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Canadian fuel cell-maker Ballard Power Systems (BLDP.TO)(BLDP) is rethinking a $130 million investment in China, gauging the risk of a “geopolitical collapse” as tensions rise.
Speaking at Ballard’s investor day on Tuesday, CEO Randy MacEwen said he is working with the consulting firm Deloitte to compare Ballard’s current investment plans in China against potential opportunities in Europe and the United States “to see whether that should be revisited.”
“On the one side, you’ve had delays and uncertainties on the China policies, and you had a heightened geopolitical environment. At the same time, you’ve seen policies emerge in the U.S. and Europe supporting the adoption of hydrogen, supporting the adoption of fuel-cell vehicles, and supporting domestic manufacturing across the hydrogen and fuel-cell value chain,” MacEwen said Tuesday.
“The big question we’re asking is, with a $130 million investment plan in the Shanghai [membrane electrode assembly] facility, and with all these variables, does that represent a disproportionate risk to our balance sheet.”
MacEwen said the review is expected to be complete by the end of 2023.
We continue to be disappointed with the delayed adoption in the China marketBallard Power Systems CEO Randy MacEwen on May 10, 2023
America’s appeal to companies investing in clean energy technologies has skyrocketed due to the U.S. Inflation Reduction Act’s estimated US$370 billion in planned spending. Meanwhile, Europe is Ballard’s largest market today, representing nearly two-thirds of revenue in its latest quarter.
However, the Vancouver-based company sees China becoming the world’s largest hydrogen market and largest market for fuel cells by 2030. But its joint venture signed in 2018 with Chinese engine manufacturer Weichai Group has faced challenges.
“We continue to be disappointed with the delayed adoption in the China market, and low activity levels at the Weichai-Ballard [joint venture], which will weigh on our 2023 results,” MacEwen said on a May 10 earnings call.
Last year, Ballard announced plans to invest about $130 million by 2025 in a new MEA (membrane electrode assembly) plant at the Jiading Hydrogen Port, in one of China's leading automotive industry clusters. In March, MacEwen said geopolitical tensions are trending in the "wrong direction," as he announced a plan to "defer spend in the China market as long as possible."
Meanwhile, Canada-China relations deteriorated to the point of tit-for-tat diplomatic expulsions in Ottawa and Beijing, as reports emerge in Canada alleging foreign interference. The flare-up follows Canada’s extradition detention of Huawei Technologies executive Meng Wanzhou in 2018, and China's subsequent arrest of two Canadian citizens.