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Welcome back to Global Supply Chain Week, our automotive day. I’m joined for this section by Craig Knight, who is the CEO of Hyzon Motors. Hyzon is a sort of a start-up, but more a spin-out of a company called Horizon Fuel Cell Technologies out of Singapore. So Hyzon itself is a relative newcomer, certainly relatively new to the U.S. But we are happy to talk be able to talk with Craig about the business of fuel cells and what we call a democratization, because they are catching on now without doubt. We don’t know that they’re not 10 years away, but Craig would probably tell us they’re not because he’s been making, you know, tens of thousands of them.

But anyway, I want to welcome Craig. Thank you for joining us.

Sure I can do that. So I’ll just give a little bit of historical context and then talk a little bit about our mission, if you like.

So we set up Hyzon Motor as a new business as like a downstream application business, a technology carveout, if you like, from the parent company. And the parent company spent almost two decades developing fuel cell technology and fuel cell applications. So we have chosen to set up this new business in commercial mobility because the opportunity for the core fuel cell technology that I’ve been involved with for almost 20 years is really very significant. So we believe that we can have a very significant impact on this pretty challenging tour by sectors that contribute a lot of emissions, and that’s heavy trucking, very busy city buses, very hot utilization delivery trucks – concrete trucks, refuse collection vehicles, that sort of thing.

So we’re really going after some of these vehicle scenarios that are very difficult to take off diesel frankly, because they’re frequently two or more driver shifts in a day and it’s just very difficult to find an alternative to be able to make those vehicles zero emission. But that’s exactly what we’re doing with Hyzon Motors.

So we can encapsulate that objective as accelerating the energy transition in commercial mobility.

So your ambitions are truly global. I mean you come out of Asia, first, you said you were one of the co-founders of Hyzon back in 2003, and, you know, one of the first things that we’ve seen, well not the first thing of all, of course, but one of the more recent things we’ve seen is the plan to sort of take fuel cells into trucking in New Zealand.

Is that the right kind of place to essentially geofence an autonomous truck network?

Ah, autonomous truck network? You didn’t take very long to get to that question, did you? We’ll talk a little bit about autonomy in a moment.

But first of all, let’s take a step back to that first part of the question around the kind of global nature of this business, if you like.

Firstly, it’s a global need. So what we’re responding to is this increasingly urgent mandate that major corporations and governments have around the world to decarbonize activities frankly. So even though we are , as you rightly pointed out, a young company within Hyzon, we have this deep experience in hydrogen and we also have a strong global network. So we were able to leverage our networks and our experience to set out a path and start executing around some commercial activities for Hyzon Motors right from the outset.

So if you like, we started a global business from day one. So consequently, we have customers in Australia, in New Zealand, as you rightly said, also in Scotland, and in Germany, and in the Netherlands. And, in fact, this reality of having emanated from Asia, it’s a reflection on the right at which hydrogen is being adopted around the world.

It was really a first wave of hydrogen adoption and investment around hydrogen that was China, Japan and Korea. Now Japan and Korea were a bit more focused on the passenger courier applications, but China in the last five years or so has been squarely focused on heavier vehicles in urban cities, which contributes substantially to pollution problems. So we were able through the parent company to gain a lot of experience in truck and bus applications, especially trucks. So Horizon has worked mostly on fuel cell power trains for trucks in the last three or four years.

So when we looked at the opportunity to globalize that, that’s really what we sought to do by going downstream in creating Hyzon Motors, sorry Al—

No, no that’s okay, and I actually mis-spoke to be honest. I wasn’t trying to trick you on autonomous. I just mis-spoke. I meant to say fuel cell geofencing, because really when you think about it and what we hear so much of in terms of trucking and things like that, it’s sort of repeatable routes and things that, you know, happen again and again – maybe dedicated routes. And a lot of it has to do with fueling quite honestly.

You have an interesting approach to fueling though and I think you need to explain it, which is basically that’s the customer’s issue.

