Navigant Research Blog

Davids, Goliaths Collide in the Fuel Cell Industry

Lisa Jerram — May 28, 2013

The fuel cell industry has seen numerous tie-ups, acquisitions, and investments in the last 6 months.

This industry covers a huge range of applications across the stationary, portable, and transportation sectors, so trying to discern broad industry trends is a bit of a fool’s errand.  Nevertheless, two things jump out about these moves, and they tell two very different stories about the state of fuel cell markets.

One is the strength of the “pure play” fuel cell companies over the large multinationals.  Ballard, Plug Power, and ClearEdge are all focused exclusively on fuel cell technologies, in contrast to UTC and the auto OEMs.  Large companies would seem to be at an advantage in an emerging market because they have the resources to wait for the market to develop.  In my analysis of EV charging equipment vendors, for example, I noted the strength of the large multinationals who are able to wait out the early days of the electric vehicle supply equipment (EVSE) market while demand ramps up.

Pay to Quit Playing

But the pure play companies are rather more, ahem, motivated to find a way to make the market work, and will tend to be more flexible and nimble.   In the case of ClearEdge, you have a very small fish swallowing up the fuel cell assets of a very big fish, UTC Power.  Even odder, United Technologies was so anxious to shed its fuel cell business that UTC actually paid ClearEdge to take it.  It seems that UTC simply lost patience with the slow development of its two target markets, prime power and buses.  (UTC’s bus business thus far is a casualty of this deal, as it does not appear to fit into ClearEdge’s business plan and, to date, there has been no announcement of a buyer.)

One conclusion here is that whether a large conglomerate persists in an emerging market depends on whether it sees the new technology business as complementary to its core business.  In the case of multinationals in the EVSE market, EV charging becomes one more offering in its portfolio, serving its existing customer base.  For UTC, although the company had long-standing expertise in fuel cell technology, executives are increasingly focused on its aerospace, elevator, and cooling products.

The second story is about another group of large multinationals – the automakers.  Practically speaking, it is challenging for a dedicated fuel cell manufacturer to compete in the passenger car market – just look at the troubles that battery vehicle companies have had.  The global auto companies are able to spread their bets among a range of clean technologies.  However, they are finding the pathway to a cost-competitive FCV challenging to navigate.  Thus Daimler’s partnership with Nissan and Ford, which will allow the companies to order components at much higher volume and spread their costs among more vehicles.  Unfortunately, Daimler has also pushed back its commercialization date from 2015 to 2017.  Let’s hope that this deal, along with the Toyota-BMW and Volkswagen ones, does not turn out to be a paper-only partnership that never sees real products introduced.

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