Author: Hydrogen Cloud Chain Analyst Team
The innovation S curve shows that disruptive innovations in history have often been initiated by small businesses and start-ups. Cross-border dark horse killing teachers is easy to occur in areas where technology iteration speed is fast and technology update cycle is short, such as Internet consumption, communications, LCD panels, etc. Disruptive innovation in industry, especially in the energy industry, is more difficult to happen. For example, after 100 years, the auto industry has only seen a cross-border killer representative - Musk, single-handedly breaking the century-old automotive industry pattern; in the energy industry, it seems that no cross-border dark horse can shake the status of giants such as Siemens. But signs of an energy revolution sparked by the rise of clean energy technology are challenging the nerves of these industrial giants! For example, the rapid rise of the photovoltaic industry has allowed Chinese companies to emerge in energy technology, and the wind power field has also continued the trend of Chinese companies catching up quickly. Looking to the future from the 2022 time point, one question is, in the field of hydrogen energy and fuel cells, will the traditional energy giants continue to lead the way, or will the emerging companies achieve dynastic change, or the hybrid or integrated enterprises with new and old combinations can dominate? This article reviews the hydrogen energy transformation process of Cummins, a century-old traditional internal combustion engine giant enterprise, and discusses and thinks, in the next 10 years, what kind of enterprises have long-distance running genes and are expected to eventually ascend to the "Iron Throne" of the hydrogen energy industry?
First, the elephant turns around: with mergers and acquisitions to step into the ranks of technology leaders
Cummins is the world's largest independent engine manufacturer, the current business covers engines, distribution, components, power systems and new energy and other five parts, of which the diesel power business is widely known, the most influential industry. Fuel cells are the next generation of clean power technology routes and one of the most promising alternatives to diesel power. In the context of the establishment of the global trend of power electrification and energy cleanup, the transformation of Cummins' traditional internal combustion engine business is imperative.
In 2019, Cummins and AP completed the acquisition of the holdings of Hydrogenics Water Gineng, a well-known Canadian company, for a consideration of about $290 million per share, of which Cummins shares accounted for 81% and belonged to the controlling shareholder. In 2021, Cummins will provide mature products and services such as electrolyzed water hydrogen, fuel cells, and hydrogen storage tanks as a leader in the hydrogen industry, which shows that through technology mergers and acquisitions, Cummins has successfully completed the elephant turnaround and quickly entered the ranks of technology leaders.
From the perspective of business relationship, Cummins' original engine, power distribution, parts, and power system business segments are generally related to the hydrogen energy business, among which fuel cells have obvious alternative relationships for the internal combustion engine business. Despite this, Cummins' expectations for future hydrogen performance are not low. As shown in Figure 1, Cummins electrolyzer business revenue targets are $400 million by 2025 and meets the 100-train supply fuel cell system sales target. Compared with another well-known electrolyzer company, NEL, which achieved a revenue level of nearly $40 million in 2021 (see Chart 2), this $400 million revenue means that Cummins will achieve a counterattack on the dominance of the NEL industry with 10 times the scale of performance growth in 4 years. It can be seen that Cummins' confidence in seizing the throne of the market for electrolyzed water to hydrogen production is almost undisguised. In contrast, Cummins is not optimistic about the revenue of the vehicle fuel cell business by 2025, and there is no specific information to disclose.
Chart 1 Cummins' 2025 hydrogen energy business development goals
Source: Cummins, HydrogenDaySummary, 2021.07
Chart 2 Revenue from the NEL electrolyzer business
Source: NEL, Hydrogen Cloud Chain Finishing Mapping
Second, the latecomers are on top: quickly build a hydrogen energy technology matrix and product line
The listing of the Mirai, a Japanese hydrogen fuel cell mass-produced car, has become an industry benchmark event, representing the maturity of fuel cell vehicle technology and setting off a wave of global hydrogen energy industrialization. This paper takes 2014 as a starting point to analyze Cummins hydrogen energy technology and product layout.
1) In 2014, Cummins began implementing hydrogen energy practices, participating in a research and development project for a hydrogen energy transportation system in Costa Rica.
2) After Cummins joined the Hydrogen Council in 2018, in October, Cummins partnered with Costa Rica's Ad Astra to develop fuel cell buses.
