China's hydrogen energy sector is currently navigating a pivotal juncture marked by both challenges and opportunities. Industry insiders are optimistic that the rapid evolution of hydrogen production, transportation, and related supply chains will propel the adoption of new energy across multiple domains, promising a broad horizon for hydrogen energy's development.

This year marks the conclusion of a demonstration program led by the Ministry of Finance, the Ministry of Industry and Information Technology, the Ministry of Science and Technology, the National Development and Reform Commission, and the National Energy Administration for fuel cell vehicles. China has witnessed remarkable advancements in hydrogen energy and fuel cell vehicles, spanning market expansion, technological progress, and cost reduction. However, the domestic hydrogen fuel cell vehicle industry appears to have stumbled into a phase of uncertainty. According to statistics from the China Association of Automobile Manufacturers (CAAM), both production and sales of fuel cell vehicles nationwide declined by over 10% year-on-year in 2024. Additionally, the top four hydrogen fuel cell enterprises in the midstream of the industry chain reported collective net losses totaling RMB 1.81 billion in 2024.

"To a certain extent, the hydrogen fuel cell vehicle industry is experiencing a chilly period," said Zu Sijie, Vice President and Chief Engineer of Shanghai Automotive Group Co., Ltd., at the 2025 International Hydrogen Energy and Fuel Cell Vehicle Conference and Exhibition. He emphasized that China's hydrogen energy and fuel cell industry is transitioning from demonstration applications to large-scale development, presenting both challenges and historical opportunities for leapfrog growth. Ouyang Minggao, an academician of the Chinese Academy of Sciences and professor at Tsinghua University, echoed this sentiment, noting that China is at a critical juncture in hydrogen energy development. He believes that from 2025 to 2030, advancements in hydrogen production, transportation, and related supply chains will catalyze the application of new energy in various sectors. "We must remain confident. The prospects for hydrogen energy are promising. As long as we overcome the current hurdle, the future will undoubtedly be bright," Ouyang Minggao affirmed.

In 2024, production and sales of fuel cell vehicles dropped by more than 10% year-on-year.

After three years of demonstration and promotion, China's hydrogen energy and fuel cell vehicles have achieved significant milestones. The market for fuel cell vehicles has expanded considerably, with cumulative promotions exceeding 28,000 vehicles by the end of 2024. Technologically, China has achieved localization and domestication of hydrogen fuel cell vehicle technology in multiple core areas, making progress in product reliability, environmental adaptability, service life, economics, and cost reduction. Nevertheless, the industry encountered unexpected setbacks in 2024.

CAAM data reveals that in 2024, nationwide production and sales of fuel cell vehicles amounted to 5,548 and 5,405 units, respectively, marking year-on-year decreases of 10.4% and 12.6%. This disrupted the consistent growth trend observed since 2021. From January to May 2025, cumulative production and sales stood at 1,176 and 1,122 units, respectively, down 25% and 26.1% year-on-year.

Over the first three years, the five demonstration city clusters collectively received approximately RMB 5.11 billion in central government financial incentives. Based on a maximum subsidy amount of RMB 9.35 billion, 45.4% of the incentive funds remain unpaid. As of March 2025, these city clusters had promoted 15,850 fuel cell vehicles, accounting for 48.8% of the four-year demonstration period's total target of 32,455 vehicles. Chai Maorong, Chief Scientist and Chief Hydrogen Energy Technology Officer of State Power Investment Corporation Limited, believes that Beijing-Tianjin-Hebei and the Yangtze River Delta are on track to meet their goals, Henan is likely to achieve its target, while Guangdong and Hebei face greater pressure due to their ambitious self-set targets.

Some analysts suggest that China's policy stance remains cautious, lacking a solid foundation for the commercialization and large-scale development of hydrogen fuel cell vehicles. Currently, commercial vehicle applications primarily focus on heavy trucks, with limited large orders. Hydrogen fuel cell vehicles have yet to achieve profitability in actual operations, and early market feedback has been less than favorable.

"I believe the industry's current 'bottleneck' is due to the extensive hydrogen energy and fuel cell vehicle supply chain, which poses numerous challenges requiring greater investment than the lithium battery industry did initially," said Zhang Shuai, partner at Yonghua Capital, in an interview with Auto Review. Consequently, the gestation period for hydrogen energy and fuel cell vehicles will be longer. However, based on current trends, issues across the supply chain are gradually being resolved.

Midstream enterprises incurred combined losses exceeding RMB 1.8 billion.

Corporate financial reports indicate a clear differentiation trend within the hydrogen energy industry in 2024. Upstream hydrogen production and material enterprises performed well, midstream fuel cell core enterprises collectively incurred losses, while downstream hydrogen refueling stations showed initial signs of profitability.

Upstream enterprises benefited from equipment localization, experiencing increased profitability and improved performance. Financial reports show that Changying Precision's net profit surged by 856%, Kingfa Sci. & Tech.'s hydrogen sales volume increased by 570%, and CIMC Enric Holdings' hydrogen energy business revenue grew by nearly 60%. Downstream hydrogen refueling stations also demonstrated initial profitability, with Sinopec announcing that some high-load stations have become profitable.