Not quite. We’re here to help. We’re here to help our customers make this transition.

Firstly, I’ll just touch on the autonomy for a second before we push it to the side.

We did recently make an announcement about a collaboration with a company out of the U.K. called A.I.Driver [Aldrivers Ltd] and they are a company that’s that’s got quite a few activities in port operations around the world with fully autonomous vehicles. However, they were fully autonomous I.C.E. vehicles. Now what we’re doing with them is preparing to deploy in the next 12 months or so the world’s first fully autonomous fully zero emission vehicles in ports. So that’s actually a pretty exciting development.

We’ve seen so many autonomous activity from Volvo with the, I would call it Lara, but it’s not Lara. It’s a different name – another woman’s name. But basically, you know, they have sort of the driverless version. It’s sort of a tow vehicle, I guess, of sorts, but it’s driven that way.

But I want to stay though with fuel cells with you because that’s obviously where you —

So, in fact, what you’ve just inferred, in terms of us, you know, leaving the hydrogen to the customers, this is actually how we’re starting the process of deploying vehicles. So we call these early seed sales or, you know, these early validation sales. That’s what we call them.

So when you sell a few vehicles for the customer to just kind of try the technology and make sure that they accept the way the vehicles operate and the way that they interact with the vehicles and all the rest of it, and the performance is as promised.

So these validation sales actually in most parts of the world, they’re happening in a scenario where the customer has already addressed the hydrogen availability issue or the hydrogen is already available to the customer. So from these early sales in the next 12 to 18 months especially, those deliveries are being made to customers that have kind of taken care of the hydrogen supply side.

We do believe in the coming few years as you go from those small volume validation sales and you start looking to kind of scaling into fleet operations really validate the technology as a meaningful part of your fleet, you really start to get to a situation where Hyzon Motors will be more active in helping the customer solve the hydrogen supply challenge because you need to start accessing significant quantities of hydrogen and you’ll start establishing substantial demand centers around fleet operations.

So with substantial demand on hydrogen in a given location, this encourages and justifies investment in hydrogen production and availability in that location. So we’re actually working with quite a few partners on the production and supply of hydrogen for the fleet operators to support the scaling up that will occur after the validation phase.

It’s actually an ideal place to scale it substantially. You can try it anywhere. But if you think about an ideal place to actually substantially replace the combustion engine, heavy vehicles, that’s a very attractive place to do that. And I think even in our announcement, we alluded to the fact that, you know, we can cover a lot of New Zealand in terms of reach for the vehicles with infrastructure that is going to be built here in the next two years. We’re not talking about infrastructure that takes ten years to build out, and that is, as you say, a function of the nature of the place itself.

So, in fact, the North Island, we can cover all commercial vehicle movement in the North Island even within the next 12 to 15 months, just with availability that will already be there. And then by the end of 2022, essentially all movements on the South Island too.

The South Island is less populated and has some more kind of stretched out locations that take a little longer to get to that point. But on the North Island of New Zealand, you’ll be able to pick any commercial truck route and it will be catered to with a fuel cell vehicle and a hydrogen station without question within 12 to 15 months.

So have you essentially solved the chicken and the egg question as far as, you know, fuel cell trucks and hydrogen, but no we don’t have hydrogen, so what can we possibly do with fuel cell trucks?

Have you beat that question?

We addressed that question in two different ways. Now on the first is, finding the partners like Hiringa in a scenario like New Zealand where it really stacks up to immediately go after a viable network. What we always spoke to, with Hiring about is the minimum viable network, right. So the minimum viable network there provides really quite adequate coverage for the North Island as a starting point.

But the second way we address it is we focus on heavily on back to base fleet operations in the near term. The back to base fleet operations mean that you only need one point of hydrogen availability for 100 trucks or 200 buses or something like that, right. So that’s a model that really works. And there are a lot of commercial vehicles that operate on back to base. It’s usually, the figure that’s bandied around is usually more than 30 percent of all heavy vehicles, actually functional like kind of a mode.

