Energy & Resources

‘H’ to IPO

Hydrogen fuel cell firm looks to list in Hong Kong


Joint venture: Toyota and SinoHytec

There were many firsts at the two Olympic gatherings in Tokyo and Beijing over the past 12 months, but one of the less remarked upon was the transport that ferried competitors and spectators around: hydrogen-powered vehicles.

China and Japan are both prioritising the hydrogen transport sector as part of their transitions towards net zero. During 2021, the two countries started scaling up their efforts, with the Japanese ending the year on 169 hydrogen-refuelling stations. The Chinese swept past them to 218 after adding 100 new stations.

The key difference between hydrogen-powered vehicles and electric ones is the energy source: a hydrogen fuel cell versus a lithium battery. Champions of hydrogen cars say they refuel faster and are more suited to journeys of longer distances than all-electric vehicles. But the technology is yet to catch on more widely because of its expensive price tag.

Another major contrast between the two types of engine is the level of media attention: China’s leading hydrogen fuel cell company Beijing SinoHytec has been getting very little of the same recognition as the country’s largest lithium battery manufacturer CATL, for instance.

SinoHytec had been hoping this would change after filing a prospectus to list on the Hong Kong Stock Exchange earlier this year. But there are now doubts about the share sale proceeding, because SinoHytec’s STAR Market shares in Shanghai have been in freefall since the end of last year.

Since reaching a high point around the Rmb313 level in December, the stock had crashed to about Rmb152 as of last week. The decline reflects a wider downturn across the sector globally as prices move beyond customer affordability. But there are company-specific reasons too after SinoHytec guided for a wider-than-expected full year loss of Rmb140 million ($22 million), compared to Rmb22.5 million in 2020.

The deficit was largely blamed on a Rmb140 million impairment charge relating to Sunlong Bus (most of China’s current hydrogen fleet consist of buses and trucks).

National Business Daily (NBD) has been digging into the company’s operations and finds other points worth mentioning. In particular, it notes that most of the vehicles deployed at the Beijing Olympics were using core technology supplied by SinoHytec’s joint venture partner Toyota. In 2020, Toyota set up an R&D joint venture with SinoHytec and a group of state-owned car manufacturers (FAW, Dongfeng, GAC, BAIC). The Japanese group owns 65% and SinoHytec 15% of the business. The following year, Toyota and SinoHytec set up a 50/50 JV to manufacture and sell hydrogen-fuelled cars.  But NBD argues that SinoHytec’s financials show an increasing reliance on Toyota. For instance, it cites increases in imports of fuel cell stacks from 16% of total sales in 2019 to 48% in 2020. These stacks represent the technological heart of the power system, accounting for nearly 40% of total vehicle cost. 

Other analysts counter that the partnership should benefit both parties over the longer term. The JV gives Toyota a strong springboard into China and the combination should help SinoHytec cement its position in the domestic market (about 35% market share, according to the consultancy, China Insights, with sales of 1,800 fuel cell engines).

The two partners have different technical approaches to fuel cell technology (Toyota’s engines rely on metal bipolar plates, for instance, while SinoHytec uses graphite-based ones).  But a SinoHytec executive told NBD that the two would develop their technologies in parallel and “determined by market demand and industry development”. 

What puts SinoHytec ahead of its domestic competitors is the range of its product offering – its fuel cell engines span 30 KW to 120 KW in power. In December, it also unveiled its next technological iteration to 240 KW. It will also try to tap into new opportunities in government policy. For example, the Beijing-Tianjin-Hebei region was the first to be granted approval as a demonstration area for fuel cell electric vehicles (FCEVs) last summer. According to the plan, the city group will build 37 refuelling stations by 2023 and get 3,000 FCEV vehicles onto the roads. By 2025, the target is 74 stations and 10,000 vehicles. A maximum of Rmb1.5 billion in subsidies are on offer to grow the FCEV fleet, as well as another Rmb200 million for refuelling stations.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.