Ballard Power Systems Inc

TSX:BLDP

Earnings Call Transcript 2020-Q4

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems Q4 and Full Year 2020 Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Guy McAree, Director of Investor Relations. Please go ahead.

[Guy McAree, Director of Marketing & Investor Relations]

Thanks very much, and good morning, everyone. Welcome to Ballard's Fourth Quarter and Full Year 2020 Financial and Operating Results Conference Call. With us today on the call, we've got Randy MacEwen, our President and CEO; and Tony Guglielmin, our Chief Financial Officer. We'll be making forward-looking statements that are based on management's current expectations, beliefs and assumptions concerning future events. Actual results could be materially different. Please refer to our most recent annual information form and other public filings for our complete disclaimer and related information. So today, Randy is going to provide his perspective on Ballard's progress throughout 2020 as well as our focus for the current year. Tony is then going to review Q4 and full year financials, followed by a Q&A session. I'll turn the call over to Randy.

[R. Randall MacEwen, CEO, President & Director]

Thanks, Guy, and welcome, everyone, to today's conference call. I'd like to start today's call by thanking all of the members of Ballard's global team. I'm immensely proud of how our team responded to the global pandemic. We were guided by our purpose to deliver fuel cell power for a sustainable planet and by our cultural values. In every decision we make, we put the safety, health and well-being of our employees, customers and partners first. And we demonstrated once again Ballard's resilience and ability to adapt with both care and speed. I want to provide a brief summary of Q4 and full year 2020 results. Ballard revenue was $28.6 million in the final quarter of the year, with total 2020 revenue of $103.9 million, consistent with our internal projections with the impact of COVID-19. Full year 2020 gross margin was 20%, adjusted EBITDA was negative $38.9 million. Year-end cash reserves were $763.4 million, and we ended the year with a 12-month order book for delivery in 2021 of $83.5 million. While Ballard's operations continued uninterrupted through the year, some customers, suppliers, partners and end users were forced to shut down temporarily at points during the year and some also deferred capital expenditures. So while our sales pipeline was very robust, growing 55% in 2020, reflecting the continued increase in market interest, order flow was muted. Looking forward to 2021, the impact of the pandemic continues to be uncertain. As a result, and consistent with our practice in the early stage of market development and adoption, we're not providing specific financial guidance for 2021. What I do want to share with you is how excited and confident I am about our business, about the important work we're undertaking in 2021 and our long-term future. Customer engagement in all of our medium and heavy-duty motive market segments, bus, truck, rail and marine, are at record levels. We're well positioned with technology, products, field experience, customer relationships, partners, brand and financial strength. As reviewed in our September Investor and Analyst Day, we have a clear strategy and deliverables in 2021, including on technology innovation, product cost reduction capacity expansion, our Weichai-Ballard JV and our relationship with MAHLE. So the company has never been in a stronger position than right now at this very moment. We're tackling big problems, decarbonization of mobility in large, attractive addressable markets, bus, truck, rail and marine. We're making solid progress in each of these market segments. I believe we'll exit 2021 with a growing sales pipeline and order book that will start our ramp for scaling with a steepening growth curve between 2024 and 2030. Importantly, we have a strong cash position. During Q1 2021, we completed a further equity transaction that added incremental net proceeds of approximately $528 million to our cash balance, which currently exceeds $1.2 billion. This positions us to aggressively pursue our 2 themes: acceleration and expansion. These 2 themes cut across 3 specific areas for planned deployment of our capital. The first is product innovation that will help accelerate market adoption by levering next-generation stacks and modules for bus, truck, rail and marine applications, including expanding the range of power product levels available in our portfolio and continued cost reduction. The second area involves investments in the expansion of production capacity and localization. We're currently finalizing the expansion of MEA production capacity at our Vancouver facility, and we have established gigawatt production capacity in China through our joint venture with Weichai. We're now carefully considering further localization opportunities in China as well as the potential to deepen our manufacturing presence in Europe. And finally, we plan to invest in M&A. We have a growing pipeline of corporate development activities. Our focus is on opportunities that help to simplify the customer experience by reducing adoption friction points and reducing costs. We also see M&A as a path to more fully participate in the secular growth of a hydroeconomy and continued strengthening our competitive position in the market. At the macro level, the pandemic appears to have strengthened global resolve to confront the climate crisis. Indeed, the decarbonization agenda had gained remarkable momentum in the past year. There are now close to 50 countries with carbon pricing initiatives and 75 countries with net 0 carbon emission targets. And notably, the growing importance of hydrogen in the future energy mix continues to be signified by supportive policy measures around the world. There are now 32 countries, representing over 70% of global GDP, that have announced hydrogen roadmaps. The CEO-led Hydrogen Council, after being launched by only 13 founding members in 2017, now has 109-member companies. The group has escalated its advocacy work to raise the profile of hydrogen, and a growing number of sizable corporate investments, joint ventures, collaborations and green hydrogen projects are being announced similarly almost daily in our industry. Now in California, transit agencies began filing zero-emission bus rollout plants as required by CARB's innovative clean transit program. And in 2020, CARB introduced its landmark Advanced Clean Truck regulations that mandate the scaled adoption of zero-emission commercial trucks in that state. In addition, 14 other states signaled their support in 2020 through an MOU supporting a target for 30% of new truck purchases being zero-emission by 2030. In China, the government updated its fuel cell policy in September last year, which we expect to have a significant impact on commercial activity going forward. And I'll comment further on this in a moment. In 2020, BloombergNEF projected that clean hydrogen could reduce greenhouse gas emissions by up to 34% over the coming decades at a manageable cost. Its report concluded that renewable hydrogen could be produced for as little as $1.6 per kilogram in most parts of the world before 2050, making it a highly competitive fuel globally, with falling hydrogen costs enabling fuel cell market penetration along the way. During 2020, we made considerable progress in the execution of our growth strategy while working to transparently provide stakeholders with insights into our business, including strategy and current market position. We shared details on our 6x increase in MEA production capacity module assembly capacity in our Vancouver facility, in addition, the commissioning of our joint venture facility in China, and we shared our planned reduction in fuel cell stack and module product costs by more than 70% by 2024. We also detailed the estimated $130 billion annual market for engine sales into the bus, truck, rail and marine segments by 2030, which represents a multibillion-dollar revenue opportunity for Ballard. Importantly, during our Investor and Analyst Day 2020 last September, we also emphasized the significance of ESG reporting and Ballard's commitment to it, including the issuance of our first ESG report with the company's 2019 annual report in April last year and our second ESG report that will accompany the 2020 report later this month. We're excited with our goal to achieve net carbon 0 in Ballard by 2030 as well as our continued work on diversity and inclusion. Now I'd like to briefly review specific commercial developments in key geographies during 2020, beginning with China. As we previously shared, the Weichai-Ballard joint venture is now operational. During 2020, the facility construction and commissioning activity was completed to enable bipolar play production, stack production, along with module assembly. Furthermore, Ballard products manufactured the JV passed a series of quality audits so that the joint venture is now a qualified supplier to a number of