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Technology Stocks : Ballard Power -world leader zero-emission PEM fuel cells
BLDP 2.035-8.5%3:50 PM EST
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To: Garth Richmond who wrote (698)5/22/1997 6:21:00 PM
From: Sid Turtlman   of 5827
 
Garth: I pretty much agree with you that getting the cost down to 1% of present is not impossible. But it is not trivial either, and it is hardly a "done deal."

I would guess that the present cost does not include a massive amount of R&D spread over a tiny volume, as you suggest. My reason comes from looking at Ballard's income statements, which I don't have with me here, so I will have to do this from memory.

The company shows sales of fuel cells, and a cost of goods sold that is somewhere pretty close to 100% of sales. That makes sense - the company has not trying to get rich on the fuel cells it has been selling to Volvo, Daimler, etc. The point is to induce potential volume customers to try out the technology. So it sells its products for breakeven.

At the same time, it has a separate line item, a significant one, for R&D that comes below the gross margin line. That tells me that it is placing R&D costs in that account, and that most of cost of goods sold represent direct labor and materials.

Obviously, the products are handmade and parts and materials are being bought in tiny quantities, which keeps the costs high. These problems will vanish with mass production.

Feel free to keep picking on me. It is a good exercise for all of us on the thread, provided we are talking about posts like yours which have intelligent content.
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