In the realm of new energy sources, hydrogen energy holds a significant strategic position. Hydrogen fuel cells, as a key downstream application of hydrogen energy, are expected to become the next generation of energy conversion devices following internal combustion engines and power batteries.

In recent years, with the support and guidance of policies, the market activity of hydrogen fuel cells has significantly increased, with the installed capacity rising year by year. It is anticipated that, with technological advancements and cost reductions, the application of hydrogen fuel cells in transportation sectors such as heavy-duty trucks and buses will continue to grow rapidly. As one of the main pathways for reducing costs in China's fuel cell systems, the process of domesticating components is expected to further accelerate.

Nearly ninety percent of fuel cell installations are used in transportation.

Hydrogen fuel cells are devices that directly convert hydrogen gas into electrical energy through chemical reactions, representing an ideal clean energy solution. Compared to traditional internal combustion engines, the emissions from hydrogen fuel cells are primarily water, with almost no greenhouse gases or other pollutants, offering the advantages of being clean, low-carbon, quick to start and stop, and noiseless. Compared to power batteries, hydrogen fuel cells have higher energy density, shorter refueling times, and longer service life. Moreover, the flexibility of hydrogen fuel cells in energy storage, transportation, and application gives them a broad range of application prospects in various fields such as transportation, industry, residential use, and power supply.

Advertisement

Based on the type of electrolyte, hydrogen fuel cells can be categorized into Proton Exchange Membrane Fuel Cells (PEMFC), Alkaline Fuel Cells (AFC), Solid Oxide Fuel Cells (SOFC), Molten Carbonate Fuel Cells (MCFC), and Phosphoric Acid Fuel Cells (PAFC), among others.

Among them, PEMFC is widely used in the field of fuel cell vehicles due to its high power density and fast start-up speed. Research reports from Dongxing Securities show that in 2022, the shipment proportion of PEMFC was nearly 86%. SOFC has high energy conversion efficiency and a diverse selection of fuel types, but due to its slower start-up time, it is difficult to apply in the transportation field. Currently, its main application scenarios are fixed power generation and energy storage fields such as combined heat and power systems, with an estimated shipment proportion of about 10% in 2022.

Looking at the application scenarios, fuel cell technology is primarily applied in three major areas: transportation, stationary power sources, and portable power sources. Among them, the transportation sector is the leading application scenario, and its dominant advantage continues to expand. According to research reports from Dongxing Securities, the installed power capacity share reached 85% in 2022, an increase of 12 percentage points compared to 2018.

Good progress has been made in the domestication of key components.

Similar to the lithium battery and photovoltaic industries, the main path for fuel cells to move towards large-scale marketization is to reduce costs. According to data from the Huajing Industry Research Institute, in the cost structure of hydrogen fuel cells, the cell stack is the largest component, accounting for about 60%. In the cost structure of the cell stack, catalysts, bipolar plates, and exchange membranes are the main sources of cost, accounting for 23%, 16%, and 8% of the total fuel cell cost, respectively.

At present, there are two main paths for cost reduction in fuel cell systems: one is the decrease in unit cost brought about by economies of scale, and the other is the substitution of domestic components.In recent years, the installation growth rate of fuel cell systems has been relatively high, and the scale effect has gradually emerged. According to a research report by Dongxing Securities, from 2017 to 2023, the annual installed power of China's fuel cell systems increased from 37.8MW to 734MW, with a 6-year CAGR of 64%. In addition, according to the "Ten Thousand Vehicles and Hundred Stations" fuel cell vehicle demonstration big data report released by the China Automotive Strategy and Policy Research Center (hereinafter referred to as "China Auto Policy Research") in July, the number of fuel cell demonstration vehicles in China has exceeded 10,000, with a cumulative pure hydrogen operation mileage of 235 million kilometers. With policy support, the current cost of China's fuel cell systems has been reduced to 2000-2500 yuan/kW, a reduction of more than 80% compared to the pre-demonstration period.

In terms of key components, the domestication rate of five parts including the cell stack, air compressor, membrane electrode, hydrogen recirculation system, and bipolar plate has exceeded 80%, breaking the foreign technology monopoly and reaching an internationally leading level in some key technologies and product applications.

Yihuatong (688339.SH) is a leading company in China's fuel cell field and has rich experience in domestication and cost reduction. In an interview with First Financial, Yu Min, the executive deputy general manager of Yihuatong, said that China's fuel cell industry started relatively late, and the company has followed the technical route of "whole vehicle power system-engine-cell stack-bipolar plate & membrane electrode" to gradually develop products and equipment, as well as to open up the industry chain, thereby achieving the domestic substitution of components.

At present, domestication has made good progress. Taking the air compressor as an example, the unit price of imported air compressors was about 100,000 yuan in the early stage, and now the domestic air compressor has been reduced to 10,000 yuan, with a reduction of up to 90%, even attracting foreign fuel cell manufacturers such as Toyota to purchase. Yu Min believes that this has brought two benefits: one is to promote the market promotion of fuel cells, and the other is to avoid restrictions on foreign technology patents.

However, the import dependence of a few components is still relatively high. Yu Min said that the import ratios of carbon paper, proton exchange membrane, and catalyst are 80%, 93%, and 98%, respectively, and the domestication process still needs to be accelerated in these three links.

Relevant data shows that 90% of the fuel cell vehicles in operation in China use imported catalysts. Overseas catalyst suppliers mainly include Japan Tanaka Precious Metals, UK Johnson Matthey, and Belgium Umicore, while domestic catalyst manufacturers include Guiyan Platinum Industry (600459.SH), Zhongzi Technology (688737.SH), etc. In the field of proton exchange membranes, the US Gore occupies more than 80% of the market share, and domestic manufacturers include Dongyue Group, Dongcai Technology, Pan Asia Microporous, Wanrun Shares, etc. The main material of the gas diffusion layer is carbon paper, and there are few global manufacturers in this field, mainly Japan Toray, US AvCarb, Germany SGL, and domestic manufacturers include General Hydrogen Energy, Jinbo Shares (688598.SH), Jiangsu Tianniao, etc.