bus and truck OEMs in China, including OEMs within the Weichai Group. China's state government has set a target of 20% of all vehicle sales being new energy vehicles by 2025, growing to 50% by 2035. In [ total ], the government is targeting the fuel cell electric vehicle deployments reaching 1 million in the 2030 to 2035 time frame. In support of these targets, China's government updated its fuel cell policy last September with a focus on a number of hydrogen demonstration clusters. Numerous applications for demonstration region status were submitted to the national government, and we anticipate the selection of initial demonstration questions to be announced soon. We expect this announcement to help unlock considerable pent-up demand for FCEVs as the market slowed over the past year awaiting regulatory clarity. Now I recently returned from an important 6-week trip to China. What I can report at this time is that the Weichai-Ballard joint venture operation is very impressive. We believe this is now the largest fuel cell production facility focused on the bus and commercial truck markets. Supported by our Ballard team, our JV team has done an exceptional job with our infrastructure and with production capabilities, including optimizing production equipment and processes over the past 6 months. We're now seeing production yield metrics at the JV already similar to yield results in Vancouver. The JV has also made important progress on localizing a significant portion of the bill of materials of our new joint venture modules. We expect this work will translate to exciting cost reductions at the module level. In addition to meetings with Chairman Tan of Weichai and important strategic initiatives to further strengthen our business in China, I also had the opportunity to meet with key government officials and policy influencers as well as new vendors emerging on the supply chain side. I also saw many fuel cell buses and trucks on the road while I was in China and with Ballard technology inside. I also wrote the world's first operating fuel cell tram line with 5 CRRC trams powered by Ballard engines, which started operation more than a year ago. At the current time, Ballard products are inside approximately 1,100 buses and 2,200 trucks in China, representing a market share of about 45%. Ballard has an industry-leading 70-million cumulative kilometers of on-road vehicle experience that Ballard has achieved to date. Ballard was also very active in Europe last year and into 2021. In 2020, we announced a key strategic collaboration with MAHLE, a major Tier 1 supplier of the transportation industry for the development and industrialization of advanced fuel cell engines to power various classes of trucks and issued classes 6 to 8 in Europe. MAHLE's expertise in powertrain design and mechanics together with Ballard's fuel cell technology and know-how creates a formidable partnership to address requirements of the zero-emission heavy-duty truck market in Europe. We are currently working with MAHLE on design of a prototype 240-kilowatt engine for the heavy-duty commercial truck market, which we expect to have ready for testing by the end of this year. In Europe's bus market through 2020 and to this point in 2021, we received orders for a cumulative total of 135 modules under the JIVE funding program, including 65 modules with Wrightbus for buses to be deployed in a number of U.K. cities; 60 modules from Solaris for buses to deployed in the Netherlands, Germany and Sweden; and 10 modules for Van Hool for buses to be deployed in the Netherlands. In 2020, we delivered 29 of these 135 modules. I would note in summary, that Ballard's share of the fuel cell modules for all buses deployed in order to date under the JIVE program now exceeds 85%. In the train segment in Europe, our work with Siemens Mobility on development of a 200-kilowatt fuel cell engine for the Mireo Plus H train is on track. And we understand that Siemens is now quoting this train to its customers. In addition, earlier this year, we announced an order from Arcola Energy in the U.K. to power its passenger train, which is planned for demonstration during COP26 in Glasgow. In Europe's marine segment, we launched our FCwave wave 200-kilowatt modular engine last year, and our Marine Center of Excellence is now in operation at Ballard Europe's facility in Denmark. And finally, in the backup power segment last year, we announced the sale of our initial 500 air-cooled FCgen-1020 fuel cell stacks to adKor and FC Energy, with a potential for up to 1,500 stacks in systems at radio tower sites in Germany. We also announced a collaboration agreement with Eltek Nordic for backup power solutions focused on countries such as Norway, Denmark and Iceland. In North America, early this year, we announced an MOU with Chart Industries for joint development of an integrated systems solution that includes a fuel cell engine with onboard liquid hydrogen storage and vaporization. The ability to equip vehicles with liquid hydrogen supply, whether it be in a bus, truck, train or a marine vessel, will address very long-haul use cases since liquid hydrogen provides 2 to 3x the energy by volume as compared to compressed hydrogen. And earlier this week, we jointly announced with Canadian Pacific that Ballard will be supplying 1.2 megawatts of fuel cell product for CP's pioneering hydrogen locomotive program to power the first-ever fuel cell powered line haul freight train. CP, with its fleet of 1,300 locomotives, has made a strong commitment to sustainability, including a vision that includes sustainable freight transportation. Once the fuel cell freight train is operational, CP plans to conduct rail service trials and qualification testing to evaluate the technology's readiness for the freight rail sector. This exciting program with a major North American transcontinental railway will expand our work in the rail segments from trams in China and passenger trains in Europe to freight trains in North America. In addition to these activities in our key geographic markets, we've been experiencing increased customer interest in other geographic markets, for example, in Australia, New Zealand and India. In Australia, last year, we shipped -- we signed an MOU as a consortium partner to establish the H2OzBus Project for the evaluation and deployment of fuel cell electric buses for use in public transit in that country. FCEVs offer an excellent option for public transit in Australia's challenging conditions and green hydrogen from renewable energy will offer flexible, scalable and low-carbon fueling solution at bus depots. In Australia earlier this year, Ballard signed an MOU with Global Energy Ventures to design a multi-megawatt power solution for its C-H2 Ship, a tanker-size marine vessel that will store and transport hydrogen from Australia to other parts of the globe, consistent with Australia's ambition to become a net supplier of hydrogen to the world. 2020 was a critical year in the hydro new fuel cell industry. And here at Ballard, while meeting operating challenges posed by the pandemic, we made significant progress on critical strategic initiatives to become -- to position the business for growth over the years to come. We have a range of zero-emission mobility opportunities that we believe present large attractive market opportunities for Ballard's technology and products over the long run. With a strengthened balance sheet, we're increasing our investments in 2021 to seize these opportunities. In 2021, we'll increase our investment in talent, competencies, technology innovation, product development and customer experience related to our core markets of bus, truck, rail and marine. We'll continue to invest in our strategic partnerships with Weichai in China and MAHLE in Europe. We'll also consider investments in further production capacity and localization in key geographies as well as strategic partnerships and acquisitions. Before finishing, I'd like to address the CFO transition at Ballard. As you would have seen in yesterday's press release, Paul Dobson will be joining the company as Senior Vice President and Chief Financial Officer effective March 29. Paul has 25 years of global financial operations and leadership experience, including as CFO and interim CEO at Hydro One and as CFO at Direct Energy. His skills and experience will serve Ballard well as we seek to scale our business over the coming decade. At the same time, Tony Guglielmin will be staying on in an advisory role until May 31, and supporting the smooth transition of this role. On a personal note, I want to thank and acknowledge Tony as he moves into retirement. He served in the CFO role at Ballard for over 10 years, delivering significant value to the company, including through his professional leadership of our finance and administration functions, his important strategic contributions and his leadership on numerous corporate and finance transactions. Everyone here at Ballard wishes Tony well in his retirement. And with that, I'll turn the floor over to Tony to briefly review the financials.

