Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems Second Quarter 2020 Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press Star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing Star and zero. I would now like to turn the conference over to Guy McAree, Director of Investor Relations. Please go ahead.
to Ballard's second quarter 2020 financial and operating results conference call. With us today on the call, we've got Randy MacEwen, Ballard's President and CEO, and Tony Guglielmin, our CFO. 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 a complete disclaimer and related information. Before we get started, I'd like to remind everyone that we're planning a virtual Investor and Analyst Day 2020 on Tuesday, September 29 this year.
Basic information regarding that event is now available on our website, and we'll be adding a dial-in information in the coming weeks to enable interested investors to participate in this live video stream day, which is set to kick off at 10:00 A.M. Eastern Time on September 29. On today's conference call, Randy's gonna provide a business update, and Tony will then review second quarter 2020 financials, followed by a Q&A session. I'll turn the call over to Randy.
Thanks, Guy, and welcome everyone to today's conference call. On our second quarter financial results, Ballard delivered top-line revenue of $25.8 million. Gross margin was 21%, adjusted EBITDA was negative $8.6 million, and we finished the second quarter with $170.3 million in cash reserves. Results were consistent with our expectations, reflecting some modest impact as a result of COVID-19. Consistent with the revenue cadence of the past few years, we expect a strong second half. Although we've seen some delays in certain programs and activities during the past quarter as a result of COVID-19, and although order intake has slowed during the pandemic, conversely, we've recently seen a significant increase in quoting activity, with the quality of opportunities improving and project sizes increasing.
Indeed, our sales pipeline has grown almost 50% in 2020 compared to the end of 2019, with most of that growth coming in the past few months. I want to repeat this point. During the pandemic, our sales pipeline is at record highs, up almost 50% over the past few months, with quoting activities particularly high across our heavy-duty motive segments of bus, commercial truck, rail, and marine. As noted on our last earnings call, in the context of the COVID-19 pandemic, our top priority remains the health and safety of our employees, contractors, customers, and partners. We continue to comply with the most conservative public health guidelines, including having most employees working remotely and implementing precautionary and prudent measures at our facilities globally.
We've preserved business continuity to align with our customer deliverables, including continued operations at our essential manufacturing and testing operations in Vancouver, as well as essential field service support to customers in China, Europe, and North America. On the supply chain side, we experienced some modest impacts in Q2, but have worked to mitigate overall 2020 risk, including by increasing our inventory positions in key materials. Although the situation remains fluid, we're not expecting any major supply chain disruptions for the remainder of 2020. On the demand side, while we continue to experience some modest delays in customer projects, programs, and order intake, we believe the overall COVID-19 context will represent long-term demand acceleration, as I described in a recent blog posted on our website. There have been several important policy and commercial developments in our target geographic markets since our last earnings call.
I want to review these for you. Let me first start with Europe, where momentum continues to build. On May 27, the European Commission proposed its EUR 750 billion economic recovery plan with the European Green Deal at its core. The plan puts a focus on kickstarting a clean hydrogen economy with renewable hydrogen, cleaner transport, and logistics as key elements. On July 8, the European Commission released a plan entitled A Hydrogen Strategy for a Climate-Neutral Europe, which cemented hydrogen as a key priority to achieve the European Green Deal and a clean energy transition. The plan sets out a phased approach to develop renewable hydrogen.
In the first phase, from 2020 up to 2024, the strategic objective is to install at least 6 gigawatts of renewable hydrogen electrolyzers in the EU, and the production of up to 1 million tons of renewable hydrogen to decarbonize existing hydrogen production and facilitate the uptake of hydrogen fuel cell buses and heavy trucks. In the second phase, from 2025 to 2030, the strategy is for hydrogen to become an intrinsic part of an integrated energy system, with strategic objective to install at least 40 gigawatts of renewable hydrogen electrolyzers and the production up to 10 million tons of renewable hydrogen.
In this phase, renewable hydrogen is expected to gradually become cost competitive with other forms of hydrogen production, and the plan calls for parallel demand-side policies to support scaling of trucks, rail, and maritime transport applications, along with a build-out of a network of hydrogen refueling stations. In the third phase, from 2030 onwards and towards 2050, renewable hydrogen technology should reach maturity and be deployed at large scale to reach all hard-to-decarbonize sectors. The European Commission expects investments over the next decade to 2030, could range between EUR 24 billion and EUR 42 billion for electrolyzers, EUR 220 billion to EUR 340 billion for scaling up solar and wind energy production capacity, and EUR 65 billion for hydrogen transport, distribution and storage, and hydrogen refueling stations.
We can now add Germany, Norway, and Spain to the growing list of countries that have announced hydrogen strategies or roadmaps, with each of these countries recently unveiling their respective national hydrogen strategies. Germany announced its national hydrogen strategy with 38 measures across the hydrogen value chain, including fuel cell vehicles. Germany also announced a massive COVID-19 stimulus package, including EUR 9 billion earmarked for green hydrogen and a commitment to 5 gigawatts of green electrolyzer capacity by 2030, with a further 5 gigawatts by 2040. Norway's strategy has a focus on the maritime sector, heavy transport, and industrial processes as the most relevant uses for hydrogen. In July, Spain announced its hydrogen roadmap, an EUR 8.9 billion plan through 2030, with 57 specific measures and specific goals for 2030.
There's also a growing call in the U.K. for a comprehensive hydrogen strategy, including for fuel cell electric vehicles, particularly targeting zero-emission bus fleets and strategies for decarbonizing heavy goods, vehicles, shipping, rail, and aviation. As an example, please see the recent report entitled, Driving Change: How Hydrogen Can Fuel a Transport Revolution, prepared by the Centre for Policy Studies. During the quarter, Ballard received follow-on orders from Wrightbus, a long-time bus OEM partner, for 15 additional modules to power buses planned for deployment in the U.K. At the present time, we have orders on hand from Wrightbus for a total of 50 modules to power U.K. buses in London, Aberdeen, and other cities. Ballard is well positioned in the European market, where we are currently powering 65 fuel cell electric buses in Europe, with aggregate mileage of over 7 million kilometers.