3) In September 2019, Cummins completed the acquisition of Hydrogenics, achieving a strategic layout of rapid entry into the hydrogen power industry. Through the acquisition, Cummins has the technology, product and service capabilities of proton exchange membranes (PEM) and alkaline water electrolysis hydrogen production. In order to build a hydrogen energy technology matrix and product line, in the same year, Cummins continued to deploy companies in the field of hydrogen energy technology, invested in LOOP Energy, signed a memorandum of understanding with Hyundai Motor Company, and invested in the development of solid-state oxide fuel cells.
Chart 3 Loop 30kW and 50kW range extender
Image source: Cummins official website
4) At the end of 2019, Cummins Electric Power Division was officially renamed as New Energy Power Division, and hydrogen power business officially became its core development segment.
5) In June 2020, Cummins signed a joint venture agreement with hydrogen storage and transportation company NPROXX, and the new joint venture will continue to operate under the name of NPROXX (Cummins accounts for 50% of the shares) to provide customers with hydrogen and compressed natural gas storage products for road and rail applications.
6) In July 2021, it was announced that forward-looking testing of hydrogen-fueled internal combustion engine development has begun, aiming to further explore new paths for the development of advanced zero-carbon technologies.
It can be seen that Cummins' early hydrogen fuel cell technology originated from its own years of research and development and strategic partners. It can be seen from the development process of Cummins hydrogen energy business that Cummins has an open culture and rich business experience in the industrialization and commercialization of new technologies. The company began to pay attention to the development of fuel cell technology more than 20 years ago, but it was not until 2019, when the global industrialization trend was established, that Cummins officially obtained mature fuel cell and water electrolyzer technology and products through the strategic acquisition of hydrogen energy technology company Hydrogenics, quickly entered the fuel cell field and began to provide products and technical services to the outside world.
As we all know, Hydrogenics is a Canadian technology company with deep technical heritage, and the acquisition of Hydrogenouss has allowed Cummins to successfully enter the ranks of international electrolyzer and fuel cell technology leaders in a short period of time. Hydrogen Cloud Chain believes that Cummins and Hydrogenics are a strong joint merger and acquisition case: Cummins' strong market ability makes up for the lack of commercialization of Hydrogenics products, and Hydrogenics' mature technology and products allow Cummins to play the advantages of the industrial chain and achieve the goal of becoming a leader in the field of electrolyzers and fuel cells in the short term. According to the 2021 annual report, at this stage, Cummins is rapidly promoting the development of the electrolyzed water hydrogen production business and promoting the landing of the electrolyzer business in Central Europe.
Third, the main products: electrolyzers, fuel cells and hydrogen storage tanks three arrows at the same time
Cummins has formed three major segments in the hydrogen energy business: electrolyzers, fuel cells and hydrogen storage tanks (hydrogen fuel engines are still in the development stage). Among them, Hydrogenics has launched mature products in electrolyzers and fuel cells, and has rich application cases; the hydrogen storage tank business is specifically responsible for the business of the shareholding subsidiary in the name of NPROXX.
(A) electrolyzer products have two technical routes of PEM and ALK
Cummins electrolyzers include two product families, the HyLYZERPEM electrolyzer and the HySTAT alkaline electrolyzer. Among them, the rated power specification of the HyLYZERPEM electrolyzer is 1MW-20MW, while the rated power specification of the HySTAT alkaline electrolyzer is 50MW-500MW. The specific models are shown in Figure 1 and Figure 2.
Figure 4 Cummins HyLYZER1000-30PEM electrolyzer and HySTAT70-10 alkaline electrolyzer product diagram
Source: Hydrogen Cloud Chain Finishing
HyLYZERPEM electrolyzer series product introduction is as follows:
Figure 5 Cummins HylyZERPEM electrolyzer product main parameters introduction
HySTAT alkaline electrolyzer series product introduction is as follows:
Figure 6 Cummins HySTAT alkaline electrolyzer series product main parameters introduction
To date, Cummins has deployed more than 600 electrolyzer projects worldwide. After a long period of market validation, Cummins provides the market with an efficient and compact solution for electrolysis of hydrogen by virtue of its advanced HyLYZERPEM and HySTAT alkaline electrolytic cell technology, and has become the industry benchmark due to its high safety, high production efficiency and return on investment (ROI) and many other advantages. Cummins HylyZERPEM electrolyzer series product application examples are shown in Figures 4 and 5.