[Anthony Robert Guglielmin, Senior VP & CFO]

Well, thanks, Randy, and good morning, everyone. Top line revenue in Q4 was $28.6 million, down 32% year-over-year. And on a full year basis, revenue was $103.9 million, down 2% from 2019. For the full year, Power Products revenue increased 19%, while Technology Solutions revenue decreased 20%. Within Power Products, full year Heavy Duty Motive was up 35% to $47.7 million. This was due to a year-over-year increase in product shipments to customers, particularly sales to the Weichai-Ballard JV and the Synergy-Ballard JV in China. We also saw higher shipments of Backup Power products to customers in Europe. The decrease in Technology Solutions revenue to $45.3 million was due primarily to decreased amounts earned from the TS program with Audi, the Siemens development program and the Weichai-Ballard joint venture technology transfer program. Gross margin was 20% for the quarter and for the full year, declines of 1 point in each time period. The Q4 and full year declines were the result of the decrease in total revenue and a shift in overall product mix. Cash operating costs increased 25% in Q4 to $16.4 million and for the full year, increased 29% or $11.2 million to $50 million. This was primarily the result of higher research and product development costs in next-generation MEAs, stack and modules. We do expect higher cash operating costs again in 2021 as we increase our investment in additional technology and product innovation and the development across our key product markets of bus, truck, rail and marine. Adjusted EBITDA in Q4 was negative $14.5 million compared to negative $7 million in the same quarter the prior year, and negative $38.9 million for the full year compared to negative $26.6 million. For the full year, this included Ballard's $12.6 million share of losses in joint venture investments in China, largely related to the Weichai-Ballard JV. Ballard's net loss in Q4 was negative $14.4 million compared to negative $9.8 million in Q4 last year, and for the full year, negative $49.5 million compared to negative $35.3 million in 2019. Earnings per share was negative $0.05 in Q4 compared to negative $0.04 in 2019. And for the full year, EPS was negative $0.20 compared to negative $0.15 for the prior year. Both the net loss and EPS numbers include the Ballard share of losses from our China JVs. Cash used by operating activities was $6.7 million in Q,4, consisting of cash operating losses of $6.7 million and flat working capital changes. For the full year, cash used in operating activities was $42.9 million consisting of cash operating losses of $25.8 million and working capital outflows of $17.1 million. In terms of liquidity, we ended 2020 with cash reserves of $763.4 million, up 417% from $147.8 million at the end of 2019 and up 111% or $401.7 million from the end of Q3. These cash reserves reflected 3 equity transactions in 2020 that generated total net proceeds of approximately $695 million. These included 2 at-the-market or ATM programs that generated net proceeds of $309 million as well as a bought deal transaction that closed in Q4 and generated net proceeds of $386 million. In addition, as Randy noted, we completed a further bought deal transaction in the first quarter this year, generating additional net proceeds of approximately $528 million. In addition to areas where we expect to deploy capital in 2021, as outlined earlier by Randy, we also have a commitment to contribute $11.4 million in 2021 toward our 49% ownership position in the Weichai-Ballard JV. At the end of 2021, we expect to have contributed a cumulative $69.1 million towards our total capital commitment of $79.5 million for our pro rata ownership share. Finally, we ended 2020 with a total order backlog of $117.8 million, a decrease of $10.3 million over the order backlog at the end of Q3. The 12-month order book at the end of 2020 was $83.5 million, up $3.9 million from the end of Q3. And as Randy noted, we have a robust sales pipeline of qualified commercial opportunities, up 55% from the end of the prior year. Now before I turn the call back to the operator for questions, I did want to say a couple of words about my pending retirement. This will be my last investor call as CFO of Ballard. I first wanted to thank an acknowledgment and many of you on the call today who I've come to know and work with over the past 11 years. It's been a pleasure to get to know you, and I do hope we can stay in touch. I also retire with confidence knowing Ballard's futures in good hands with a strong executive team and a dedicated workforce as well as a very strong balance sheet. Lastly, I look forward to working with Paul on a smooth transition over the coming weeks. With that, let me turn the call back over to the operator for questions.

[Operator]

[Operator Instructions] The first question comes from Sameer Joshi with H.C. Wainwright.

[Sameer S. Joshi, Associate]

Tony, congratulations on the -- and good wishes for the retirement. So my first question is about the China JV and revenue contributions from that. At what level of revenue contributions from China do you see your equity distribution also breakeven? This year, I think you had over $12 million of equity distribution losses from that JV. How should we look at '21? Should we expect that contribution to be a positive contribution this year?

[Anthony Robert Guglielmin, Senior VP & CFO]

Yes, Sameer, this is Tony. Yes. So you're right. The equity contribution was negative in 2020, and we expect it to be negative as well in 2021. As Randy mentioned, we're expecting a fairly significant ramp up in deliveries from the China JV, but they'll likely take place in the more in the second half of the year once the policy framework gets finalized. So we don't expect 2021 to be a breakeven year for the joint venture, largely as a result of the delay in the China policy. So I think realistically, we're looking more into 2022 that we would expect to start to see the JV getting closer to breakeven based on continued ramp up. So 2021 will continue to be a negative contribution. Not quite at the same level as 2021, but it will continue to be negative.

[Sameer S. Joshi, Associate]

Understood. You just mentioned the order backlog as of December 31, I assume, was around $118 million, which was down around $10 million year-over-year. How does that contrast with the strong sales pipeline? Is there -- are there delays in order conversion or what's the reason for the drop in that backlog?

[R. Randall MacEwen, CEO, President & Director]

Yes, Sameer, we have seen this very significant increase in customer interest really across the board. If you look at our sales pipeline, up 55%, a very significant portion of that comes from the medium and heavy-duty motive markets of bus, truck, rail and marine and relatively speaking, a very good diversification across the markets as well as across the geographic markets, too. As I pointed out, in 2020, we did see a number of customers defer capital expenditures and not signing orders as a result in some cases of COVID-19. A lot of organizations were reducing their CapEx budgets to moderate cash flow, as you'd expect. So I do think that had a fairly significant impact. But I think as we look forward, what we see is the sales pipeline, a significant part of that, we would hope to convert into orders in 2021 and 2022. And it is important to remember that lots of times that the sales pipeline takes time from the time we receive interest, translate that through the sales force, different grades that we have in the pipeline, ultimately to order book because the -- it's a long sales cycle for these markets. So I think you'll see some very good movement in 2021 and into 2022 as well.

[Sameer S. Joshi, Associate]

Understood. One last one before I step back in queue. You listed a bunch of investments in various planned acquisition and upgrades. So should we -- what is the budget for these investments? And is it mostly going to be on operating expenses or are there any capital expenses associated with this investment as well?

[R. Randall MacEwen, CEO, President & Director]

Yes. Certainly, on the product innovation side that I referred to, that would be in the operating budget. In terms of production capacity expansion and localization, there could be additional CapEx spend as we look to deepen our manufacturing presence in China and Europe, for example. No dollar amounts specifically that we can share today. And then as we look at M&A, of course, that would be investment of cash and potentially stock as well for potential transactions.

[Operator]

The next question comes from Rupert Merer with National Bank.

[Rupert M. Merer, Managing Director and Research Analyst]

Once again, congratulations on your retirement, Tony, all the best. I'd like to start with the expectations for R&D this year. Can you talk about what we may see in R&D expenditures and if you can give some color on the activities you're going to focus on this year and maybe expected deliverables you could see this year from your R&D program?