Let me now turn to the United States. In California, on June 25, the California Air Resources Board passed its landmark Advanced Clean Truck regulation, requiring truck manufacturers to transition from diesel trucks to electric zero-emission trucks, with a plan for every new truck sold in California to be zero emission by 2045. Manufacturers who certify medium and heavy-duty chassis or complete vehicles with combustion engines are now required to sell zero-emission trucks as an increasing percentage of their annual sales in California, starting in model year 2024. For 2024, 9% of all on-road Class 4-8 truck sales must be zero emission, incrementally scaling up to 50% for 2030 and 75% for 2035. Similarly, for Class 7/8 tractors, the requirements are 5% for 2024, 30% for 2030, and 40% for 2035.
In the past few weeks, 15 states, including California, New York, New Jersey, Massachusetts, North Carolina, and Pennsylvania, have signed an MOU committing them all to mandating that 30% of heavy- and medium-duty trucks sold must be zero emission by 2030, with all heavy and medium-duty truck sales being zero emission by 2050. Momentum is now building throughout the U.S. for decarbonizing commercial trucks. There was also important progress in California over the past few months on the zero-emission bus front. Several California transit agencies, including Orange County, AC Transit, and SunLine, published zero-emission bus rollout plans in compliance with CARB regulations, with many of these plans expecting to use fuel cell electric buses going forward. For example, in June, OCTA, which operates more than 500 buses serving a population of approximately 3 million people, unveiled its zero-emission bus rollout plan.
In its plan, OCTA noted that a 100% fuel cell electric bus fleet scenario showed a lower overall cost than a mixed fleet scenario and than fuel cell battery buses on a standalone basis, and that fuel cell electric buses offered extended range and a better match to their operating parameters. By comparison, OCTA noted that many routes cannot be effectively served by battery electric buses without mid-route charging, and that the current range of battery electric buses may require more vehicles and drivers than fuel cell electric buses to meet similar service levels. The plan also noted that a 100% fuel cell electric bus scenario more closely approximates the current CNG bus range, CNG bus operations, and current CNG business-as-usual scenario.
Based on the results of their analysis, OCTA's zero-emission bus rollout plan focuses on using 100% fuel cell electric buses for fixed route operations. In California, Ballard is now powering 37 fuel cell electric buses with cumulative mileage of over 2 million kilometers. Now let's turn to the large China market. First, I'm pleased to confirm that the Weichai Ballard joint venture has now begun production activities, together with assembly of next generation LCS fuel cell stacks and LCS-based modules. We expect all manufacturing and assembly processes to be optimized, and the start of a production ramp through the remainder of this year. For Ballard, this has been something of a soft launch, given the travel and social distancing restrictions resulting from COVID-19. However, we anticipate a more formal opening ceremony at a future date to celebrate the commissioning of this important operation.
As a reminder, the joint venture is located in the city of Weifang in Shandong Province, and is housed in a newly constructed 19,200 square meter facility, currently staffed with approximately 130 employees. This is an exciting step forward in our partnership strategy with Weichai, and our supply of fuel cell products for buses, commercial trucks, and forklifts in the China market. In parallel with the work of the joint venture, Weichai has built 4 hydrogen refueling stations, or HRSs, in Shandong Province to support 7 fuel cell electric bus lines, with a total of over 200 fuel cell electric buses that have already traveled more than 1.2 million kilometers to date.
There's also work currently underway to develop a series of fuel cell electric vehicles for the China market, including 4 fuel cell bus models, 2 heavy duty fuel cell truck models, and 2 logistics truck models, all of which are being developed at Weichai's OEM subsidiaries, Zhongtong Bus, Asiastar, and Sinotruk. These subsidiaries, along with Weichai's extensive network of third-party bus and truck OEM customers, provides significant market opportunities for the sale of fuel cell modules and stacks to power the growing range of fuel cell electric vehicles expected to be deployed in China in the coming years. We're very excited with our initial progress with Weichai in the large China bus and truck markets. We're also excited about continued progress at the Synergy-Ballard joint venture in Guangdong Province, in which Ballard holds a 10% ownership interest.
As a reminder, that JV is manufacturing Ballard's previous generation FCvelocity-9SSL fuel cell stacks. Subsequent to the quarter, we received a follow-on order for $7.7 million of MEAs from this joint venture, given growing market demand. On the China policy front, we're still awaiting the release of the updated national policy on hydrogen and fuel cells, which has been delayed. It is now expected this quarter. There has, however, been continued progress on the provincial and local levels.
On June 24, Shandong Province released the medium and long-term development plan for the hydrogen energy industry in Shandong Province, 2020-2030, by which the province targets the adoption of 3,000 fuel cell electric vehicles and 30 HRSs by 2022, 10,000 fuel cell electric vehicles and 100 HRSs by 2025, and 50,000 fuel cell electric vehicles and 200 HRSs by 2030. Qingdao City in Shandong Province has also committed to a significant hydrogen and fuel cell electric vehicle plans, including 2,000 fuel cell electric vehicles, 10 fuel cell bus lines, and 25 HRSs by 2025, and 8,000 fuel cell electric vehicles, 30 fuel cell bus lines, two fuel cell tram lines, and 50 HRSs by 2030.
During the second quarter, Guangzhou City, with a population of 11 million people, released its hydrogen energy industry development plan, 2019 to 2030. This is an aggressive plan that sets 2030 targets, including for fuel cell electric vehicles, to account for at least 30% of public transport and sanitation vehicles and more than 100 HRSs. In terms of metrics in China, including field deployments, there are approximately 3,200 commercial trucks and buses with Ballard fuel cell technology currently operating in China. To date, these vehicles have traveled an estimated 40 million kilometers on China's roads, with vehicles monitored by Ballard, delivering approximately 98% fuel cell availability in the first half of the year.
We're also continuing to power the world's first fuel cell tram line that went into service on the Gaoming line in the city of Foshan, Guangdong Province. These 5 trams have now accumulated over 50,000 kilometers of service. To accommodate the growing number of fuel cell electric vehicles operating in China, we estimate today there are now 52 hydrogen fueling stations in service and an additional 50 under construction. I would like to note as well, that earlier this week, we announced that fuel cell electric vehicles powered by Ballard have now cumulatively traveled over 50 million kilometers, an industry-leading indicator of durability and performance, and enough to circle the globe 1,250 times. As noted earlier by Guy, we're planning our virtual Investor and Analyst Date 2020 on September 29.