And then there are a lot of other vehicles that are functioning on pretty predictable point to point type of logistics that are interacting with intermodal facilities and all that sort of things. So a very substantial portion of trucks are serviceable without having a national network of hydrogen, but rather having hydrogen close to the point of that, you know, close to the base of that hub of activity or that kind of start, if you feel like. They emanate out from a point and come back, so you can have hydrogen in a central location and do a lot of good work.

And then, of course, when you have a viable hub of activity like that, and it’s located within two or 300 hundred miles of another viable hub, well, of course, you’ve got point to point fueling already, right. And with that, a handful of viable point to point fueling scenarios, you’re already building a network. The network will occur all on its own.

Right. The idea of back to bases is interesting because recently one of the competitors in the U.S. put together maybe four partners and said they were going to use a mobile hydrogen refueling – that could be green hydrogen, it was probably gray at best – and the idea was they would sort of truck hydrogen to the needed place.

Did you see any place along the supply chain for hydrogen where something like that makes sense?

Look, our view is that hydrogen is kind of the ultimate localizing force. It’s really very difficult to move economically. Moving liquid fossil fuels is fairly efficient from a cost structure standpoint. Hydrogen is not like that at all. So a tanker that might carry, you know, 25,000 liters or 6,000 gallons of a liquid fossil fuel – a diesel or gasoline – the same tanker can only cap 500 kilograms, you know, of hydrogens – a thousand pounds. So it’s just not the same kind of ah bang-for-your buck in terms of logistics cost for fuel value.

Now hydrogen’s more efficient in a vehicle than diesel by a kilogram, liter or a pound or gallon, whatever, but that’s still, that’s such a huge differential in the energy density of the fuel being moved that it makes the cost structures really challenging. So, in our view, it makes sense to make hydrogen as close to the point of consumption as humanly possible.

You have a partnership strategy that I’d like you to talk about, that is, partners pretty much on everything, except maybe the core fuel cell work, the stack work and that sort of thing.

This seems to be the way you’re going to market, you know, both in terms of truck builds and things like that.

Can you talk about partnership model?

Yes, that’s really important, Alan.

So I’m not sure that, you know, the growing team of engineers would think we don’t do anything besides build fuel cells. There’s a whole lot of other stuff that goes into engineering the complete vehicle solution, but I’ll describe it for you.

So, you’re right, that the heart of a commercial vehicle is the engine. And naturally, in a fuel cell electric truck or a fuel cell electric bus, that heart, that engine is a fuel cell. So clearly the very important component or the most important component in a commercial vehicle powered by hydrogen is the fuel cell itself. And that is indeed our core technology focus. However, it’s also very important how the power gets from that fuel cell, so it’s, the power is generated in the fuel cell through the conversion of the hydrogen. It’s obviously a static conversion. There’s no burning involved. How that power gets to the wheels, if you like, that’s also incredibly important.

So just nearly as important as the work that goes on to develop and build our fuel cell systems, is the work that goes on to design and manage that entire process of assembly and all the rest of it for the holistic vehicle systems. And this includes all of the controls, our ability to access the data and remotely in terms of the operation of the vehicle, the efficiency with which the electric motors and the region braking all work, et cetera.

So there’s a lot of vehicle level control and integration and design that occurs. And then we do, as you said correctly, we do partner on the manufacturing of the vehicle platform, such as the chassis, the cab chassis setups, you know. We like to buy glider kits and fit them out with our fuel cell system and our drive system. And we believe that’s an efficient way to get vehicles to the market. And we can use existing capacity in, you know, production of cabs and chassis, and the production of electric motors with vendor partners and the production capacity being built in hydrogen storage and all that sort of thing.