[Anthony Robert Guglielmin, Senior VP & CFO]

Rupert, it's Tony here. So the R&D -- the total budget from -- like looking at 2020 over '21, we do expect to increase our investment in the OpEx area, which as Randy mentioned a moment ago, it's probably going to be up $20 million plus this year, year-over-year. So it isn't a fairly significant increase. And it will kind of flow through our cash OpEx and reported Opex. And that investment is across a number of programs. Certainly, the work that we're doing on next-generation, high-power density modules focused particularly on the truck market, that's one particular area. We're also launching some next-generation MEAs and stacks this year. So it's across a range of power levels and across MEA stacks and modules, as I say, with a focus, particularly on the truck market. So as I say, think about potentially $20 million plus increase in our investment in the cash OpEx area this year.

[Rupert M. Merer, Managing Director and Research Analyst]

And does that include your activities with MAHLE?

[Anthony Robert Guglielmin, Senior VP & CFO]

Well, that would include some of the development work, yes, with MAHLE. That doesn't include any specific investment if you're thinking about, as has been discussed earlier about any localization or joint venture, that's all to come. But yes, this would include the development work on this heavy-duty around the truck program that Randy alluded to in his remarks, yes.

[Rupert M. Merer, Managing Director and Research Analyst]

On your Investor Day, you talked about a 3-year goal to reduce your cost by 70%. So is it fair to assume that your R&D expenditures this year are in programs that are going to be over the next 3 years and maybe we shouldn't expect too many deliverables in the 12-month timeframe?

[R. Randall MacEwen, CEO, President & Director]

Yes. When you look at -- a couple of things. When you look at the MEAs and plate work that we're doing, we saw some very good progress last year. And in fact, our product cost reduction in 2020 was higher than our plan. So the actual realized cost reduction was higher-than-planned for -- at the stack level in 2020. And when you look at the investments of -- in 2021, there will be developments that are crystallized and we'll be able to share in 2021. A significant portion of the additional spend -- incremental spend is really around acceleration and also around expansion of the product portfolio with different power ranges. And remember now, we're focused on bus, truck, rail and marine. So each of these markets, in some cases, have different market requirements. So really trying to address the unique market requirements at the module level, while continuing to drive standardization at the MEA plate and stack level. There will be announcements this year on product improvements, on cost reduction at the stock level and at the module level. But you're right, some of the more earlier stage R&D activities do take -- crossover into multiple years. And certainly, with the 3x3 plan cost reduction for 70% cost reduction over that -- into 2024 timeframe, there are clear time lines and deliverables in each year, and I'm very confident about the progress we're making against that.

[Rupert M. Merer, Managing Director and Research Analyst]

And then secondly, just a quick follow-up on China. In your disclosures, I highlight that you still had some optimization work to do at the Weichai-Ballard JV on the production side, just wondering if you can give some more color on what activities you have in China?

[R. Randall MacEwen, CEO, President & Director]

Yes. So the key areas for optimization really are around yields on plate assembly, the production of plates, we just, in December and into January, have now achieved yield results that are consistent with what we're seeing in Vancouver. There are some pieces of equipment that some suppliers are making some small changes to that should even help that further. So I actually believe we'll have higher yield from the Weichai-Ballard JV than we'll see here in Vancouver in the coming months. So that's very encouraging. These are minor adjustments we're talking about here, nothing major in terms of time or spend. It's really about fine-tuning. I think the more important really deliverable is the unlocking of that market to get the policy framework clear, so order flow can be released and production can scale.

[Rupert M. Merer, Managing Director and Research Analyst]

It sounds like you have some time for optimization while you're waiting for those policies to come through. Anyway, I'll leave it there.

[R. Randall MacEwen, CEO, President & Director]

Yes. Thanks, Rupert. And one thing I'd note, too, is looking at our own yield results in Vancouver over the last number of years, where we have the higher production runs, higher volume production runs, yield results are higher. So looking forward to seeing that occur in the JV as well.

[Operator]

Next question comes from Pearce Hammond with Simmons Energy.

[Pearce Wheless Hammond, Research Analyst]

Sorry, I was on mute. Congrats on your 2020 accomplishments. And Tony, all the best in your retirement. In the earnings release, it seemed very clear that you could expand your geographic focus beyond your 3 core areas of China, California and Europe this year. What markets are you looking at, what are some of the criteria for entering those markets? Does it have to do with subsidies and market structure? And then lastly, would this be entering with a new JV partner or an existing partner?

[R. Randall MacEwen, CEO, President & Director]

Yes. Pearce, thanks for that. So we are looking at a couple of new geographic markets. I commented on some progress that we've already made, for example, in Australia, we're seeing progress in New Zealand. I think you'll see something on that fairly soon. And India is a market that we're seeing very strong interest coming out of the hydrogen fuel cell space at this point. And as we kind of look at markets, we think about what's the policy framework and support in those markets, what's the size of the addressable market, particularly for bus, truck, rail and marine? And what's the competitive dynamics and how are we positioned those markets. So those are a couple of things that we would look at. Whether we, say, enter those markets, whether we do that independently or with partners, every market is different. India is a very unique market. That's the market, I think, we certainly would look at a collaboration there. And -- but other markets like Australia and New Zealand, very easy for us to set up an office with sales and support capabilities, the service capabilities in those markets as well.

[Anthony Robert Guglielmin, Senior VP & CFO]

It's Tony here. Pearce, just to supplement, too. I think just specific to Randy's comments, too, I think what we're also starting to see as well is the demand pull from some of our customers in some of the newer markets that we're looking at. Many of these customers are global by nature, and so we'll end up being looking at new markets for things like the mining and marine, which are truly international markets. So I think we may find ourselves following some newer customer opportunities around the world because of where the customers are located as well.

[Pearce Wheless Hammond, Research Analyst]

That's great. And then my follow-up is you've talked a little bit about some of the initiatives on fuel cell cost reductions that you've talked about, but is there any specific like technical or scientific advancements that you'd want to highlight today that's helping reduce fuel cell cost?

[R. Randall MacEwen, CEO, President & Director]

Yes. I think we went through this fairly significantly during the September Investor and Analyst Day, where we looked at different operating -- sorry, different technical parameters that we're looking at today, tomorrow and even a number of years from now. So things like current density, power density, operating temperature, free start capabilities, the different parameters that we currently have and what those targets will look like as we move out in time. So a lot of activity underway, a lot of exciting work that's been done in 2020. As an illustrative example, the ability for us to have thinner plates to help improve power density was a pretty significant development for us. In 2020, the ability to have new materials, in some cases, thinner materials or lower cost materials or materials with higher performance there's a lot of work that needs to be done, in many cases, actually working collaboratively with the supply chain to help them with their specifications in order to improve their material set.

[Operator]

The next question comes from Michael Glen with Raymond James.

[Michael W. Glen, Equity Research Analyst]

Congratulations, Tony, on the retirement. Just to start with, Randy, you do seem to be speaking more favorably or optimistically, say, for this China roadmap. I'm just wondering if there's anything in particular driving that. And as we see that information come out, are there particular aspects of that roadmap that you'll be looking to see?

