Do investors agree with Elon Musk on EVs vs FCVs?

Elon Musk’s views on hydrogen fuel cells have been disparaging for some time. He tweeted “Fuel cells = fool sells” in 10 June 2020. He has described hydrogen fuel cell vehicles (FCVs) as “extremely silly,” confirming comments at the 2015 Automotive News World Congress that “the best-case hydrogen fuel cell doesn’t win against the current case batteries, so then, obviously … it doesn’t make sense.” However, investment from government and rapid scaling of hydrogen fuel cell production by business indicates that not everyone agrees. 

Elon Musk, Tesla CEO, famously champions electric vehicles (EVs) over FCVs. Both EVs and FCVs use an electric motor to power the vehicle, instead of a combustion engine. But the batteries in EVs must be recharged at a power terminal, and the electricity that recharges EVs may or may not originate from environmentally friendly sources. The hydrogen fuel cells that power FCVs make the electricity they use on board, never needing to be plugged in. They also perform better in terms of range and speed than EVs. 

The U.S. Department of Energy plans to partner with industry, labs, and universities to lower the cost of hydrogen fuel cells, and to increase their durability and performance. This is because fuel cells are very environmentally friendly to use, they only emit water and hot air, and are not air or noise polluting. They are also much more efficient than combustion engines, and “can convert the chemical energy in the fuel directly to electrical energy with efficiencies capable of exceeding 60%.”1

Hydrogen fuel cell stocks are not new in the transport industry – they were used to put the first person on the moon in 1969.2 Fuel cells are already used in vehicles and power plants. There are fuel cell busses across the US, and many fuel cell powered forklifts working for Amazon and Walmart.3 Established companies like Ballard have been making fuel cells for decades for use in the transport industry (transit busses, marine, automotive, trucks, and rail) as well as for use in stationary power generation and backup power for critical infrastructure.4

Investment by the auto-industry in FCVs filters down the market and spurs competition for and investment in smaller companies that make the fuel cells themselves. Since 2008, Honda, Hyundai and Toyota have released models of FCVs for purchase, though currently only Hyundai and Toyota have models in production. Other manufacturers including BMW and Land Rover are allegedly planning to release new models in the next five years. 

The global hydrogen market is big and growing. The Hydrogen Council projects steep rises in the use of hydrogen in a range of sectors, including industrial energy and transportation, by 2050.5 Many governments have hydrogen strategies, recognising the contribution hydrogen fuel cells can make in climate change in policy and investment decisions. Combined government and private sector investment commitments currently stand at over 337 billion USD.6 This has been projected to rise to 500 billion USD by 2030.7 The International Energy Agency’s report The Future of Hydrogen stated “hydrogen is today enjoying unprecedented momentum. The world should not miss this unique chance to make hydrogen an important part of our clean and secure energy future.”8 More specifically, the hydrogen fuel cell market was valued at 2.5 billion USD in 2020, and was forecasted to 13.8 billion USD by 2026 (indicating a compound annual growth rate (CAGR) of 33.1%).9

There are several types of hydrogen stocks that provide the hydrogen for fuel cells. Most hydrogen fuel is made through a process called reforming. This combines fossil fuels with steam to produce carbon dioxide and hydrogen. Blue hydrogen, created by specific blue gas hydrogen stocks, uses the same process of reforming but captures the carbon dioxide released underground. There are doubts that blue hydrogen is more environmentally friendly than traditionally produced hydrogen in the long run. Green hydrogen stocks, which are increasingly popular, are companies that use green energy sources to create hydrogen, with water as a by-product. Green hydrogen is carbon neutral and currently very expensive, though forecasts predict it will become cheaper over time.10

There are three main sorts of companies involved in the hydrogen market: companies that manufacture hydrogen, companies that manufacture fuel cells for the auto industry (to replace batteries or combustion in cars), and those that manufacture fuel cells for other purposes. 

1. Hydrogen producers

There is a large market of companies that produce, store and transport hydrogen, which in turn enables fuel cell development and functionality. One of the more successful hydrogen stocks is Air Products and Chemicals, valued at $528.7 million. At the end of Q3 of 2021, 32 hedge funds owned a stake in Air Products and Chemicals11.  Linde plc is a leader in transporting and storing natural gas, including hydrogen. There is also work by companies working on developing cheap, accessible green hydrogen. For example, Sun Hydrogen stock have developed a technology to create hydrogen fuel from any sort of water (including sea water and wastewater) and sunlight, potentially enabling low-cost, green hydrogen fuel cells to be more widely accessible. Other large companies, such as DuPont de Nemours, are also investing heavily in developing green hydrogen production lines. 

2. Fuel cells for transportation

There is increasing competition in the market to create the most effective hydrogen fuel cell. Plug Power, based in NYC, is working on a fuel cell that could compete with the batteries in EVs. In November 2021, Plug Power acquired Applied Cryo Technologies, a company that provides equipment, services, and tech for storing, transporting, and distributing liquid hydrogen. FuelCell Energy is said to be partnering with Toyota to provide hydrogen for Toyota’s heavy duty fuel cell trucks. Another significant player in the automotive sector is Hyzon Motors, who focus on heavy duty trucks. Fuel cells have demonstrated advantages over EVs, including Musk’s Tesla’s, in both range and speed. This means that it has been more efficient for the trucking industry to switch straight to using fuel cells rather than battery powered trucks.12

3. Fuel cells for other industries

In addition to fuel cells for the auto industry, some companies are working on producing hydrogen fuel for use in industry and in private residences. Ceres Power Holdings is working on commercializing long duration energy storage. Cummins Inc. design engines, power generation and filtration, with applications for construction and mining, as well as trucking and other industries. Bloom Energy Corporation focuses on energy servers that incorporate the use of hydrogen fuel cells. 

It certainly seems that industry and capital are not as sceptical of FCVs as Musk. And while it is difficult to know exactly what the best hydrogen stocks are, investors may consider targeted yet diversified exposure via the Defiance hydrogen ETF, which includes a range of hydrogen companies’ stock. 

1 U.S. DoE research goals for hydrogel fuel cells







8 Dr Faith Birol