Figure 7 Cummins HylyZERPEM Electrolyzer Project Introduction
Source: Cummins, Hydrogen Cloud Chain Finishing
Figure 8 Cummins HylyZERPEM electrolyzer application example
Cummins HySTAT alkaline electrolyzer series product application examples are shown in Figures 6 and 7.
Figure 9 Cummins HySTAT Alkaline Electrolyzer Project Introduction
Figure 10 Cummins HySTAT alkaline electrolyzer application example
It can be seen from Cummins' electrolyzer products that through technology mergers and acquisitions, Cummins has fully undertaken Hydrogens' perfect product line and mature electrolysis water company in the electrolyzer business, making Cummins quickly become a hydrogen energy company with good electrolyzer and fuel cell technology and project experience. Cummins electrolyzer projects are mainly distributed in Germany, Belgium, Norway, the United Kingdom, Italy, Belgium and other European countries, the United States, Canada; the project scale is mainly in 1MW-2MW; supporting P2G, hydrogen refueling stations, industrial and other application types.
(2) Fuel cells are mainly used in the fields of transportation and standby power generation
At present, Cummins has both PEMFC and AFC technology route products, and began to invest in the development of SOFC fuel cell products in 2019. The main technical parameters of Cummins fuel cell products are introduced as follows:
Figure 11 Cummins fuel cell products are introduced to the main technical parameters
Cummins' fuel cell products are mainly used in electric vehicles, such as hydrogen fuel cell trains, hydrogen fuel heavy trucks, urban commuter cars, electric forklifts, hydrogen fuel boats, etc. as well as a fuel cell backup power generation system configured by an independent electric power plant.
Figure 12 Cummins fuel cell-powered first North American hydrogen fuel cell zero-emission ferry
Back in 2015, Hydrogenics was selected by Alstom as a key partner to develop and implement a hydrogen fuel cell system for Alstom's Cordailint passenger train. Two Alstom CordaiLint trains powered by Cummins fuel cells have been successfully put into commercial operation in Germany in September 2018.
Figure 13 Alstom Coradiai Lint hydrogen fuel cell powered passenger train
As of October 2019, Cummins has shipped about 2,000 hydrogen fuel cell products worldwide, of which about 400 units have been sold to China, and the number of buses equipped with HD30 fuel cells running on Chinese roads is about 120.
On July 26, 2021, AirProducts (AP) signed a Memorandum of Understanding with Cummins. Cummins will supply the AP with a hydrogen fuel cell electric powertrain, integrated on selected OEM heavy-duty truck models, which will convert the models of AP's global transportation fleet to hydrogen fuel cell vehicles. After successfully completing the validation and pilot phases, Air Products plans to convert approximately 2,000 trucks from its global fleet to zero-emission hydrogen fuel cell vehicles. The two sides expect that the validation operation of the fleet can be started in 2022.
Cummins' hydrogen storage cylinder product business is carried out under the name NPROXX by a joint venture with NPROXX and will not be described in detail in this article.
(3) The revenue of the new energy division
Cummins New Energy Division (NewPower) was formed in 2019 by the merger of the former Electric Power Division and the Hydrogen Energy business. It can be seen from the revenue and profit of the NewPower department that the overall business of the department is still in the development stage, and the R& D investment of the department has increased significantly in the past three years, which is also the main reason why the EBITDA of the department is negative and increasing year by year. The financial data of the new energy power division is shown in Figure 14.
Chart 14 Cummins New Energy Power Business Sales 2018-2020
In millions of United States dollars
Data source: Cummins annual report, hydrogen cloud chain collation
Fourth, in one go: the characteristics of China's hydrogen energy localization strategy
Compared with other international hydrogen companies entering China, Cummins's biggest feature may lie in its deep localization strategy. Cummins attaches great importance to the localization of the Chinese market. Nearly 50 decades ago, before the door of China's opening up to the outside world was fully opened, Cummins came to China to seek cooperation and became one of the first foreign companies to "test the waters" in China. According to Cummins' official website, Cummins has set up 30 institutions in China, including 16 joint ventures, 19 regional service centers and a service network of more than 2,000 authorized dealers. China has become Cummins' largest overseas market.