So we’ve tapped into those kinds of vendors, but we’re very much focused on the fuel cell system and how the fuel cell system gets its power to the wheel, if you like. And the efficiency and the nature of that entire operation. And the reason why we feel comfortable and confident in putting a partnership model around this is because really it’s the core fuel cell and the design of the entire vehicle running on the electric system that determines the performance of the vehicle, the fuel efficiency of the vehicle, and the durability and, therefore, how many miles you can get out of it, how many miles you’re going to get from that vehicle.

Right. Right. I want to get you out of here on this one.

You announced very recently that you’re already expanding in Upstate New York and Rochester, and Honeoye Falls. I have to mention for the audience that it’s not ironic, but it’s actually quite helpful that you took over the former General Motors fuel cell headquarters in Honeoye Falls and purchased —

Sure. So we’re fortunate that we were able to move in and, you know, refurbish and equip the former General Motors fuel cell labs in the Honeoye Falls area, because there’s a lot of infrastructure in these labs. And so we were able to, you know, refurbish and recertify these labs with all the hydrogen equipment and so on, and we’re doing, you know, testing and engineering in those labs now.

But we also needed a very sizeable production area because we don’t only have to build fuel cells, we need to do prototyping of trucks and so on. Because even though we have a partnership model on manufacturing at scale, we still need to develop the vehicle level systems. We still need to build the vehicle prototypes, the working prototypes that goes through a lot of validation and testing and so on before we’re able to outsource an assembly process to a partner like Fontaine Modification, which is our assembly partner here in the U.S. It’s group owned by Berkshire Hathaway. They’ve got lots of plants scattered around the country, the listeners probably know them well enough.

So before we issue work instructions and assembly, you know, kits, we have to get it right. And we’re doing that kind of prototyping here in the Rochester area as well. So, in fact, the new facility which we’re just refurbishing now is going to be setup not only for fuel cell production and fuel cell system production, which kind of turns the core fuel cell module into more of like a more recognizable engine replacement, but also hydrogen systems, you know, doing this small scale truck integration and testing. That’s happening here as well.

So definitely we need, we needed a pretty good size space and we found a terrific building which we were able to secure late last year and just, as I said, just refurbishing now and getting ready to be working in that building here in the second quarter.

Well, I’m going to close this out with something that comes up a lot when we talk about electrification, fuel cells and things like that, and that is, you know, your timing seems extraordinary. You came here, you know, and purchased the lab back in July of last year. But now the whole, the very quick way you managed to put together funding through the SPAC that’s such a big area, electrification for the blank check companies or the shell companies, if you will.

Very quickly, tell us how that came together and did you have a lot of suitors? Or did you talk to a lot of folks? What happened?

Sure. So, as you know, even from our earlier conversation, Alan, we were considering how best to bring the kind of capital into the company that we needed so that we’ve got a strong balance sheet to go and execute the plan, because we really needed to build facilities, highly experience automotive teams, and that’s what we’ve been setting out to do here in the last six to nine months obviously.

But when we considered the routes to raise capital, obviously through private investment or traditional IPOs or SPACs, you have to kind of consider the pros and cons of all of them. Obviously, we spoke with bankers and investors and advisors on all different fronts. And we did speak to a number of potential SPAC partners. We didn’t find a large number of really suitable candidates. We really needed a very, the right fit for us.

Now in funding the decarbonization, plus SPAC, we felt a very strong fit right from the outset. And basically, almost from the first meeting, it was almost a mutual commitment to really dig into this and see if it, you know, if it made sense, because it just, it felt like such a positive fit from the beginning. And actually, the process has been pretty enjoyable, I mean pretty taxing as well. Just tiring.

But working with that group, which is highly professional and organized and very focused on a mandate where they identify an operating business that had a core technology that really could cause a disruption or an acceleration around this energy transition kind of activities. It’s really just been, for us, ideal.

So we could have done it in a different way, yes. Are we happy with the way it’s come together? I would say also yes.

Yes. Well listen. Craig, thank you so much for your time for sharing so many specifics with us and just helping us understand how you really, the democratization of fuel cells which we probably never really fully defined that has actually come together for Hyzon Motors.

Best wishes to you as you move ahead.