We're looking forward to this event, where we'll have more time to provide you with enhanced visibility on our corporate strategy, updates on progress against our key markets and our towns, our unique selling proposition and sustainable competitive advantages, our current and planned value chain positioning, our technology and product roadmap and cost down plans, our progress on the implementation of advanced manufacturing here in Vancouver, progress at the Weichai Ballard joint venture, and progress in our ESG initiatives. This will be an exciting day, and we look forward to having the opportunity to hear from our senior leadership team on the impressive work that Ballard is doing to build an attractive business. With that, I'll turn the call over to Tony to briefly review the Q2 financials.
Thanks, Randy, and good morning, everyone. Top line revenue in the second quarter was $25.8 million, up 9% year-over-year. In the quarter, power products revenue was up 62%, driven by heavy-duty motive, which was up $6.1 million to $12.5 million. This was due primarily to higher shipments of fuel cell products to China. Just a reminder, too, on the treatment of revenue from sales to our Weichai Ballard joint venture in China, in which we have a 49% interest. We recognize 51% of the revenue upon shipment of products by Ballard to the joint venture, while the remaining 49% is only recognized when the JV sells and ships products to its end customers in China.
As of the end of Q2 this year, $16.3 million of revenue associated with product shipments to the JV in relation to the $44 million order placed in May 2019, has yet to be recognized. In addition, $2.1 million of MEA revenue related to the $19.2 million order received in December 2019, has also yet to be recognized. We expect this total of $18.4 million in revenue to be recognized as the associated products are sold and shipped by the joint venture to its customers. Turning to Tech, Technology Solutions, the decline in TS revenue to $9.8 million in Q2 was due primarily to decreases in revenue from the Audi program, the technology transfer program with our Weichai Ballard JV, and from the development program with Siemens.
This decline reflects both a reduction in the scope of certain programs, given the planned completion of some activities, as well as the impact of customer-requested program changes and deferrals resulting from COVID-19, which included the impact of COVID-19 travel restrictions. As a result, we expect full-year revenue for Technology Solutions to be down on a year-over-year basis. Gross margin was 21% in Q2, down 2 points year over year. This decline was largely the result of the shift in product and service revenue, including the lower TS revenue. Cash operating costs increased 38% year over year to $11.6 million. This was primarily attributable to increased expenditures in technology and product development work related to our next generation stacks and modules for the bus, truck, train, and marine markets.
Adjusted EBITDA in Q2 was -$8.6 million, a decrease of $3.6 million compared to the same quarter last year. This also included Ballard's $2.9 million share of losses related to the Weichai Ballard joint venture. Ballard's net loss in Q2 was -$11.4 million, compared to -$7 million in Q2 last year. Earnings per share was -$0.05 in Q2, compared to -$0.03 in Q2 2019. Both the net loss and EPS numbers include the same Ballard share of losses from the Weichai Ballard JV. Cash used by operating activities was $14.8 million in Q2, consisting of cash operating losses of $5.3 million and working capital outflows of $9.5 million.
The change in working capital was largely due to higher accounts receivable related to timing inventory, as Randy mentioned, higher inventories in anticipation of shipments in the second half of the year. In terms of liquidity, during Q2, we generated additional net proceeds of $12.2 million from the ATM program we launched in Q1, ending Q2 with cash reserves of $170.3 million and no debt. We ended Q2 with an order backlog of $155.5 million and a twelve-month order book of $101 million, down slightly from Q1 as a result of lower order intake in the quarter due to COVID-19.
Lastly, I wanted to add that during the quarter, we rang the opening bell on the Nasdaq Stock Exchange, virtually, of course, to celebrate the company's 25th anniversary on Nasdaq. With that, let me turn the call back over to the operator for questions.
Thank you. We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. Our first question comes from Craig Irwin with Roth Capital Partners. Please go ahead.
Good morning, and thanks for taking my questions.
Good morning.
Randy MacEwen, Jo Bamford, CEO of Ryze Hydrogen is a really good customer of yours, and he's out there doing 3,000 fuel cell buses, over the next few years. It seems like there's pretty good regulatory support in the UK, and they're trying to work out the funding for that, although it is, it is apparently in their stimulus. Can you maybe just help us with a little visibility on the potential tempo of orders, if we do see the funding materialize as expected? Are there many other customers like this that have aggressive programs, to serve the European opportunity?
Craig, good morning, and thanks for the question. You're right, Jo Bamford has been a great customer for us and a great friend, in fact. He's very active in the U.K. market, agitating to have zero-emission buses, not just 3,000, potentially up to 5,000 zero-emission buses, over the next number of years, looking for a pretty significant portion to be fuel cell buses, and is quite influential in that market. One interesting thing about Jo is that not only does he own Wrightbus, but he also owns a company called Ryze Hydrogen, which is providing hydrogen fueling station, including for an existing project with Transport for London. Jo is quite active in that market.
It's a local producer, manufacturer of buses, and has very good market share in that market. You know, in terms of the cadence of orders, I think it's a little too early to comment on that. We're pretty excited about what we're seeing in their sales pipeline, with different cities in the UK as well as in Europe, generally. They're quite active now, looking at other opportunities in Europe. To the second part of your question, of course, Wrightbus is a great leader in this market, but there are others as well.
So you're seeing Solaris is very actively bidding in a number of key countries on mainland Europe, and you've got Van Hool as well, who's been very active for a long period of time, continuing to look at opportunities for fuel cell buses and have launched some very good projects with very good products. So I think we're going to see a significant uptick in Europe as well as the U.K. over the next couple of years. When we look at the growth that I mentioned earlier in our sales pipeline, a very significant portion is coming from the bus market, and we're showing a strong contribution from Europe, I would suggest over the next 12-36 months.