[R. Randall MacEwen, CEO, President & Director]

Yes. I think there are a couple of important developments. Even in December, China released a policy document that really goes to what they call encouraged industries. So the fuel cell industry has now been designated as an encouraged industry, which is -- really means that they're supporting the localization in China of international companies, and those companies, in theory, should be treated very similarly to domestic players, and you can do that without having a JV controlled by a Chinese partner. And so as we think about opportunities for continued value chain expansion in China, that's a very encouraging development for us. The other thing is just having spent 6 weeks in China, you get to see firsthand the momentum in that marketplace. While we clearly had a stall out in China over the last year because of the policy landscape, that hasn't changed the enthusiasm and excitement and the number of companies that are now entering as supply chain potential supply chain partners. And that, to me, was very encouraging because we're seeing let me just use catalyst as an illustrative example, a number of new catalyst companies that are looking to move into this space and are working -- we're working with now collaboratively to help them design the appropriate catalysts that can dramatically improve performance and lower costs. So there's a lot of work going on in the supply chain that is very compelling. And then actually seeing vehicles on the road, which you don't see anywhere else in the world in any scale at all, visiting, I think I was in 10 different cities and probably 5 cities I was in, and I actually saw vehicles on the road. This is very compelling. And so there's a lot of activity going on. I got to meet with many politicians and policymakers at very senior, senior levels, and I have a very high conviction level on the growth we're going to see in the China market and a very high conviction level on the role that Weichai-Ballard will play going forward.

[Michael W. Glen, Equity Research Analyst]

And just any like specific aspects that you're particularly looking for as that roadmap comes into form? Is there certain aspects that you're hoping will be contained in that?

[R. Randall MacEwen, CEO, President & Director]

Well, I think on -- there probably won't be any surprises in my opinion, in terms of the next phase. The question will be which demonstrations are awarded initially and I think there's probably an understanding at this stage that at least 3 regions will be included. We expect that to be Shanghai, Guangdong and Beijing, and those are the 3 regions where you're seeing a lot of support. In fact, Shanghai just recently issued another policy document supporting the deployment in scale of fuel cell vehicles. So I think that's a very attractive marketplace. And there are other policy frameworks that will be announced, I believe, in 2021 beyond this cluster demonstration that's being financed through the Ministry of Finance. I think you'll see other developments coming out of the Ministry of Science and Technology, for example, that will support deployment of fuel cell vehicles in a very substantive way.

[Michael W. Glen, Equity Research Analyst]

Okay. And just in terms of the recent meetings that you had with your JV partner, like how -- have they given you any insights into how they view the ramp, how they expect the ramp to take place in terms of volume? And just in terms of something you mentioned last year on a conference call, did you happen to have the discussion with them about a potential IPO of the Weichai-Ballard JV?

[R. Randall MacEwen, CEO, President & Director]

So we discussed both while I was there. And we are -- there's a lot of interest right now in the China market for fuel cell and hydrogen companies coming to market. In fact, there's a company currently going through the IPO process, REFIRE, Shanghai Reinventing Fire, is currently going through the IPO process in China. That's a very good test case, and we're studying that case with a lot of interest, of course. So yes, I would say there's an alignment of interest and view on long term looking at the opportunity to IPO the vehicle. When to do that and what the right circumstances are will be things we'll continue to discuss. On the production ramp, we have a couple of different scenarios for 2021 and 2022, depending on when and how the policy framework gets clarified. And so hopefully, that will be soon. Congress is meeting currently in Beijing right now. There are expectations that coming out of Congress, there should be more clarity on this when the policy gets announced is difficult to know for certain. But if that gets announced soon, I think that will add more certainty, and then we can trigger one of our different scenario plans that we have at the JV.

[Operator]

The next question comes from Aaron MacNeil with TD Securities.

[Aaron MacNeil, Equity Research Analyst]

Paul, if you're on the line or listening, congrats on the new role. Tony, I'll join everybody else and congratulate you again on your retirement. Randy, you referenced it in your prepared remarks, but based on the press release activity in Q1, it seems like the cadence and the magnitude of order flow has increased. And would you characterize this as sort of a lumpy group of announcements just based on pent-up demand due to COVID? Or can we view this kind of pickup in the first quarter? Is something more sustainable and indicative of some of the broader secular trends as it relates to fuel cell commercialization?

[R. Randall MacEwen, CEO, President & Director]

Yes. I think the history of the industry has been lumpy announcements and very project-based work, right? And I think you're right that we've seen here recently an increase in cadence, and I think [indiscernible] the importance of some of the announcements as well and the indicators that some of those projects could lead to longer-term volumes as well. When you're meeting with the counterparties right now, I just recently met with CP, for example, as -- and got to hear directly from them their vision on decarbonizing locomotives. And just the passion and the interest that the counterparties have today is really quite different than you would have seen 2 or 3 years ago. And I think that's reflective of -- at the Board level. These are important issues. ESG investing is really driving a lot of this as well, in my opinion, across a number of different markets. And so I think the commitment level to decarbonize is much stronger and the understanding of the role that hydrogen can play to decarbonize is also much stronger. So I'd like to hope that this is an indicator of what will happen going forward. But I think history has taught me not to be so bullish about that quite yet. I do think that the sales pipeline rather than the announcement order, the sales pipeline, to me, is a more -- a stronger indicator of where the business is headed than necessarily the timing and lumpiness of press releases.

[Aaron MacNeil, Equity Research Analyst]

Understood. And then I know this is kind of been brought up already as well, but can you say how your backlog is broken down in terms of fuel cell sales and then the technology solutions piece? And are those different sort of buckets moving in different directions right now? Like could you give us any sense of kind of how -- what that looks like in more detail?

[R. Randall MacEwen, CEO, President & Director]

Yes. I think, actually, in my mind, the sales pipeline is probably a better indicator of where the trends are as compared to the order book. And if you look at the sales pipeline, it's interesting, a couple of years ago, we targeted trying to have diversification of effectively 40% from China/APAC, 40% from Europe and 20% from, I'll call it, North America or Rest of World. And if you look at the sales pipeline, that's the relative geographic split is very similar to that target we had set some years ago. And then, of course, we're seeing a very heavy weighting -- as you would expect, bus, truck, rail and marine, we characterize those 4 markets in that order because we believe those are the -- and that's the sequence of adoption for those markets, bus, truck, rail and marine. And we have what will be scaffolding effect whereas the bus market, we'll start to see penetration and scaling. Then the commercial truck market will add on top of that. And as the bus and commercial truck market go to scale, the rail market will add on top of that and sequentially with marine. And what's been surprising to me is the rail and marine market, I think, will surprise to the upside. We're seeing a lot of interest in those 2 markets. That's showing up in the sales pipeline and customer engagement. That isn't even reflected in the sales pipeline, but I think for us, progress in 2021 on the commercial truck market is critically important. We're very pleased with the positioning we have in this market in China. The fuel cell policy in China is weighted towards commercial trucks. If you look at the number of vehicles with -- and platforms that have Ballard technology certified in that market as well as the Weichai positioning in the truck market in China, that's very encouraging. And then the progress we'll make with MAHLE in 2021 on the commercial truck market is critically important. And then, of course, there are other activities we have that aren't disclosed yet. So I think the sales pipeline is probably a better way to think about it than the order book. And that relative geographic split as well as a fairly heavy weighting on the 4 applications, bus, truck, rail and marine, and a really good diversification among those markets is showing up.

