Volvo Signs Fuel System JV Deal With Canada’s Westport
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Vancouver, British Columbia-based alternative fuel specialist Westport said July 19 the companies had signed a nonbinding letter of intent for the JV, in which the parent company of Volvo Trucks North America would take a 45% stake.
At least one analyst sees the partnership as transformative for Westport. The deal is “arguably the most significant announcement in its history,” said Eric Stine, senior research analyst of clean technology and industrials at investment firm Craig-Hallum Capital Group.
The JV is expected to launch in the first half of next year.
Volvo — which sells the Volvo Trucks and Mack Trucks brands in the U.S. Class 8 market — will pay $28 million for the stake in the business and could contribute as much as $45 million more.
Volvo Group and Westport Sign Letter of Intent to Establish Joint Venture to Reduce CO2 Emissions from Long-Haul Transporthttps://t.co/8lCM7aZpwX — Westport Fuel Systems (@WestportDotCom) July 19, 2023
Westport will contribute its current high-pressure direct-injection assets to the JV, which it said would accelerate the commercialization and global adoption of the fuel system technology for longhaul and off-road applications.
The HPDI system uses natural gas and could use hydrogen, too, as the fuel source instead of diesel. Westport said that while Volvo will be a key customer of the venture, the partnership’s mandate will be to enhance commercialization of HPDI through the addition of new trucking and equipment manufacturers as customers.
Volvo previously laid out plans to reach net-zero greenhouse gas emissions by 2040. However, the truck maker is not putting all its eggs in one basket when it comes to technology, with a three-pronged program in battery-electric, fuel cell-electric and internal combustion engines.
“Decarbonization with internal combustion engines running on renewable fuels, especially with HPDI, plays an important part in sustainable solutions. HPDI has been on the road in Volvo trucks for more than five years and is a proven technology that allows customers to significantly reduce CO2 emissions in LBG [liquefied biogas] applications here and now and is a potential avenue for hydrogen,” said Volvo Chief Technology Officer Lars Stenqvist.
Volvo’s involvement is a clear endorsement that internal combustion engines will remain a dominant technology for the next 15 to 20 years-plus in trucking despite battery-electric and fuel cells getting so much attention, Craig-Hallum Capital Group’s Stine said in a research note.
Stine said the JV effectively makes HDPI the truck maker’s technology of choice and decarbonization path forward in ICE applications. He added that other OEMs will take notice. Volvo and Westport had been working together in an unofficial relationship, selling about 6,000 trucks with HDPI over the past five years, he said.
Westport previously had a natural gas truck engine JV with industry heavyweight Cummins Inc. that ended in 2022. In May, the company reported a loss of $10.6 million for the first quarter of 2023 after having posted a profit in the year-ago period due to the sale of its equity stake in the Cummins JV.
We continue to develop partnerships for a more sustainable future, and we believe the future requires a mix of technologies to fulfill our customers’ transport assignments. https://t.co/ucCXEIdUY9 — Volvo Group (@VolvoGroup) July 20, 2023
During Westport’s May 9 earnings call, CEO David Johnson said hydrogen-based fuel systems would be key to the company’s focus going forward. Westport’s hydrogen product line was not changing the fuel cycle for internal combustion truck engines but would make them 10% more efficient, among other things, he said.
Investors reacted positively to the JV announcement. Westport’s share price was trading more than 20% higher July 20 compared with the start of the week at $11.28.
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