Thank you for that. The next question I wanted to ask is about the China market, right? Thank you for the update on the infrastructure in China. You know, I know that that's very important because of the structure where people have to run the buses before they actually get the official release of funds. Can you maybe share with us where you think the discussions for regulatory support stand right now? You know, I know there's a lot of optimism that this is gonna be reinstated, what do you think has to happen, or what's the potential timing for clarity around that?
Yeah, Craig, this is a very active discussion right now in China, day-to-day. I know there are a lot of players, a lot of different provinces and key centers that are positioning to, you know, secure support as demonstration regions in China. It's a very sensitive moment, I would suggest, in China right now on this front, and I think we'll see clarity within the next 60 days.
Excellent. That's a short timeline. I like that. Next question is Audi. Audi did just trickle down a little bit this quarter. I guess we can call it Audi Volkswagen has been a very good customer for you on the services side, and if we track all the revenue and the capacity from the different contracts that they've announced, they really look like they're starting to bump up against the end of their capacity at this point. Many of us expected there to be a commercial endpoint for Audi Volkswagen. Do you expect similar services opportunity to recur, maybe with Audi or another? you know, maybe will this shift into a different type of relationship where you might provide component or manufacturing support?
Yeah, the plan, Craig, was for the Audi development program to complete next year, and certainly we continue to track to that plan. There has been some reduced scope this year. You know, Audi has had some budgets trimmed as a result of some of the financial distress in the overall markets for automotive, particularly in light of COVID-19. We've been quite responsive to some of their requested changes. I think it's we're gonna let Audi lead the communications on what their plans are for fuel cell passenger cars. More broadly, what I would say is that not just Audi, but the passenger car OEMs generally, we've seen a very strong shift from many of these companies to also look at how they can leverage their technology for the commercial vehicle market.
That's something that I think increasingly we're seeing from the passenger car OEMs. I think longer term, we're still quite bullish about the passenger car market, particularly when you look at, you know, vehicles that have high utilization. When you start thinking about digital, connected, autonomous vehicles with more power demand, just to support electronics on board, but are on shared mobility platforms and being used, say, 15 to 20 hours a day, rather than our typical vehicle today of 1 hour a day, utilization rates go up, and the need for fast refueling and long range become important. Longer term, we're very excited about the passenger car market. That's an industry that is very challenged right now in 2020. I think there's still a lot of budgetary issues we're seeing in the near term from those type of enterprises.
Great. And then last question, if I may, before I jump back in the queue. I appreciate the discussion about the $18.4 million in deferred revenue recognition from joint venture revenue. Can you maybe discuss the gating factors for us to see this revenue recognized for Ballard? And what is your current thinking about the tempo of release for that $18.4 million?
Yeah, that's a great question, Craig. There are a number of gating factors there. One, of course, is to make sure that the products that are assembled at the JV are ready for the market. That's really optimizing production and ramping through production. Second is making sure that the vehicles that are being certified, you know, go through the right steps to make sure that customers have confidence. Even though we're talking about in the case of Zhongtong Bus, Asiastar Bus, and Sinotruk, companies that are within the Weichai Group, of course, we need to make sure that they're comfortable doing the testing, understand the safety protocols, understand operations.
In some cases, these are, you know, new platforms, new customers, and so they're, you know, getting familiar with it. That's why we're pretty excited that there are 200 vehicles already on the road, that are getting real-life experience and clocking kilometers, and the customers are getting comfortable. Then there's other customers outside of the Weichai Group that are being introduced to the Weichai-Ballard joint venture products as well, including, for example, Yutong, the world's largest bus OEM. It's just a matter of Weichai-Ballard joint venture, you know, working with these end market customers and it, you know, beyond the JV, and making sure that they're ready to take those at the right time.
The other aspect of this has been really getting the hydrogen fueling stations in place as well. You know, there were 4 in Shandong right now. There's, you know, plans that I mentioned earlier to scale up the number of hydrogen refueling stations. That's gonna be critical. What I expect you'll see likely just in Shandong province alone, is something in the range of 14 or 15 cities that do fairly sizable bus demonstration projects, you know, in the next couple of years, these initial orders will be the first part of that.
Yeah, Craig, it's Tony here, too, just to supplement Randy's comment. You know, in terms of the timing, I, as Randy alluded to, you know, there's a number of gating items that are, including, of course, the fact that the joint venture is really only starting to become, you know, fully operational. But certainly we will start to see that $18.4 million hit our books in the second half of the year and perhaps into the early 2021, which kind of ties a bit to Randy's comment about the typical back end of the year being a little hot stronger than the front end of the year. This will be a contributing factor to why we're feeling a little bit more bullish on the back end as well.
Okay. Just a point of clarification, do we need to see a positive outcome on the China regulatory side for that to be released in the fourth quarter? Or is this expected to be released under most circumstances?
Yeah, we do expect, of course, the policy to come out on the timeline. If it was deferred, I don't expect it to have an impact here on this revenue piece we're talking about, but it would have an impact on, you know, some order uptake in later this year for the JV.
Great. Thanks again for taking my questions. Congrats on the progress.
Thank you, Craig.
Our next question comes from Amit Dayal with H.C. Wainwright & Co. Please go ahead.
Thank you. Good morning, everyone. I appreciate you taking my questions. Look, with respect to the revenue split, you know, for 2020 between China and other markets, would it be possible to get some color on, you know, how that may shape up for 2020, and then going into 2021, as you ramp up in China, you know, how that picture may look like at the end of next year?
Yeah, sure, Amit, it's Tony here. For 2020, this year, you know, China, and then when I say China, I'm including here not only the power product sale, but of course, the ongoing Technology Solutions program with Weichai, which is of course, revenue, or a good portion of our TS revenue. China this year will probably be somewhere in the order of 60% odd of our revenue this year, you know, plus or minus for 2020. For 2021, we actually expect to see Europe start to become a larger portion of the total revenue contribution, and that's for two reasons.
Number one is, you know, as Randy was describing, we are starting to see some good momentum in the European bus market. We do have, you know, a fair amount in our, in our order book, in our backlog related to Europe. The other one is just with regard to China revenue, particularly, as you'll recall, the revenue that we're booking in Ballard related to Weichai will become MEA revenues. It's already now, you know, in the second half of the year, MEA revenue. Proportionately speaking, MEA revenue, while significant in volume, is a lower dollar value. That shift next year will start to, I think, you know, at ballpark, even out. We would expect, you know, beyond 2021, Europe will become an even increasingly larger portion.