[Aaron MacNeil, Equity Research Analyst]

Understood. Maybe I'll just close up with a bit of an oddball question. But one of your competitors has essentially given away [ warrants ] to its customers in order to incentivize spending. And so for obvious reasons, it's a double-edged sword. But as it relates to Ballard, are you worried that investors may not be familiar with those details of how -- that customer engages with major customers, and how your backlog versus their backlog may differ? Or are you worried that this model will make that competitor a bit stickier with large potential customers or future customers, just given a growing and fairly high-profile reference base at work?

[R. Randall MacEwen, CEO, President & Director]

Yes. I mean, for us, we're just going to focus on technology innovation, product improvement, great customer experience and make sure we're positioned well in the markets. I'm not going to second-guess what that company did. They're doing very well in the forklift material handling market, and they've got a very entrenched position, kudos to them.

[Operator]

The next question comes from Greg Wasikowski with Webber Research.

[Gregory Adrian Wasikowski, Associate Partner]

I just wanted to draw off a point you just made, Randy, in seeing an acceleration in the marine market. I'm just curious, could you give us an update on the project that you have going with ABB? And then secondly, just from the marine market as a whole, can you give us your thoughts on a time line that we could see an acceleration for larger capacity hydrogen carriers as well as the potential for hydrogen being used as a propulsion for longer haul tankers, cruise ships and container ships? Obviously, in the future, but your updated thoughts there would be great.

[R. Randall MacEwen, CEO, President & Director]

Yes. So the focus in 2021 is to actually get the type approval for our FCwave product. It's a 200-kilowatt modular product. This will be the first product, first fuel cell product that I'm aware of that will have type approval, which means it's specifically designed to meet the rigorous marine requirements. We've seen a lot of interest from customers and now have, I think, close to [ 15 ] orders in the marine market. So it's very compelling, the uptake we've had already. And these, of course, are all demonstration projects, right? It's very early stage. These customers want to sample these products, trial them, pilot them and then move, like we did in the bus market, from trials to larger opportunities. So that's the timeline that we're on right now. In terms of ABB, ABB is a giant in the marine segment. We're very pleased with the relationship we have with them. And a number of these projects we have, ABB is involved. And we continue to look for opportunities to expand that relationship and work together. In terms of propulsive power for larger vessels, in my opinion, this is many, many years away. We need to have a compelling hydrogen storage solution. Costs need to come down as well on the product side, and we need to have reliabilities at much higher intervals than we do today. If you look at reliability today, for example, in 2020, during COVID-19, which was a challenging period, we had uptime or availability rates for vehicles in the field of about 97%. What we'd like to see that is we're going to continue to see that number improve. Where we had any issues in the field, typically, it's been as some of the balance of plant components, things like compressors and hydrogen recirculation blowers. And what we see is that the new suppliers, companies like MAHLE that are entering into the market and looking at developing new balance of plant components with higher reliability and lower cost are going to help address these markets where reliability requirements need to be higher, and we are talking about a longer extended range requirements. So I think those markets are a ways away. I'm very encouraged by the work that Chart is doing on looking at liquid hydrogen and vaporization, a very talented company with a lot of innovation and very aggressive on the M&A and strategic collaboration front. I think they'll be a key player in this market as well.

[Gregory Adrian Wasikowski, Associate Partner]

Great. That's really helpful. And then along those lines, just talking about the Global Energy Ventures MOU, it seems like Asia Pacific is at least the initial focus there. So specifically to China, I'm wondering what kind of appetite you've seen from China and understanding that's still should be very much policy dependent, but is it something that you could ultimately facilitate or even promote given your presence there?

[R. Randall MacEwen, CEO, President & Director]

Yes. Great question. I'm going to suggest probably 10 different meetings I was at during that 6-week period where people raise the opportunity to collaborate with Ballard in the marine market. The Yangtze River delta, the Pearl River delta, have a number of marine vessels of all different kinds with decarbonization challenges. So I believe China will be a very attractive market for the marine segment and it's an area of activity for us going forward.

[Gregory Adrian Wasikowski, Associate Partner]

Tony, wish you well in your retirement.

[Operator]

The next question comes from Rob Brown with Lake Street Capital Markets.

[Robert Duncan Brown, Senior Research Analyst]

I've got a question on capacity additions. I think you said you're doing a 6x capacity expansion in Vancouver. What does that give you in terms of revenue capacity? And then maybe what you're thinking on adding capacity in Europe in terms of timeline? Yes.

[Anthony Robert Guglielmin, Senior VP & CFO]

Yes. So Rob, this is Tony, the 6x capacity expansion, we discussed, this brand-meeting capacity here in Vancouver, and we see that MEA, that capacity investment, taking us out through to about 2025, roughly, before we have to increase capacity again. So I won't put a revenue target, a revenue number on it because obviously, a lot of those MEAs are going into our product and including some shipments to China, but think about capacity through the mid-part of the decade. And then beyond that, we're kind of focused and not just focus on MEAs, the incremental cost to increase capacity, again, in MEAs is relatively modest. We're talking $10 million to $20 million to increase capacity of like magnitude on MEAs and of course, whether we think longer-term about MEA localization in other markets, the bigger question, I think, or the bigger capital question is more on capacity for stacks and modules. So China, of course, we're well situated with the joint venture to satisfy that market. With regard to our capacity on stacks and modules out of Vancouver, we're certainly capacitized for the next couple of years. But I think we are -- that's an area that we are looking at, I think we've talked in the past, in one of our potential programs, is localization of capacity in Europe as an area of consideration for stacks and modules. So I think it's safe to say between now and 2025, we will need to make some additional investment in stack and marginal capacity ex China, which is fine. So -- and that -- the order of magnitude on that to replicate a facility to do that, could be in the $100 million range. For a stack and module assembly facility, maybe a little higher, but that's kind of how we think about capacity over the next 5 years.

[Robert Duncan Brown, Senior Research Analyst]

Okay. Great. And then just in MAHLE, I think you talked about some product development milestones next year. Could we see customer project activity in 2021 or would that be thereafter?

[R. Randall MacEwen, CEO, President & Director]

Well, we're certainly involved in customer discussions already with MAHLE and end customers, so users, OEMs. So don't know what announcements we -- the time frame for our announcements, I think, to be more cautious, we'd probably say 2022 because the product will be effectively unveiled in 2021. And so a lot of important work going on to get the product optimized for truck platforms as well as with the right balance of plant components for higher reliability and lower cost.

[Robert Duncan Brown, Senior Research Analyst]

All of my best wishes to Tony in his retirement.

[Operator]

Next question comes from P.J. Juvekar with Citi.

[Prashant N. Juvekar]

Looks like some of your orders, Randy, were slow to come in 4Q due to COVID. Do you think they were pushed into 1Q? You recently won an order of 50 buses from Wrightbus and then more orders from Van Hool. Does that put you ahead of schedule in 1Q from where you thought you were? And I guess, related to that, for all these buses in Europe, who is supplying hydrogen fueling and hydrogen refueling stations for this? And are you limited by how quickly that hydrogen infrastructure builds up?