Cummins' business development model in China can be roughly divided into two stages:
(1) Cummins has introduced a very mature and successful product platform into China, and achieved local production through joint venture alliances with different OEMs.
(2) Cummins develops a new product platform that meets the actual needs of Chinese users for the specific needs of the Chinese market and users. These new platforms are the representative results of Cummins Chain's global technical resources and joint venture partners in the research and development of new products.
In the field of hydrogen energy, Cummins may continue the idea of internal combustion engine business and continue to actively promote the localization strategy of hydrogen energy business through cooperation and other means.
In May 2021, Cummins Wuhan Hydrogen Energy Engineering Center was officially opened, which is the first engineering center of Cummins New Energy Division's hydrogen energy business in China, which is located in Shanghai Friega Wuhan Factory Park, covering an area of 1500m2, using a split modular structure, consisting of several functional areas: facility area, trial assembly and experimental preparation area, office area, load room, hydrogen/nitrogen storage area, fuel cell engine test area and stack test area. At present, the center has the functions of fuel cell engine trial production, hydrogen pipeline trial production, hydrogen-related parts testing and fuel cell performance testing. Among them, fuel cell performance test equipment includes stack performance test bench and fuel cell engine test bench, both from the world's top equipment suppliers.
Figure 15 Cummins Wuhan Hydrogen Energy Engineering Center officially opened
Image source: Cummins
The Energy Power Experimental Building will be equipped with the latest fuel cell laboratory, and Power Cummins will continue to increase R&D investment in the field of new energy in China. The new Cummins East Asia R&D Center, which is being expanded, is also located in Wuhan, and the base is expected to be completed and put into use in 2022. Among them, the exclusive new battery laboratory, the drivetrain laboratory, and the wheel hub laboratory and other cutting-edge hydrogen energy research and development equipment will effectively promote the localization and application of Cummins new energy technology.
Figure 16 Aerial view of the new site planning of the Cummins East Asia R&D Center
In September 2021, Cummins Hydrogen China Headquarters landed in Lingang New Town Area of Shanghai Free Trade Zone, and the project will build Cummins Hydrogen Energy China Headquarters, New Energy R&D Center and Manufacturing Base, covering businesses such as electrolyzed water hydrogen equipment stacks, fuel cell engines and core components, high-pressure hydrogen storage cylinder systems, etc., and the project plans to achieve an output value of 10 billion yuan.
Figure 17 Cummins Hydrogen China Headquarters Project Landed in Shanghai Lingang Area
On December 8, 2021, Cummins and China Petrochemical Capital Corporation initiated the establishment of Enze Fund in a 50:50 ratio and set up a joint venture company in China, Cummins Enze (Guangdong) Hydrogen Energy Technology Co., Ltd. The joint venture company will land in Nanhai District, Foshan City, Guangdong Province, and the production line will produce Cummins HyLYZER series proton exchange membrane (PEM) electrolysis water hydrogen production equipment, the first phase of the annual output capacity of 500 MW will be completed and mass production in 2022, and the subsequent production capacity can be expanded to GW (1000 MW) according to market demand.
Figure 18 Cummins Enzer Proton Exchange Membrane Electrolysis Water Hydrogen Production Plant R&D Production Base Project Signed
5. Summary and Enlightenment
As a benchmark company for global engines, Cummins has entered the game of hydrogen energy as an "elephant turn". The highlight is the rapid movement, in just one or two years to complete the integration of hydrogen energy business, and began to force the market, perfectly keep up with the market with the rhythm of goods. As a representative of traditional power enterprises, Cummins' rapid entry is of landmark significance for the development of the hydrogen energy industry: on the one hand, it shows the path choice of traditional engine companies to transform into new energy; on the other hand, in the context of other foreign companies accelerating their entry into the Chinese market, its localization development strategy will also have a certain impact on the domestic market competition pattern.
