Index > Briefing
Wednesday, February 03, 2021
Opportunities Aplenty in China's Hydrogen Energy Market

Since entering the Chinese market, Toyota, an automobile company which has had a long history in China, does not appear to be particularly successful. Because of its strategic misjudgment, Toyota has missed the opportunity to make a place for itself in the Chinese market. Instead, German cars have become more popular in the country. To cite an example, the outdated Volkswagen Santana has been in circulation in the Chinese market for more than 2 decades, and has garnered high profits.

In the current new energy vehicle market, will Toyota learn from its previous mistakes? Will Toyota give full play to its R&D advantages in hydrogen energy vehicles and attach importance to China's new energy vehicle market at the strategic and tactical levels, or will it still be slow to take action as it has done in the past? ANBOUND's researchers have recently expressed this concern when communicating with industrial analysts of Japanese financial institutions and it is understood that Japanese business practitioners also share the same view. However, looking at Toyota's actions in the Chinese market, ANBOUND's researchers believe that they do not seem to realize the urgency of China's development in the hydrogen energy market. At least from the perspective from the public market action, Toyota's sense of urgency appears to be lacking.

Since ANBOUND's founder Chan Kung introduced the strategic concept of developing a "hydrogen energy society" some years ago, ANBOUND's research team has been advocating and promoting the implementation of this strategic concept in the past two years enthusiastically. At the same time, we are also observing the development, growth and maturity of China's hydrogen energy related markets. One of our conclusions is that in view of the changes in certain situations that China is facing at multiple levels, China's development in the hydrogen energy industry and market may accelerate. For this reason, we suggest that China's hydrogen energy market should have a sense of urgency as well.

First of all, at the macro level, in order to achieve its "carbon peak" in 2030 and "carbon neutrality" in 2060, China's implementations of its five-year plan and macroeconomic policies, industrial policies and industrial projects, as well as technological innovation policies and projects will reflect the relevant adjustments. The hydrogen energy industry and hydrogen energy utilization are likely to meet the above policies.

Secondly, at the level of industrial investment, China's investment in the hydrogen energy industry has gradually increased and has now reached a certain scale. According to McKinsey's Road Map to a US Hydrogen Economy report, governments and related industries in China, Japan, and the European Union have invested a total of USD 2 billion in hydrogen energy each year; and the U.S. Department of Energy has invested an estimated amount of USD 100 million to USD 280 million. Using hydrogen refueling stations as an example, according to industry statistics as of 2020, Japan has built 146 hydrogen refueling stations; European countries 136, China 118, while the United States has only built 46 hydrogen refueling stations, most of which are located in California. Currently, the world produces about 63 million tons of hydrogen annually, of which 22 million tons originate from China, while the United States only produces about 11.4 million tons. In addition, more and more local governments in China are optimistic about new energy, which will be one of the important driving forces for the maturity of China's hydrogen energy market.

The third is at the capital market level. Although China's hydrogen energy market is still developing, its concept of hydrogen energy has proven to be quite attractive in the capital market. Taking the hydrogen fuel in fuel cell vehicles as an example, SinoHytec is the first A-share listed company in China's hydrogen fuel cell industry. Since its listing on August 10, 2020, its market value has nearly doubled to a current amount of RMB 22.44 billion. In the first month of 2021, 21 fuel cell companies, both from and outside of China, have shown growing trends in order, production expansion, financing, IPO, and product technology.

In China's fast-growing and evolving hydrogen energy market, on one hand, there is an abundance of opportunities, while on the other, the generation and disappearance of market opportunities is also accelerating. Market opportunities may be missed if this window of opportunity is not seized. China's hydrogen energy industry market is booming, and it needs leading companies with real R&D capabilities, strong manufacturing capabilities, and strong capital support. We believe that Toyota, which has mastered advanced hydrogen fuel cell technology, is very much in line with the role and has the ability of being such a leader. Now everything is ready and only Toyota's bold decision is owed.

Tesla's rapid development in China serves as a good example. This American-capital electric car company became the first wholly foreign-owned foreign auto company in China. Thanks to its stylish design, coupled with its technological concept, Tesla has quickly become the leader in the Chinese electric car market. In the field of hydrogen cars however, Toyota should have a stronger position than Tesla. It is understood that Toyota's hesitation in the Chinese market may be related to concerns about core technology transfer and intellectual property protection. The reality is that this worry is unwarranted. In 2019, China's newly promulgated "Foreign Investment Law" clearly stated that it is forbidden to use administrative means to force foreign capitals to transfer technology and intellectual property.

ANBOUND also pointed out that the current situation will not last forever and changes in geopolitical factors may affect future Japanese companies' investment in China. For example, if the United States were to include hydrogen fuel technology in restricted areas related to "national security", it would increase the obstacles that Toyota will have to go through in order to invest in the Chinese market. Currently, Toyota is still being overly cautious in the Chinese market.

Final analysis conclusion:

China's social development has created an urgency for the large-scale promotion and application of hydrogen energy. Companies with advanced hydrogen fuel cell technology such as Toyota need to be more proactive in the Chinese market. The Chinese market has great potential, and such companies will need to seize the opportunity fast.

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