The fuel cell market shows a high degree of concentration. In recent years, China's fuel cell system industry has continuously seen new manufacturers entering the market, and the market activity has been increasing. According to statistics from the Gao Gong Industry Research Institute (GGII), in 2023, 7,478 domestic fuel cell vehicles were equipped with 96 fuel cell system manufacturers (including subsidiaries), and the number of system manufacturers increased by 26 compared to 2022; after merging the sales of each holding subsidiary into the parent company, there were a total of 57 fuel cell system manufacturers, an increase of 11 compared to 2022.

In terms of market concentration, in 2023, the top 10 system manufacturers equipped 5,682 units, with a total market share of 76%, a decrease of 4.3 percentage points compared to the same period last year; the total installed power of the top 10 system manufacturers was 562MW, accounting for 76.6% of the total installed capacity, which basically matches the proportion of installed units.

Looking at the installed capacity of fuel cell system manufacturers, there are 15 manufacturers with more than 100 fuel cell vehicles, 23 with more than 50, and as many as 18 system manufacturers with less than 10 units, which also reflects that the domestic fuel cell market concentration is still high, and leading enterprises have more order advantages and scale benefits.In the supply chain, there is currently a high degree of binding between domestic fuel cell system manufacturers and vehicle manufacturers. According to a research report by Guojin Securities, based on the cumulative situation of matching based on the power of the whole vehicle, Yihuatong's system is mainly matched with Meijin Automobile, Zhengzhou Yutong, and Foshan Feichi, with matching rates of 53%, 21%, and 8% respectively; Refuel Energy is mainly matched with China FAW, Zhengzhou Yutong, etc., with matching rates of 57% and 37%; Jieqing Technology is mainly matched with SAIC Hongyan, with a matching rate of 52%; Guohong Hydrogen Energy is mainly matched with Shaanxi Automobile Group and Dongfeng Liuzhou, with matching rates of 62% and 34%; the rest are one-to-one matching.

However, the competitive landscape of fuel cell system suppliers is still constantly changing. From January to June 2024, in the cumulative installation volume ranking of domestic fuel cell system companies, Yihuatong, as the leader, continued to maintain the first place, and the 2nd to 6th places were Refuel Energy, Guohong Hydrogen Energy, Fengyuan Hydrogen Energy, Cummins, and Jieqing Technology, while in 2023, the 2nd to 6th places were Jieqing Technology, Refuel Energy, Guohong Hydrogen Energy, Weichai Power, and Weishi Energy.

Under the policy of increasing investment, the sales volume of China's fuel cell vehicles has increased against the trend.

Hydrogen fuel cell vehicles, as the main application field of fuel cell systems at this stage, show a high degree of relevance between the two. The global sales volume of hydrogen fuel cell vehicles showed a contracting trend in 2023 and the first half of 2024. According to data from SNE Research, the global sales volume of hydrogen fuel cell vehicles in 2022 was 20,704, a historical high, and then began to decline; in 2023, it dropped to 16,413, a year-on-year decrease of 20.7%; in the first half of 2024, the figure was 5,621, a year-on-year decrease of 34.1%.

Among them, the United States and South Korea saw the largest decline in sales. According to data from the German Automobile Industry Association, in the first half of 2024, the sales volume of hydrogen fuel cell vehicles in South Korea was 1,742, a year-on-year decrease of 41.8%; the United States sharply decreased from 1,825 in the same period last year to 322, a year-on-year decrease of 82.4%; the sales volume in Europe was 594, a year-on-year increase of 21%; the sales volume in Japan was 440, doubling year-on-year.

In contrast, the Chinese market has continued to grow against the trend, maintaining its position as the world's largest producer and consumer of fuel cell vehicles. According to data from the China Automobile Industry Association, in the first half of 2024, the national production and sales volume of hydrogen fuel cell vehicles were 2,773 and 2,644 respectively, a year-on-year increase of 11.1% and 9.7%, both ranking first in the world.

This is closely related to the frequent introduction of policies favorable to fuel cell vehicles in various parts of China since 2024. For example, since March 1, 2024, Shandong Province has temporarily exempted hydrogen vehicles equipped with ETC devices from paying highway tolls on Shandong highways, and the policy trial period is 2 years. It has been calculated that without considering the exemption of highway tolls, the life cycle cost of hydrogen heavy trucks is relatively high. Under the policy of exempting highway tolls within the 2-year demonstration period, a 49-ton hydrogen heavy truck can save about 898,000 yuan in toll fees, and the life cycle operating cost is reduced to 5.917 million yuan, saving 359,000 yuan in cost compared to diesel heavy trucks, and has a significant economic advantage.

In August, the Shanghai Municipal Government issued the "Shanghai City Transportation Field Large-scale Facility Equipment Update Special Work Plan (2024-2027)", which clearly proposes to promote the research and development and application of hydrogen fuel cell vehicles by updating transportation field facilities and equipment, and to accelerate the improvement of infrastructure such as hydrogen refueling stations, providing strong support for the promotion of hydrogen fuel cell vehicles.

Su Chen, the director of the Guojin Securities Research Institute, said to the First Financial Daily that hydrogen fuel cell vehicles are currently in the pilot stage, and the development stage is similar to that of lithium battery vehicles 10 years ago. In the future, with technological progress and cost reduction, hydrogen fuel vehicles are expected to see explosive growth in fields such as heavy trucks and buses.