This is my first blog post as a Pike analyst. As I haven’t completed a report yet, the choice of potential topics is unlimited. So naturally I am going to write about… forklifts.

Ok, so not the sexiest of topics. But forklifts are being touted as one of the early markets for fuel cells, and shipments have taken off dramatically since 2008. This is likely to continue in 2011. Certainly the market has received a major jolt from 2009 Recovery Act funding, which is supporting shipments of hundreds of forklifts in North America. But demand is not only coming from government supported projects, and large scale fleet conversions or hydrogen-only Greenfield sites show that buyers see these as real products, not demonstration units. If the initial fleets at companies like Walmart, Coca Cola, and Wegmans bring the anticipated return on investment (ROI), there could be a dramatic uptick in demand in the next few years.

This is not a glamorous application. There will be no glossy magazine ads or flashy press unveilings. And, perhaps, no extravagant promises that will be difficult to keep (one can hope). But forklifts show the fuel cell industry moving away from trying to sell fuel cells as a technology and toward selling a product. By and large, customers do not want to buy technology. They want to buy a useful or desirable product. Forklifts are a step in the right direction, and fuel cells are also being packaged into other products with early market demand such as APUs for RVs and yachts, thousands of which are sold every year, or backup power for the telecom industry or combined heat and power systems. These are not the showy applications like cars and tend to be happening with little notice or fanfare.

That said, it is still early going for fuel cell forklifts. Some key market factors that will affect the success of this sector are:

• the limited market segments where fuel cells provide a good return on investment (2 and 3 shift warehouse operations, indoors, with a minimum fleet size of around 40 vehicles);

• competitor technologies such as advanced batteries or fast charging;

• the very small number of fuel cell companies in this sector (if one fails, the market could really stumble)

The fuel cell forklift market still depends on the federal tax incentive for fuel cells to make the ROI case, so fuel cells need show they are competitive at least before this tax credit expires in 2017, but really long before then. (Indeed it could be counterproductive if companies continue to rely on this tax incentive for too long.) Over the next few years, it will be important to watch if more orders from the big fleet customers are booked and if costs come down.