[R. Randall MacEwen, CEO, President & Director]

Yes. So let me take the, first of all, the questions on the order book. And I do think we should expect to be cautious still here. COVID-19 is not finished yet, obviously. And I think in terms of order inflow, we should be cautious for the next couple of quarters still. But I think I'm very encouraged by what I've seen, and I'm more encouraged by the robust sales pipeline of very qualified commercial opportunities we have. In terms of supply of hydrogen refueling stations, and are we limited by fueling stations. I think it's important to remember, we focus on these use cases where you have centralized depot refueling and don't need to have a distributor refueling infrastructure. So that's an important point to understand. And many of the end users are already used to having a diesel refueling station at their site. And so their operation isn't disrupted. All they're doing, effectively, is replacing the diesel refueling station with a hydrogen refueling station. And so in terms of who's actually typically supplying that, there are a number of different companies that have been doing that, Linde, Air Liquide, Air products, the industrial gas giants. Then you have companies like Shell and BP that have been active in that market as well. And then you have some additional players, companies like RISE in the U.K. that are supplying hydrogen for bus and other applications. So a number of different players. I think what's encouraging is that there's a universal conviction that the cost of delivered hydrogen will go down circa 70% over the next decade.

[Prashant N. Juvekar]

Great. And then I guess my next question is, you're really good at making MEAs and few FC stacks. That's the same technology for electrolyzers. And so would you potentially consider getting into electrolyzer production in the future? And that will give you some hydrogen capability as well to be a bit more vertically integrated?

[R. Randall MacEwen, CEO, President & Director]

Yes. So a very good point. To clarify, not only are we good at MEAs and plates and stocks, we're also good at modules as well. But yes, you're right. There is some overlap because electrolysis and fuel cell technology are effectively reverse processes and do use some of the same materials like membranes, like catalysts, like gas diffusion layers, for example. And so there's a lot of merit to your commentary. We are not looking at developing electrolysis greenfield in-house. We would consider strategic collaboration and M&A opportunities on the electrolysis side, but we aren't looking to set that up internally on a stand-alone basis.

[Operator]

The next question comes from Craig Shere with Tuohy Brothers.

[Craig Shere]

Congratulations on all the commercial progress lately. Just want to dig a little deeper on Aaron's order flow and Greg's maritime questions. If I'm understanding you correctly, the Canadian Pacific freight train and the Global Energy Ventures hydrogen carrier opportunities are like step changes from what you laid out in your September Analyst Day, [ 20, 30, 10 outlook ] because of the multifold increase in unit kilowatt requirements. If these initial demonstrations work out, how material can those markets become? And how soon do you think we'll know if those demonstration projects are working out?

[R. Randall MacEwen, CEO, President & Director]

Yes. So great question. I think as we look at these markets, there's no doubt in my mind, these markets will be decarbonized. And then you say, okay, how can the rail market be decarbonized, and I'll just use locomotives in North America as an illustrative example. It's something like under 1% of locomotive rail is electrified in North America. So you have 2 options. You can go with overhead catenary wire, which is very expensive, or you can look at hydrogen. Those are, in my opinion, the only 2 viable options for decarbonizing mobility -- rail mobility in North America for freight. So I think the market opportunity is compelling. And if you look at markets where I think a price of CO2 will -- CO2 pricing and costs will increase over time, that could be quite additive to the model as well. I think from a market adoption perspective and a sequencing perspective, you should think about these pilot projects roughly taking a couple of years, 2 to 3 years. What I would suggest is you will see likely the CP locomotive demonstrated in 2021. And then you'll see over a 2-year period, that trial and results from that trial. And what we've seen is that from the bus -- our experience from the bus market, is that once users get comfortable with the technology, comfortable with the safety protocols and comfortable with working with new technology from an operator perspective like bus drivers or rail operators. Usually, they're very excited about it. I think this is a -- both these markets -- we characterized the size of those markets during the September conference call, I think we were very conservative in that characterization. And what I've seen, even since September, suggests to me those numbers are probably fairly muted.

[Craig Shere]

Great. And digging deeper into the fuel cell truck market. It seems more than the others we just talked about, the competition is just simply heating up. Westport recently announced a hydrogen combustion engine effort. Plug is working with Renault. Daimler and Cummins recently announced the link up. Can you elaborate on your MAHLE relationship and what you view as your competitive positioning? And the pending hydrogen fuel truck marketplace?

[R. Randall MacEwen, CEO, President & Director]

So I think that's a fair observation. We are seeing, of course, many players rush to this market. And why? Because it's an attractive addressable market that fuel cells are uniquely positioned to address. And so yes, we are seeing an increased competitive landscape, validates our thesis for some time on the attractiveness of this market. What I think is important, very important to understand, is that Ballard has already proven the durability of our fuel cell technology in the field. So as we mentioned earlier, over 70 million kilometers of in-revenue service of now 3,300 buses and trucks in operation. No one else, no one else has that type of installed base for buses and trucks. And if you look at some of the units we've had in the field operating, in some cases, over 8 years, we've seen 38,000 hours of durability on same fuel cell stack. So these are industry durability records, and we're not talking about the passenger car market here where you need 5,000, maybe up to 10,000 hours of durability. We're talking about a market where you need 30,000 to 40,000 hours of durability. And so we've proven that out in the field, not as a lab exercise or as a concept. And I think as you look at brands looking to put technology into their vehicles, they're going to want to make sure they have not just safety and reliability, but also the durability for a total cost of ownership. So I think we have a significant advantage on total cost of ownership because of our durability, proven durability. And I also think, if you look at the MAHLE relationship and their positioning in the commercial vehicle market, and what areas they have expertise in. It's highly complementary to the work that we can do to increase performance and reduce costs on the stack. And if you look at some of the balance of plant components that they're currently designing and we'll be launching and integrated into our advanced fuel cell engine for the commercial truck market in Europe. I think it's a exciting collaboration. And if I was to compare it to other collaborations, I think it's -- should be very strongly positioned.

[Craig Shere]

Great. And my last one, the order book at year-end was almost $118 million with $83.5 million to be delivered in 2021. But since year-end, to the point in prepared remarks, you announced the Canadian Pacific trade opportunity, the Global Energy hydrogen carrier opportunity, the U.K. passenger trading opportunity and the bus orders with Wrightbus and Solaris. And we're kind of guestimating just those combined might be $11 million in orders. Could your order book for 2021 delivery already be approaching $100 million right now as we speak?

[R. Randall MacEwen, CEO, President & Director]

Yes. To me, what I would prefer to focus on is, directionally, what is the order book going to look like, perhaps at the end of 2021, and I think with the sales pipeline activity we have, we expect to see some great conversion in 2021. But I don't want to, in any way, suggest what the 2021 outlook on revenue is going to be just because with COVID-19 in the early stage of the market, our position is not to provide financial guidance.

[Operator]

The next question comes from Jonathan Lamers with BMO Capital Markets.

[Jonathan Lamers, Analyst]

Most of my questions were asked. On simplifying the customer experience, could you expand on what the customers are looking for there? What Ballard would be looking to acquire or could develop in-house?

