One week after the Ballard Power Systems' (NASDAQ: BLDP) Q3 earnings release, industry experts continue to disagree over the future of Chinese hydrogen subsidies and the impact on the Canadian fuel cell manufacturer's ability to grow business in the world's largest truck market.
In an earnings update published earlier this week, Henrik Alex of Seeking Alpha singled out what he referred to as "perhaps the most astonishing statement by management" during Ballard Power's earnings call, when President and CEO Randy MacEwen stated that a new wave of Chinese fuel cell vehicle subsidies was forthcoming.
"In fact," Henrik wrote, "this is quite the opposite of rather unequivocal statements made by the Chinese Ministry of Finance at the end of September."
In a letter published last September, the ministry announced it would end incentives for hydrogen fuel cell vehicles in 2020.
But a recent Cowen & Co. note took MacEwen's comments at face value.
"Momentum in China continues to be strong," the note reads. "Management is constructive on conversations around national governmental support for heavy-duty trucks and buses and believes support will be extended through 2025."
At stake is the ramp-up of Ballard Power's Weichai Power joint venture. In May, Ballard signed a $44 million deal with the Chinese manufacturer helping deliver approximately one-third of the 2,000 fuel cell electric vehicles Weichai committed to deploy in China by 2021.
Government support is integral to ensuring these vehicles find buyers in a market where EV sales have declined precipitously in the past year.
FreightWaves first reported on the apparent disconnect between statements coming out of Chinese media and Ballard Power in October. (See: No hydrogen subsidy, no problem.)
The apparent discrepancy showed up again during the Q3 earnings call last week, when MacEwen told investors: "Importantly, the industry is continuing to await the next phase of the national government subsidies. Based on our information including discussions with our partners, we expect continued strong support by the China national government for the adoption of fuel cell vehicles and hydrogen fueling infrastructure, including a subsidy program we expect to extend through 2025."
Craig Irwin from Roth Capital expressed confusion, noting that China Daily and other Chinese language media "have a less optimistic take on the subsidy changes for fuel cells in China than what you shared today on the call."
In his response, MacEwen said, "Some people have misinterpreted the Chinese government's statements." He cited the company's "intelligence" indicating "a new subsidy scheme introduced that will be highly supportive of fuel cells and hydrogen refueling infrastructure."
MacEwen also said the number of fuel cell buses and trucks in China has increased to over 4,000, up from around 1,500 at the start of the year. The country has set an ambitious goal of having 1 million hydrogen fuel cell vehicles on the road by 2030.
Ultimately, much like the trade war, there's probably only one way to find out exactly what the Chinese government plans to do around electric and fuel cell vehicle subsidies: Wait and see.
Ballard Power reported Q3 2019 results slightly below consensus expectations and affirmed full-year projections.