Yeah, Amit, it's Randy here. Thanks for the question, and just to supplement a few points. You know, our strategic objective is to have balanced revenue in our key geographic markets. We characterize our key geographic markets as China, the European Theater and California. You know, going forward, if you look to kind of over the next five years, I'd expect to see a balance of about 40% of our revenue coming from China, about 40% coming from Europe, and about 20% coming from, you know, North America, but primarily California. That's the first point.
I think the second point, too, that Tony mentioned is, while the revenue from China at the Ballard level becomes somewhat constrained because we're selling MEAs rather than full systems, there's significant value creation occurring at our joint venture. We expect to see, of course, future, you know, value creation and value distributions, either dividends or cash distributions coming from the JV. You know, first, we'll see EBITDA contribution, then we'll see cash distributions, and ultimately, we would expect to see that platform potentially to IPO and to see value creation there as well.
Understood, Randy. Yes, that's how we've kind of modeled it out as well, you know, for our forward year projections. Good to hear this mix and the, you know, the diversification that you are starting to see already, which, you know, looks good from this point right now.
Yeah. I'll just add to that. You know, the sales pipeline that I referenced earlier, you know, a lot of that growth that we saw, you know, over the last few months, is coming from the European market.
It looks like, you know, last year, the discussion was about China and all the policies over there. You know, in the last few months, it looks like Europe is sort of superseding what China is doing.
Well, what's interesting is that you've got, you know, very strong European policy, very strong policy in California, and we will see a new China policy. Within this, you know, within the span of, you know, a relatively confined period, let's call it four or five months, you're likely to see all three of our key regions come out with strong supportive policy.
Yeah, looks like it. When we look at the pipeline that's building against, you know, this environment, you know, how should we think about that pipeline converting to orders and backlog? Maybe it's a little early now, but, you know, are there any catalysts that potentially move some of these from pipeline to orders quickly, or will these, you know, take a little more time, I guess?
Yeah, the type of projects we're typically involved in, the sales cycle, you know, it's a little protracted. It's not something that happens over a couple of week period. We've seen rare instances of that, but it's the exception, not the rule. What I can say, looking at the sales pipeline, it is very encouraging for 2021 and 2022, in terms of the growth rate that we'll see in the heavy-duty motive segment.
Got it. You know, competition appears to be coming up to recent IPOs over here in the U.S. markets. You know, I'm reading about, you know, players emerging in China as well, both on the infrastructure side and maybe on the, you know, vehicle side as well. You know, your thoughts on how you are positioned relative to some of these players who are, you know, getting a little bit more, press and, you know, promotion, et cetera, right now?
Yeah, this is something we want to spend a bit of time on in the September IR day, is really clearly articulating the unique selling proposition that Ballard has and the very strong position we think we have from a competitive differentiation. One, I'll just highlight here, two maybe, is just the real-world road experience we have, obviously, with 50 million kilometers of vehicle experience on the road with Ballard technology inside, industry-leading, of course. The durability, actually having vehicles in the field, operating over 38,000 hours as an illustrative example, is an industry record that, you know, from our understanding, I'm not aware of any others.
You know, when you look at kind of the field experience we have, performance and durability in these heavy- and medium-duty motive applications, I think it's very compelling.
Got it. With respect to the JV, are there any additional investments that you need to be making, you know, into the plant? You know, at what point does this start operating sort of on its own cash flows?
The, you know, our cap, as you recall, you know, we do have the requirement to make capital contributions into the JV through next year. We made an additional capital contribution in the quarter. We do have, you know, I don't have the number right in front of me, I apologize, but, you know, if it was in the neighborhood of $30-odd million left to contribute, that's the contractual capital contribution, which we will make, but we're not anticipating any additional cash requirements beyond what's already, what's already included in our disclosure around the ongoing commitment.
In that regard, we think, you know, with the JV starting to move up, you know, move more product sales, it will become cash flow breakeven, you know, and EBITDA contributing in the next couple of years. That's from our perspective, we expected, and Randy MacEwen alluded to some dividends, which probably will come at the, you know, at the end of the 5-year period. But beyond those contractual equity commitments, no additional cash call.
Understood. Thank you for that, Tony. That's all I have, guys. Really appreciate you taking the questions. Thank you so much.
Thanks, Amit.
Our next question comes from Rob Brown with Lake Street Capital Markets. Please go ahead.
Good morning.
Morning, Rob.
Just wanted to dig in a little bit more to the sales pipeline. You talked about quoting larger size orders. Could you just kind of characterize what's happening in the marketplace and what kind of size order ranges are you seeing? Are these more real deployments moving from test deployments, or what are you seeing in the marketplace at this point?
Good morning, Rob, and thanks for the question. Yeah, I think there's a couple elements there. One is that I think there's a recognition that in order to drive down the cost of hydrogen, you need larger size deployments of buses and commercial trucks, even on the rail and marine side, so that you have higher demand for hydrogen and higher utilization of your fueling infrastructure costs. I think, you know, that's been recognized. We're seeing larger projects to get better economics overall, including the hydrogen costs. Like you point out, we've been at this at Ballard for some time with demonstration projects, particularly in the U.S. and Europe, and we're now seeing the next step of that.
Rather than having, you know, 10 and 15 buses, you know, it wasn't long ago where 2 to 5 buses was a typical deployment. Now we're, you know, in the last few years, that's scaled up to, say, 10 to 15. Now we're looking at, you know, hundreds of fuel cell buses going forward and thousands eventually for larger scale deployments. You know, when we've got 3,200 commercial trucks and buses operating in China, you know, it's a very good data point that the numbers are starting to move north. The other thing that's really quite interesting outside of mobility is stationary is showing some significant pickup in interest as well, with much larger opportunities on the stationary side as well.
