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Hydrogen fuel cells have long been considered a promising energy storage alternative. However, they have seen limited adoption so far; but that may change in the future. Several governments and leading companies are throwing their weight behind this promising technology. Let’s take a closer look at what these developments may mean for fuel cell companies such as Plug Power (NASDAQ:PLUG) and FuelCell Energy (NASDAQ:FCEL).
Uneven growth
The adoption of hydrogen fuel cells in the global electric vehicle segment is patchy. At the end of 2020, there were roughly 34,800 fuel cell electric vehicles (FCEVs) in use worldwide. Of these, 29% were in South Korea. The U.S. followed with a 27% share while China accounted for 24% of the FCEVs. South Korea is betting big on hydrogen, and the country increased its hydrogen refueling stations by 50% in 2020.
In 2020, roughly 9,590 new FCEVs were sold globally — lower than the 12,350 units sold in 2019. However, the growth in FCEV sales returned in 2021. Around 9,000 FCEVs were sold in the first half of 2021 — nearly the amount sold in the entire 2020.

Image source: Getty Images.
Moreover, just two companies — Hyundai Motor Company (OTC:HYMTF) and Toyota Motor Corporation (NYSE:TM) — account for more than 90% of FCEV sales in the first half of 2021. Hyundai sold roughly 5,000 units of its Nexo FCEV in the first half. This number increased to around 7,276 at the end of the third quarter. Notably, around 6,400 of these FCEVs were sold in the domestic Korean market. Toyota sold roughly 3,700 FCEVs in the first half of 2021. Roughly 52% of these were exported, while the remaining were sold in Japan.
Of late, both Hyundai and Toyota are giving a renewed push to advance fuel cells. Earlier this month, Hyundai announced an investment of $1.1 billion for setting up two new hydrogen fuel cell plants, with a combined annual capacity of 100,000 hydrogen fuel cell systems. The Korean plants will start production in the second half of 2023. Notably, Hyundai Mobis — Hyundai’s parts and service subsidiary — already has the largest fuel cell production capacity in the world and supplies fuel cells for Nexo.
Toyota is also a key player in the fuel cell EV market. The company produces its own fuel cells for use in Mirai — its top-selling FCEV. Toyota is expanding its initiatives in the hydrogen segment and intends to develop fuel cell stacks for use in heavy-duty vehicles. It plans to use its Kentucky plant to assemble these modules. Further, it is advancing fuel cell technology for use in the marine sector.
Overall, both Toyota and Hyundai are increasing their focus on hydrogen fuel cells and plan to continue doing so in the coming years.
Fuel cell companies to grow
Hydrogen fuel cell technology seems to be getting increased attention from industry and governments alike. The big question is — what will it mean for fuel cell companies like Plug Power, FuelCell Energy, and Ballard Power Systems (NASDAQ:BLDP)? The answer to this question isn’t an easy one. On the positive side, increased adoption of hydrogen fuel cells will help development of supporting infrastructure, such as fueling stations, which have long been a key factor limiting the growth of FCEVs. That, in turn, should pave the way for still more growth and benefit all fuel cell companies.
On the flip side, increased investments by auto giants in fuel cells significantly increases competition for fuel cell companies. Notably, there are several other players in the hydrogen market that compete with fuel cell companies. These include small companies such as Doosan Fuel Cell and ITM Power as well as large players like Cummins (NYSE:CMI) and Air Products and Chemicals (NYSE:APD).
Pure-play fuel cell companies are taking several steps to grow in this backdrop. For example, Plug Power recently partnered with Renault (OTC:RNSDF) to jointly develop FCEVs and related infrastructure in Europe. The European market has been behind South Korea, Japan, and China so far in terms of FCEVs, but European countries are looking to expand the use of hydrogen. The Plug Power-Renault partnership could thus benefit from this under penetration.
Investing in fuel cell stocks
Overall, the developments in the hydrogen fuel cell segment look positive for fuel cell companies. These may, however, benefit bigger players more than the smaller ones. Though companies such as Hyundai, Toyota, Cummins, and Air Products and Chemicals have a very tiny percentage of their operations into hydrogen and fuel cells, even then their operations could prove to be much bigger than those of pure-play fuel cell companies like Plug Power or FuelCell Energy. That makes the job of an investor looking to invest in hydrogen more difficult.
Plug Power, Fuel Cell Energy, and Ballard Power Systems have all been incurring losses for decades. If a bigger player finds value in any of these companies, the possibility of an acquisition cannot be ruled out. If you find fuel cell stocks too risky for your appetite, you might want to gain a small exposure to the segment by investing in one of the bigger companies that has operations in this sector.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
https://www.fool.com/investing/2021/11/01/top-automakers-are-investing-in-fuel-cells-should/