(1) Verify the establishment of the development trend of the hydrogen energy industry
Cummins' entry has two symbolic significances: (1) recognize that hydrogen power is one of the development directions of future commercial vehicles. With the electrification division, Cummins has laid out hydrogen power directions such as fuel cells and hydrogen internal combustion engines, at least indicating that the world's largest engine company recognizes the possibility of hydrogen power in the field of commercial vehicles. (2) Recognize the prospects of the hydrogen energy industry. Generators are also one of Cummins' main businesses, and electricity and Cummins can be said to have a direct connection, so Cummins has a more direct understanding of the application of hydrogen in the energy field. In the hydrogen energy business, Cummins has changed from an early tentative to a direct acquisition of well-known companies to quickly enter the market, and its choice of entry timing and method of change shows that Cummins recognizes the rapid development trend of the hydrogen energy industry in the next few years.
(2) The choice of market strategy and the hesitation of technological development
In the hydrogen energy business, Cummins chose to quickly promote the electrolyzer business, but temporarily postponed the hydrogen power business, and its market strategy shows Cummins' affirmation of the future of the hydrogen energy industry, but also includes the recognition of the market and the uncertainty of technology choices. Reasons for slowing the development of hydrogen power include:
(1) The market has not yet reached the starting stage. Whether at home or abroad, hydrogen power is in its infancy. At present, foreign countries are mainly passenger cars, Cummins has a limited angle of entry, and domestic ones are mainly resource-based markets, and orders come from the resources of the government and affiliated enterprises, and market-oriented orders are also limited. For Cummins, considering factors such as uncertain market opportunities, insufficient infrastructure construction, and low promotion of OEMs, hydrogen power is far from the main business level, and it is reasonable to slow down the pace of the market.
(2) The technology is not yet mature. Cummins' corporate standards in the internal combustion engine sector have always been above the industry average. At this stage, from the application level, hydrogen power technology, whether fuel cells or hydrogen internal combustion engines, is still quite different from the internal combustion engine in terms of stability and reliability, and Cummins has a short time to develop fuel cell technology, and rushing to launch related products is not conducive to brand maintenance. For Cummins, it may still take some time to study and improve the technology, product systems and standards, or find suitable partners to develop, practice and iterate together.
(3) Uncertainty of technological development. For hydrogen power, the biggest uncertainty at this stage does not come from the competition of pure electrification, but from the choice of hydrogen internal combustion engine and hydrogen fuel cell.
For internal combustion engine enterprises, fuel cell technology route still exists in a series of problems such as success, life, failure rate, etc., the development of fuel cells also need to abandon the original technical advantages, almost from scratch, and the hydrogen internal combustion engine technical route solves the emission problem, can continue its technical accumulation in the internal combustion engine, and even directly retain the entire industrial chain, while the cost is low, long life, the threshold is relatively low, no need to face the difficult choice of whether to "self-revolution", can be described as a great temptation.
Therefore, traditional internal combustion engine enterprises must face internal fierce discussions when choosing routes, and those that have established dual-technology routes will inevitably face internal resource competition. In the case of unclear technical routes, foreign enterprises such as Toyota, domestic enterprises such as FAW, GAC, etc. have laid out a number of routes, and have achieved the purpose of being prepared. (For a specific analysis, see "Is the hydrogen fuel engine a Jedi counterattack of the internal combustion engine, or is it the last straw to grasp before dying?") 》）。 For internal combustion engine representative companies like Cummins, the internal debate may be even more intense. Fortunately, Cummins' family is big, and the resources are enough to support the two routes to go hand in hand, and then make trade-offs after the market signal is further clarified.
(3) The impact on the Chinese market
As mentioned in the third part, Cummins has carried out a deep localization development in China. Compared with the general foreign companies, Cummins's localization is more thorough, especially in research and development: taking the Cummins East Asia R&D Center as an example, it is not only Cummins' 17th R&D institution in the world, but also the second largest R&D institution in the world after the headquarters Columbus Technology Center, and 90% of Cummins' local manufacturing technology in China comes from the East Asia R&D center.
The deep localization is an important reason why Cummins can survive in China for a long time. Cummins continues its localization strategy in the hydrogen energy business, which will have a profound impact on both independent brands and foreign companies: compared with independent brands, the price is similar, the product is better, and the same service; compared with ordinary foreign companies, the product is at least the same level, the price is lower, and the service is better.