Okay, good. Thanks for the color. Then for the China JV ramp, in production, and now that you're ramping, could you give us a sense of how many units and-or kind of the plan of the ramp, and then, maybe when you think you can start to see visibility on the cost down with volume ramp that you've sort of planned for? How do you see that playing out?
Yeah, I apologize. I'm gonna have to ask you to be a little patient on this one. You know, Weichai is, you know, would like to get ahead first on the communication side, we wanna be respectful of that request. Certainly at the September IR day, we'll provide more visibility on this front.
Okay, good. Thank you. I'll turn it over.
Great. Thanks, Rob.
Our next question comes from Michael Glen with Raymond James. Please go ahead.
Hey, good morning. Hey, Randy, can you just give some update in terms of medium- and heavy-duty truck market? Clearly, you have a strong alignment in China with a partner to grow in that market. As we think about Europe and North America, how should we think about your approach to that opportunity? Should we think about another JV with an incumbent OEM or other approaches that you're thinking about there?
Yeah, Michael, thanks for the question. It's a really interesting time right now, where you've got basically the large truck OEMs, as well as all the Tier 1 suppliers, looking at this market very carefully. I think there's a recognition now with California and with Europe having very strong policy that requires zero emission, and with batteries, in our view, not able to satisfy many of the use cases, that fuel cells are really the only zero-emission option longer term. We're seeing all these OEMs and Tier 1 suppliers carefully studying and actually have accelerated their review of the fuel cell opportunity for commercial trucks. I think what you can expect is a very comprehensive relationship that Ballard will strike with a major name brand partner, particularly with strong European exposure.
We're not in a position yet to comment more on that, but there's a lot of work that's been going on, you know, for the last 6 months on this front. We expect significant more work for the remainder of 2020. We'd expect to be in a position later this year to provide, you know, some really good visibility on what I think is perhaps the most exciting part of our business plan going forward.
Okay. No, that's very encouraging to hear. Then, clearly, you know, you've talked about Europe with respect to what's taking place with hydrogen. Can you speak to perhaps some of the specific strategies in place at Ballard to ensure that you receive your fair share of these opportunities? How should we think about the competitive environment over there? We've seen a number of other companies step in with some capital deployments towards fuel cell development. How should we think about the competitive environment with these customers as well?
Sure. Yeah, no, we're really looking at opportunities to increase our presence in Europe. You know, on the fuel cell side, we do have obviously an existing facility in Hobro, Denmark. We have our Marine Center of Excellence that will be commissioned in the coming months. A lot of activity in the marine market, by the way. I think that market will surprise to the upside. I think, you know, as you look at our M&A strategy, particularly, we're quite active looking at M&A opportunities, and a number of them are in the European market. I think this will help strengthen our European positioning. Then, you know, you just kind of look at the deployments and the market share.
We're probably somewhere around 85% market share for fuel cell buses that have been deployed. We're also looking at, collaboration and consortium models. You've seen what we announced last year with the H2Bus Consortium, where we brought together, you know, really leading players, including Nel on the hydrogen fueling side and electrolysis side, including Ryze Hydrogen, as I mentioned earlier, from Jo Bamford. Including on the tank side, Hexagon, and you know, Wrightbus obviously, with the buses.
You know, bringing together a consortium to lean forward on volumes, lean forward on the cost structure, and to drive to about a 375,000 EUR fuel cell bus cost with a 5 EUR per kilogram of green hydrogen delivered to the vehicle, you know, maintenance costs of about EUR 0.30 per kilometer, which is one we continue to work to drive down. There are a number of different ways we're approaching this. I think coming back to your initial question, Michael, about the truck market and the collaboration we're looking at in Europe with a key player for the commercial truck market tied with our own physical presence and capabilities in Europe looking to strengthen that and grow our European business as well as through M&A plus consortium models. We're working on all three of these parallel.
Okay. As we think about, and specifically to the competitive environment, there's been some larger entities, they've significantly increased their capital deployment to fuel cell development. Are there ways that we can think about benchmarking what you have in terms of a product versus what they have in development or they're bringing to market?
I think when you look at most of the companies that are looking to bring fuel cell technology to the market, regardless of whether it's China, Europe, or North America, in most cases, those technologies have been designed for the passenger car market, 5,000 hours of durability. We've designed our fuel cell technology for 30,000-40,000 hours of durability. I don't think there's any dispute that Ballard is way ahead in the market on fuel cell technology, the core fuel cell technology, stacks, MEAs, plates, understanding what balance of plant components are required to match up with the stacks, and then optimizing, you know, your control strategy at the module level as well. I don't think there's any doubt in the market that we are the leader on durability for these heavy-duty motive markets.
If you kind of look at the technology and product offerings for others, you know, one of the key questions I would ask is, you know, what durability has been proven? You know, they're gonna need to invest, as you point out, significant capital over the number of years, while we continue to improve to our next generation.
Okay, thanks for the info. I'll go jump in to Keith.
Great. Thanks, Michael.
Our next question comes from Rupert Merer with National Bank Financial. Please go ahead.
Good morning, everyone.
Good morning.
Given one of your previous answers, you may defer this question to later, but looking at the JV in China, how long do you think it'll be before you might lean on that JV for product to sell outside of the Chinese market?
Rupert, thanks for the question. Great question. You know, I think one of the really kind of constructive things we did in how we structured our arrangements with the Weichai Ballard joint venture was to have that optionality. The JV is exclusive, the exclusive platform, both for Weichai and Ballard, for bus, truck, and forklifts in the China market. Ballard has exclusive rights to purchase those products outside of China. What that means is, as we're looking at scaling in Europe and scaling in North America and other markets, we're seeing, for example, India becoming very active. As we're seeing these markets scale, we have the ability to, you know, manufacture in region, or, you know, continue to manufacture in Vancouver if we choose, but we also have the optionality of sourcing from the JV.
As we'll describe in September, the JV has significant production capacity expansion capabilities as well. I think it provides us a lot of optionality. I think we'll have that optionality as soon as 2021. You know, I think it'll be a function of how are we satisfying the market requirements in those specific markets? What's the most cost-effective way, and what is the market looking for? We do see some instances, of course, where markets are becoming much more insular and looking for more locally produced product.
