Fuel cell maker Ballard Power Systems has tossed away its best technology, and with no significant opportunity remaining, the Canada-based company can’t ride the fuel-cell jalopy much farther, suggests TheStreetSweeper. Sonya Colberg, senior investigative reporter at TheStreetSweeper said in a report titled: “Ballard Power Struggling In ‘Extremely Silly’ Niche” states that investors’ hope of the cell maker striking a deal similar to the Volkswagen arrangement with other car companies may not fructify.

Ballard Power Systems

Ballard Power Systems: Fuel cell is decades away

Sonya Colberg points out that Ballard Power Systems’ shares rose after it announced that Volkswagen will pay $50 million for the proton exchange membrane fuel cell patents it bought last April. She notes that Canada-based Ballard would have been wiser to ink a deal to sell Volkswagen all the fuel cells it wants. Interestingly, the market was excited as the stock ran up by $1, though the deal was really worth only 38 cents per share.

Though the cell maker’s agreement does include a $30 million VW service contract extension to 2018, she notes that money will get coughed out over the years. Moreover, she points out that Ballard can’t replicate its Volkswagen arrangement with others since DaimlerChrysler, Toyota, Honda, Nissan, GM, Ford, Hyundai and BMW all already have their own fuel cell plant in-house. Colberg also believes Ballard’s recent strategy to sell fuel cells for buses won’t have sufficient financial impact.

Citing experts, including some at Volkswagen, she argues that wipespread us of fuel cells is decades away. Highlighting the limited prospects of fuel cell cars beyond Japan, Volkswagen Group Japan President Shigeru Shoji said, “It might fly in Japan, but not globally.”

Growing momentum for electric cars

Colberg also calls Tesla Motor’s CEO Elon Musk’s recent dismissal of fuel cell cars irrational. He emphasized that it will become obvious in time that hydrogen is impractical for powering cars. At the Automotive News’ annual World Congress last month, Musk said, “If you’re going to pick an energy storage mechanism, hydrogen is just an extremely dumb one to pick.”

Moreover, a Forbes article also said fuel cell vehicles sale will likely be even smaller than electric car sales for many years.

Colberg does say though that the industry is moving toward electric vehicles over the next decade and not fuel cells. For instance, Apple appears to be secretly working toward an Apple-branded electric car to rival Google’s prototype self-driving electric car. These developments underscore the growing momentum of electric car vehicles, rather than fuel cell cars.

Touching upon the safety concerns, Colberg notes that hydrogen can ignite from static electricity and leaks easily, sometimes with tragic results. She notes some people might think “Hindenburg” when they hear “hydrogen,” following an explosion at a Rochester, N.Y. hydrogen filling station in 2010 that occurred during a fuel transfer.

She also mentions Ballard’s backing out from a China bus deal worth “approximately $6 million over the 2014-15 period” amid China’s Azure Hydrogen’s “material breaches.” Thus, she notes investors should forget about seeing Ballard get into the China market.

Colberg concludes that Ballard Power can’t ride this fuel-cell jalopy much further. Moreover, the fuel cell maker has a history of restated earnings and consistent losses, and top executives’ high compensation threw away its greatest hope for decent future revenues.

As reported by ValueWalk last month, several fuel-cell related stocks were mauled by bears, with Ballard Power Systems losing 8%.