After the joint venture electrolyzer enterprise between Cummins and Sinopec landed, some domestic electrolyzer manufacturers said bluntly to the hydrogen cloud chain: "Cummins has given us a lot of pressure. Their products are indeed better at present, through localization, after two or three years of cost reduction, the market competition pressure will be very large. ”
For other foreign companies, in the case of close product strength, the market is more willing to choose a company that can continuously provide technology and service localization and continuous iteration, or a conventional manufacturer or even a product trader? The answer is clear. Therefore, Cummins' entry will greatly activate domestic competition in the hydrogen energy market, bring talent flow and higher technical product standards to the development of independent brands, and bring pressure of technological openness to foreign companies that pursue a closed technology culture, such as Toyota, Hyundai and other Japanese and Korean enterprises - which is conducive to the benign development of the domestic hydrogen energy industry.
Judging from the strength of Cummins' promotion of the electrolyzer business, the prospect of the hydrogen energy market has been very clear, but it seems that the prospect of vehicle power is still an unresolved question: who is the transition route between fuel cells and lithium batteries, fuel cells and hydrogen internal combustion engines? From Cummins setting a revenue target of 400 million yuan for electrolyzers in 2025, and only setting up a supporting 100 fuel cell trains for hydrogen power - the train is already an existing business cooperation, the side verifies Cummins's hesitation about how to develop hydrogen power. Toyota, which has developed fuel cells for a long time, also began to reserve hydrogen engine technology routes in 2017, and Cummins, which focuses on internal combustion engines, has also begun to lay out fuel cell routes, indicating that there is no definite answer to this problem at present.
(iv) How to ascend to the "Iron Throne" of hydrogen power?
Through mergers and acquisitions, Cummins has completed its technical reserves, and with the advantages of supply chain, market and localization, Century Cummins has completed the first step of "elephant turnaround". A Cummins with a century-old history and natural long-distance running genes, ten years later, can it continue the market dominance of the internal combustion engine era, and can it recreate a Cummins in the hydrogen energy industry in the future?
Although Cummins has the advantages of technology and resources in rolling domestic enterprises, "success is also Xiao He, and failure is also Xiao He". For Cummins, a visible and common-sense obstacle is: the confusion about the technical route, the strategic misjudgment that is easily caused by the conflict between the existing business and the traditional business, may be the only shortcoming of Cummins at present, and it is also a potential risk that hinders Whether Cummins can ascend to the "Iron Throne" of hydrogen power in the future. According to this, the hesitation of traditional giant enterprises such as Cummins in the choice of technology routes has brought opportunities for dislocation competition for domestic enterprises. The best way to "dance with wolves" is to accelerate running, or take advantage of the "tiger snooze" opportunity to take the initiative and seek to enter the international industrial chain to practice internal skills!
In the new stage, the policy is open, and the advantages of Cummins and other international giants entering the Chinese market outweigh the disadvantages, and domestic enterprises do not need to worry about limited development space. Due to the large enough market space, which dark horse companies that have experienced three waves of knockout competitions such as domestic substitution, technological innovation, and curve overtaking still have the opportunity to finally ascend to the "Iron Throne" of the international hydrogen energy industry. The basis for such a judgment is: taking the electric vehicle and photovoltaic industry as an example, in the next 10-30 years, if China will become the locomotive of the global hydrogen energy industry, then, on the hydrogen energy and fuel cell industry track, there will inevitably be a number of dark horse enterprises similar to the Ningde era, Longji hydrogen energy, BYD, and even Wuling Hongguang. For the current domestic enterprises, how to stand out in the next industrialization competition and successfully enter the next stage of the track seems to be more realistic. After all, there will be industrialization first, and then there will be wonderful stories of domestic substitution, technological innovation, and overtaking in curves.
Editor: Hydrogen Hydrogen My Heart Proofreader: Wind Hydrogen Yang Review: Hydrogen Cloud Fairy
Source: Hydrogen Cloud Chain
Statement: The content of the article is for reference only, and does not mean that hydrogen cloud chain endorses its views or confirms its description, part of the source network of graphics and text, hydrogen cloud chain collation and release, if there is infringement, please contact the author to delete