[R. Randall MacEwen, CEO, President & Director]

Yes. So great question, Jonathan. Basically, what we want to do is simplify the ability for customers, and here, I'm thinking of vehicle OEMs. And then ultimately, end users, but at the vehicle OEM, how do they integrate a fuel cell module into their vehicle platform? How do they integrate it into a powertrain and then onto the vehicle itself? And so today, our scope of work is typically to provide the fuel cell engine they need to do -- the vehicle OEM needs to take that engine, pair it up with the DC-DC converter, pair it up with a storage solution, integrate it into an electric powertrain and then also make sure that the packaging for everything into their vehicle platform is effective and efficient as well. And in some cases, customers have that in house capability. In other cases, initially, they're using third-party systems integrators. And really, what we want to do is simplify that experience for them, to bring more scope and importantly, to optimize the solution. So as an illustrative example, and by the way, I should have mentioned that package also includes batteries as well. So as an example, what's the right DC-DC converter for a certain application? What's the right amount of fuel cells versus batteries for a certain application and use case duty cycle? And so we want to provide more value and simplify that experience for the customer to reduce customer friction points and enable and accelerate adoption while also getting more value for Ballard in the process. The optimization will also lead, in my opinion, to cost reduction.

[Jonathan Lamers, Analyst]

Right. And one question on China, Randy. You mentioned that your trip increased your confidence that the Weichai JV will play a meaningful role as the market grows. Did you uncover any updated sense on the competitive dynamics, whether the competitor's products will meet the technical requirements needed to qualify for the subsidies as well as Ballard's products can?

[R. Randall MacEwen, CEO, President & Director]

I would say it was the opposite. I actually had the opportunity to meet with a number of companies that could be competitors to Ballard and came away recognizing they have a lot of work to do to catch up.

[Jonathan Lamers, Analyst]

And for Tony, on the Technology Solutions business, the Audi program appears to be winding down from a revenue contribution perspective. Are there any replacements for that business on the horizon?

[Anthony Robert Guglielmin, Senior VP & CFO]

Yes. And you're quite right. So the Audi pro -- as we've announced previously, that program is starting to reach the end of its TS program life. And so yes, the revenue has ramped down. Yes. Randy -- I'll go back to the pipeline and referring to the pipeline Randy mentioned earlier. We do have a fairly significant number of TS programs that are in the pipeline at the moment. Hopefully, we'll be able to convert some of those over the course of the year. So nothing that I think we can point to or would want to point to at this particular point. But lots of interest coming from different markets. We've kind of talked about some new and evolving and developing markets. Some of those could generate some additional engineering service and TS programs in some new markets. So hopefully, we'll have more to -- we can talk a bit more specifically about some of these this year, but there is a decent amount of TS in that pipeline that Randy mentioned. Randy, do you want to supplement?

[R. Randall MacEwen, CEO, President & Director]

Yes. I think one important point, too, is we've had a significant portion of our engineering labor force allocated against our Technology Solutions programs. And for us, the ability to actually reallocate some of that talent towards some of the in-house programs, albeit increasing our cost structure is, I think, a really interesting opportunity because this, again, feeds into the point about acceleration.

[Jonathan Lamers, Analyst]

Okay. And one really basic question. On the sales pipeline, the dollar base for that 55% increase, like just a bit larger than the company's consolidated sales. How should we think about that?

[R. Randall MacEwen, CEO, President & Director]

Significantly higher. Yes.

[Operator]

The next question comes from Mac Whale with Cormark Securities.

[MacMurray Davidson Whale, Analyst of Institutional Equity Research]

Just very quickly, Randy, you talked about pent-up demand in China. When the announcements come out, do you think there is enough time left in '21 where you can deliver into that pent-up demand so that maybe your estimates of what the market would be in '21 might still be, like I say, a year ago, might still be valid? Or do you -- can you not just catch up?

[R. Randall MacEwen, CEO, President & Director]

Yes. Great question. I think there's a couple of layers to it. First of all, we need to make sure what -- how are the policies structured. In some cases, the policies may be structured so that first to use gets highest subsidies or get access to those subsidies if there are limited subsidy pools in certain pockets as well. So there could be a race, in some case, to use some of the higher subsidies that might become available. So we'll have to see how the policy is structured and whether that incents rapid deployment, first of all. The second thing is that, of course, the JV does have some inventory. And really, what we want to see, of course, initially, are more deployments out of the JV that relieve that inventory and allow us to recognize deferred revenue. So that will be helpful. And then, of course, the third will be as we move through that inventory at the JV and then move into additional sales beyond that, triggering more MEA volume purchase orders from Ballard to support the JV activities. So that's the way I would think about it.

[MacMurray Davidson Whale, Analyst of Institutional Equity Research]

Okay. Having followed the space for 2 decades now, it's interesting to see the comment that you say about the competition not being ready. I can wholeheartedly back that up if that matters to anyone. But it's interesting to me, I would say your position then is one in which you're willing to allow for -- let me phrase it another way. You can disagree, but it almost as if you're not that threatened by what you see. But is there not a risk that you let a customer try some competitor, they come away disillusioned with the capability of fuel cells and the industry loses a believer as opposed to Ballard losing a customer. Could you not take your big balance sheet, drop pricing, drive demand, win big market share and dominate the industry and have happy customers? I'm just wondering how you see the balance sheet in that game.

[R. Randall MacEwen, CEO, President & Director]

Yes. I want to clarify something. The question about competitors and where they -- what status they're at, I, again, believe we have a strong leadership position in these medium and heavy-duty motive markets. And I was commenting specifically on some of the development activity, company development activity and product development activity in China. Of course, there are other competitors, Toyota, Hyundai, Daimler, et cetera. Again, most of them have been focused on the passenger car market and they're now pivoting. And if you look at the timeline, for example, for cellcentric, which is the JV between Daimler Truck and Volvo Truck, the time line is many years after our timeline with MAHLE. So we're -- I think we're well positioned there. Of course, you have other companies, Bosch, for example, is active and Cummins is active. So there are incredible competitors here. I don't want to be dismissive of the competition, to be clear. But what I do think is that you mentioned, will some customers potentially work with others and experience -- have bad experiences. We have seen that over the last number of years, and those customers are now with Ballard. I can -- there are quite a few examples of that, particularly in the bus market where they've tried others. And there's a reason we have over 85% market share because not only are we providing a product that has the highest performance in the field, but we take care of the customers from a customer service and customer experience perspective. I think as we look at opportunities going forward, I think the commitment level from customers isn't so vulnerable that if they have a bad experience with a potential supplier, that's going to turn them off the market. I think it will enable them to turn to others. And if they're having bad experiences, they're always welcome to come to Ballard.

[MacMurray Davidson Whale, Analyst of Institutional Equity Research]

And just an appreciation with it you, Tony, over the years, with all your hard work and insight. So thanks and good luck.

[Operator]

This concludes the question-and-answer session. I would like to turn the conference back over to Randy MacEwen, the CEO, for any closing remarks.

[R. Randall MacEwen, CEO, President & Director]

Great. So the call went a little longer today and appreciate your patience for that. So thanks, everyone, for joining. Paul Dobson, our new CFO, effective March 29, and I look forward to speaking with you in early May when we'll discuss our results for Q1 2021.

[Operator]

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.