Yeah, Rupert Merer, Tony Guglielmin here. If I just to supplement, you know, what you were driving to, and Randy MacEwen combined, certainly, we have the right to buy finished product, of course, from the joint venture for the rest of the world. You know, beyond that, though, we also are benefiting substantially from supply chain. The joint venture, our joint venture in China, has qualified a number of low-cost balance of plant. Recalling that the balance of plant in a module is probably 60% to 70% of the total cost of a module. Even if we're not going to be, quote, unquote "buying modules from the joint venture," we are benefiting already from new supply chain.
That's driving down our current balance of plant costs that we're actually using in our current product today for the rest of the world. It's really a combination of not just with the flow product, but also supply chain. We'll probably have, again, back to not to punt too far, but we'll be getting into, particularly getting into that balance of plant cost down in September, and we'll give you some more concrete examples. We're seeing that benefit already.
Yeah, there's been very strong progress. It's been unbelievable how quickly, you know, things operate in China, particularly with the Weichai supply chain muscle. The conversion of some of our balance of plant components over to China-sourced materials at significantly lower costs, while still maintaining quality, has been a key deliverable, and a lot of progress made so far in 2020 on that. It also means we're getting the advantage of the scale that comes from the China market being applied on those balance of plant components to these other markets as well.
I may be asking for a bit of a preview here, feel free to defer this question as well. If you look at where your costs are today and where they need to be in the future, what's your sense of how much of the cost out will come with supply chain and scale versus how much work needs to be done on the R&D side?
Yeah. What we'll show in September is about a 70% cost reduction, Rupert, at the stack level, and about a 70% cost reduction at the module level. We'll allocate what portion of that comes from design engineering changes versus supply chain versus volume assumptions. The volume assumptions will be tied out with our business plan. These won't be, you know, unreasonable volume assumptions. In aggregate, they roll up to about a 70% cost reduction. What's really interesting is on the stack side, we call it our three by three program. On the stack side, we're very well advanced, and I would say, you know, probably 80%, 90% of that cost reduction is highly probable at this stage with very low development risk.
Great. Thanks for the color. I'll get back in the queue.
Thanks, Rupert.
Our next question comes from Aaron MacNeil with TD Securities. Please go ahead.
Good morning, all. Thanks for taking my questions. Randy, you mentioned the strong line of sight in Europe over the next few years. I think Tony mentioned earlier that this was partially due to projects already in the backlog. I guess I'm wondering, you know, from a backlog perspective, how we think that European opportunity will play out, and do you expect that COVID will have a lingering impact on the trajectory of your overall backlog over the coming quarters? Or do you see an inflection point now that things have somewhat stabilized?
Good question, Aaron. Thanks for the question. I think we'll likely see, you know, some of the COVID challenges we've seen, including with some of the European customers, likely clear in 2020, with that cloudiness disappearing by the end of the year and much more clarity in 2021. What I would say is that is, if you look at the cadence or the sequence of growth in the European market, the bus market will be first. The commercial truck market, you're gonna see very strong progress from Ballard in the commercial truck market in Europe, you know, over the next 6-12 months.
The rail market is gonna start to contribute, and we're seeing a lot of quoting activities from our partner in the rail market in Europe, and then marine will come subsequently as well. What we'll see is a scaffolding effect, where you see the growing bus market, you add on truck. Both those markets are growing. You add on rail, all three of those markets are growing, and you add on marine. We see a very strong scaffolding effect of these four markets, where we have the same core competencies, the same technology, and in some cases, the same products leveraged across these heavy-duty motive applications. And that's I think we'll see that scaffolding appear most prominently in Europe first, with China and North America having a similar scaffolding effect subsequently.
Yeah, Aaron, it's Tony. I'll just supplement as well. You know, again, Randy alluded to the pipeline and the record pipeline. Historically, to be, you know, to be completely transparent, we haven't talked a lot about our pipeline in the past. We've generally focused in on the twelve-month order book and the backlog, which is the committed orders for delivery. We talked about a $100 million-odd, twelve-month order book, a $155 backlog. I think what we're getting to here is an opportunity to provide some more transparency on that pipeline, because Randy alluded to some markets like the marine market and rail market, and even the we'll call it the distributed generation, stationary power. There's an awful lot coming into our pipeline that actually speaks to some of the scaffolding.
We'll have an oppor- we're kind of thinking about how best to describe that. I suspect in September, we'll provide a bit more transparency on the pipeline, including that scaffolding effect of revenue over the next number of years. It's a, it's a growing, increasingly growing market. I mean, historically, for us, of course, it's been bus order, bus order, bus order, with throw in, you know, the Weichai, but it's really diversifying both geographically and by market. As I said, you know, we have not really delved into that in the, you know, much in the past, but we will certainly going forward.
I'm not gonna try to pin you down on what quarter you think it's gonna be, but presumably, you're soft guiding to some sort of inflection point in the backlog at some point in the near term. Is that a fair characterization?
.Yeah, I mean, I think what we've indicated recently is that we're likely to see, you know, relatively strong growth rates over the next few years, you know, 30%-40% in that range. Then, you know, as you get closer to the 2024 requirements in California, 2025 requirements in Europe, you know, there's a lot of work that needs to occur with not just us, but partners and hydrogen refueling infrastructure to support that. You will see a very steep curve, you know, from 2023 onwards, and at the, you know, that will occur in Europe and in California. At the same time, when China probably has scale at that point as well.
Our costs and our ability to address those markets even more, capably from a cost side, will be very helped, I think from the scaling effect we're gonna see earlier in China.
Okay. Then moving on to the JV side. I know you mentioned the smaller dollars, but can you remind us if the MEAs that relate to the 2,000 unit commitment from Weichai are already included in the backlog? What the timeline for Weichai-related backlog additions might look like, if they're not, over the coming quarters? I guess I'm just trying to get a sense of how the 2,000 unit commitment might impact your backlog over the coming quarters.
Sure. Just to speak specifically, Let's focusing in on the 2,000 unit order, as you may recall, we shipped 500 odd parts kits over the course of last year, early this year. That would've been in, you know, first satisfaction of the 2,000. We also then announced a $19.2 million MEA order last December, that we've started shipping and will be shipping. Between that $44 million order, the $19 million order, there's, you know, it starts to account for a good portion of that 2,000 units. There's probably a little bit more MEAs to fully satisfy it.