In contrast, the four leading midstream hydrogen fuel cell enterprises experienced a decline in performance in 2024. Sinohytec's revenue decreased by 54.21%, Guofu Hydrogen Energy by 12.2%, Guohong Hydrogen Energy by 36.9%, and Reshape Energy's revenue shrank by 27.5%. These enterprises collectively reported a net loss of RMB 1.81 billion, with average losses increasing by over 60%.

Sinohytec, for instance, reported an operating revenue of RMB 360 million in 2024, a 54.21% decrease from the previous year's RMB 801 million. Its net profit attributable to shareholders was -RMB 456 million, marking the first time since 2020 that both operating revenue and net profit declined. This trend persisted in 2025, with Sinohytec's first-quarter revenue falling by 19.92% year-on-year to RMB 10.5263 million, and net profit attributable to shareholders reaching -RMB 93 million, indicating expanding losses. Since 2020, Sinohytec has accumulated losses of RMB 1.144 billion.

Industry insiders attribute Sinohytec's revenue decline to a sharp reduction in orders. In 2024, the company produced 868 fuel cell systems and sold 742, with production and sales volumes decreasing by 56.45% and 60.95% year-on-year, respectively. Total sales power stood at 98,800 kW, a 47.84% year-on-year decrease. Moreover, under the dual pressure of high costs and price competition, the company's product gross margin dropped by 21.19 percentage points to 11.7% compared to 2023, a more significant decline than previous years.

Zhang Shuai acknowledged the difficulties faced by some enterprises, particularly those in need of financing. Fuel cell vehicle loading data for the first half of the year shows limited revenue allocation per enterprise. If this persists for another two years, many enterprises will face increased operational pressure. However, Zhang Shuai believes that for enterprises committed to long-term development without significant historical burdens, the current market entry point presents an opportunity. "Whether it's tough or not, whether it's a 'cold winter' or 'spring,' depends mainly on the enterprise's position in the supply chain and its development history," Zhang Shuai explained.

In March 2025, China Risun Group Co., Ltd., and Sinohytec announced the signing of a framework agreement, with Risun Group intending to exchange all equity of Dingzhou Risun Hydrogen Energy (Risun Hydrogen Energy) for Sinohytec's A-share stocks and invest up to RMB 550 million to subscribe for additional shares. Post-transaction, Risun Group will become Sinohytec's controlling shareholder, with Risun Hydrogen Energy becoming a wholly-owned subsidiary of Sinohytec. Sinohytec stated that this reorganization will drive the "extension and supplementation" of its industrial development, expanding upstream and entering the "production-storage-transportation-refueling-research-application" industrial end. Risun Hydrogen Energy is expected to provide large-scale, cost-effective hydrogen supply.

Policy and capital support are urgently needed.

In Ouyang Minggao's view, China's fuel cell technology has evolved from a follower in 2020 to a competitor in 2024, achieving significant breakthroughs over the past five years. He believes that hydrogen energy is crucial for the new energy revolution. Based on the current energy mix and development trend, China's new energy revolution is expected to enter a period of rapid growth within the next five years. The entire industry is currently at a turning point in hydrogen energy development, also described as a "period of pain." However, from 2025 to 2030, accelerated developments in hydrogen production, transportation, and related supply chains will propel new energy applications across multiple sectors. He firmly believes that while the cycle may be longer, relevant industries and enterprises must exercise patience and adopt a long-term perspective.

Zu Sijie bluntly stated that small industrial scale, insufficient economics, and hindered market competitiveness are currently the key factors restricting the scale-up of the fuel cell vehicle industry. He suggested strengthening top-level design and introducing the next round of support policies for the hydrogen energy and fuel cell industry promptly to avoid a policy vacuum. This includes strengthening hydrogen energy management, ensuring hydrogen refueling station construction, and simplifying the special equipment management system for onboard hydrogen storage systems.

"In fact, breakthroughs have been achieved at various points in the hydrogen energy and fuel cell vehicle supply chain, including hydrogen supply and pricing, fuel cell vehicle cost and performance, etc.," said Zhang Shuai. The industry's biggest challenge is connecting these individual breakthroughs into a cohesive system to achieve a closed loop, thereby elevating the industry to a new level. To this end, he recommended that relevant departments expedite the improvement of supporting policies and regulations, such as eliminating the requirement for hydrogen production to be located in chemical industrial parks and waiving highway tolls. Additionally, given the hydrogen energy industry's heavy closed-loop assets, large state-owned enterprises and financial institutions should pay closer attention to commercialization progress. While promoting industrialization, they can develop corresponding financial instruments to alleviate capital burdens on owners.

Note: This article was first published in the "Hot Topic Tracking" section of the July 2025 issue of Auto Review magazine. Stay tuned for more updates.