to Wu, with China’s pledge to become carbon neutral by 2060, hydrogen will play a role in heavy industry as a clean energy source.

“For this heavy industrial sector, high heat content is required and renewable energy is therefore not a good option to fuel the heavy industrial sector – but hydrogen is,” she said.

The analyst said China leads the world in hydrogen production, and accounts for a third of global production.

Read more about electric vehicles from CNBC Pro

“In the future, green hydrogen production could be promoted by using renewable energy to produce hydrogen,” Wu said.

He said that coal currently produces hydrogen, and the transition to green production will only be possible if the cost of renewable energy continues to decline.

“What we have seen over the past 10 years is that the cost of solar power generation in China has dropped by 80%. The cost of wind power generation has dropped by 40%,” she said. “If this trend continues – and we believe it will be because of technology advances – it means green hydrogen will be possible in the future when these things come into play.”

— CNBC’s Anmar Frangoul and Evelyn Cheng contributed to this report.

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