It's safe to say it's either, you know, in the revenue, it's that, or that revenue to be recognized, I mentioned earlier, and some incremental MEAs yet to be shipped. I think the next, what I'd watch for beyond that, of course, is expecting. You know, we anticipate getting another order for MEAs, probably later this year for 2021. That's, that'll be the next significant order to Ballard, related to the sort of incremental and above the 2,000 odd.
Okay, great. That's great color. Finally, for me, this is just a point of clarification: Did I hear correctly that you are working towards transitioning the JV into a separate public entity? If that's incorrect, that's fine, but maybe you could clarify what the longer term ownership plan is for the JV.
Yeah. I think Weichai has a history of doing this, where they have investments in companies in China, that they then take a portion of that company public. Certainly, that's something that Weichai and Ballard had contemplated upfront when we put together this joint venture. There are, you know, some fuel cell companies that have gone public, you know, Yihuat ong or SinoHytec, as it's referred to, went public this year. In China, REFIRE is likely to go public as well. It, I think it'll be a very attractive IPO market for a number of years for hydrogen and fuel cell-related technologies in China. When you have Weichai behind, you know, an IPO, it's a different, a different credibility factor, I would suggest, than some of the others.
Yeah, that is a longer term plan to unlock value, that I don't think is currently expressed in the current Ballard valuation.
Okay, understood. Thanks for answering my questions. I'll turn it over.
The next question comes from Mac Whale with Cormark. Please go ahead.
Hi, good morning, or good afternoon now, here on the East Coast. In terms of timing on a follow-up order, you kind of alluded to that in getting some MEA orders for the next 2,000. Presumably, once you start to optimize the ramp up at the JV, you would want to see month-over-month an increase in production and shipments. Can you speak a bit to visibility beyond the 2,000 units, and what sort of a production ramp would look like in terms of just targeting and going forward?
Mac, I think, you know, the 2,000 units really aren't dependent on the announcement of the China- new China policy, whereas orders beyond that are. You know, we wanna make sure that when I say they're dependent, you know, the volume is gonna be dependent on how the policy shakes out, you know, which jurisdictions, what the requirements are. I think we need to wait for that before we can kind of forecast what 2020 will look like in terms of the JV moving units and what that means for MEA sales. I think, you know, kind of use that 2,000 as a base load level. We expect, of course, to see a growing number each year. Just looking only at Shandong province requirements as an illustrative example, you know, there needs to be a scaling effect.
Okay. Presumably, because you have these different initiatives underway and discussions ongoing, that these potential buyers will be relatively ready to go after an announcement is made about the policy. What's the sort of lag in policy to orders that you expect?
I think most of the end market, you know, the vehicle OEMs outside of the Weichai Group are quite active now, looking at the technology. You know, hopefully, we'll see a number of them get platforms tested and certified, added to the MIIT list, so that lag factor is shorter. You know, historically, it's usually taken about 6 months in some cases for those platforms to get registered, but the time is getting more compressed. So perhaps that won't be as gating as it was, you know, a number of years ago when it first was introduced.
Just generally speaking, I would expect that, you know, we would forecast seeing an order from the JV in late 2020, that will set the stage for 2021 MEA supply, and then we'd expect to see some scaling.
Okay, great. Thanks. I have the rest of my questions are sort of technical modeling questions. I'll take them offline later this afternoon. Thanks, guys.
Great. Thanks, Mac.
Our next question comes from Anne Margaret Crow with Edison. Please go ahead.
Hi. Good afternoon, gentlemen. Thanks for taking my call. It's really good to see the progress that's being made within the fuel cell market, and particularly at Ballard. I wanted to just explore a little bit more what was happening in China. The first thing was, how does your work with Weichai fit in with the work that they're doing with Ceres Power on the solid oxide front? The second one was, it was good to see that you had got an order recently from the Synergy Group. Did you expect to get the $150 million minimum revenues from them by the end of 2021?
Anne Margaret, thanks for the question. First on Weichai's strategy and the relationship with Ceres. You know, I think Weichai is very interested in having optionality on other fuel cell technologies, and is, you know, looking at Ceres and obviously has an investment in Ceres and looking at commercial collaboration with a joint venture in China with Ceres. I think the primary market that they're looking at is likely more stationary applications. There is a thesis that perhaps solid oxide fuel cells may be able to satisfy onboard power generation for vehicles. I think most people have discounted solid oxide for that.
If anyone's gonna be able to do it's likely gonna be Ceres, but it's a, I think there's a pretty tough putt for solid oxide fuel cell technology to get there, in my opinion. You know, as some context, the former CTO of Weichai had a prior history at Eaton, at where he had developed some solid oxide fuel cell technology and has a real affinity for that technology. That, that was part of the history of that relationship as well. I think it's a very good relationship between Ceres and Weichai. Ceres is a very credible company. I think they're doing an outstanding job on their commercial collaboration front, their technology development and, you know, strong balance sheet. I've got a lot of respect for the CEO at Ceres as well.
On the Synergy Group front, of course, we were delighted to get the follow-on order, you know, which was something we had. The size of that follow-on order was bang on with what we expected and what they committed to do last year for 2020. That was very encouraging to see them come through with their commitment. In terms of future orders, we'll have to see how that market plays out, particularly again, with the China policy coming out in the next, say, 60 to 90 days, how that Synergy-Ballard JV stack technology meets the market requirements. I think we'll have to wait on that.
In terms of the aggregate value of the Synergy JV and revenue stream going forward, you know, I think, you know, what we've seen in 2020, as I said, is consistent with what was agreed to last year. There's no further kind of firm take-or-pay commitments at this point.
Okay. That's very helpful. Thank you very much.
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.
Thank you for joining us today, and we look forward to speaking with you again on September 29, during our Investor and Analyst Day 2020, and subsequently in November, when we'll discuss results for Q3. Thanks again.
This concludes today's conference call. You may disconnect your lines. Thank you for participating.