Westport Fuel Systems Inc. (WPRT) Earnings Call Transcript & Summary

David, I don't know how long of a sort of a hard stop time you have, but I don't really have anything booked. If we've got a lot of questions, we can go as long as people want to go. So it's up to you when to sort of pull the record on it.

Yes. I think about a 15 minute longer than our scheduled is fine for me. Beyond that, I start to run into conflict. So because...

Okay. That's good. Then after an hour and 15, it gets a little long.

Yes. Yes, for now, I get you, I think it's enough and…

Yes. We're all excited.

Glad to do a follow-up at some future date.

Sure. That's great. All right. It looks like everyone has taken their seats, so to speak. So I'm going to start the introduction, all right? Great. Thanks, everyone, for joining us today. Just a few comments before starting the webinar with CEO, David Johnson. We'll be presenting and will be discussing the business and it's opportunities. We'll be taking questions from the audience near the end. [Operator Instructions] We are recording this webinar, and we'll be posting it on my YouTube channel over the weekend. Please check out Radius Research on YouTube, and please subscribe if you can. It really helps out the platform and helps get on great more CEOs and interesting tech companies onto the platform. So thanks, everyone, for joining us today. Good day. I'm Martin Gagel with Market Radius Research. It's Thursday, January 13, and we've got CEO, David Johnson, of Westport Fuel Systems. Westport is a leading supplier of advanced fuel delivery components and systems for clean, low-carbon fuels, such as natural gas, renewable natural gas, propane and hydrogen to the global transportation industry. I'm very excited to have David Johnson with us today. Westport went public in 1999, so has been in the capital markets for about as long as I have. The company was part of the original clean tech boom back in the early 2000s. And over the years, Westport alumni have seeded many new tech and clean tech companies in the Vancouver area, creating a lot of great technology and innovation. Like any tech company, Westport's had its ups and downs and has been transforming itself over the years with acquisitions and significant partnerships. While much of the world is focused on battery, EVs and fuel cell vehicles, Westport technology provides both the bridge to our lower carbon world and a good solution using renewable natural gas and hydrogen. So David, thank you very much for joining us today. And please remember, this is neither a recommendation or investment advice. We're here to learn about the company. Do your due diligence and come to your own investment conclusions. David, thanks for joining us today, and please tell us about Westport Fuel Systems.

Okay. Morning, Martin. Thank you very much for having me and a pleasure to be with you and your audience and for the opportunity to talk about the company, of course. Maybe before I get started, kind of clicking through the slides and hopefully, answering questions as we go, it would be my pleasure to do so, just a brief a little bit about me. I've been with Westport now 3 years. Joined in January 2019 and thoroughly enjoying the opportunity and the potential of the company and look forward to educating your audience a bit more about us. My background personally is started born and raised in the car industry essentially. I'm a New Yorker from the Catskill area, and my family had a car dealership, a Ford dealership and so as soon as I could push a broom at the dealership, that's what I was doing and then cutting the grass and then washing cars and cleaning toilets and the whole thing. But always in automotive, went on to get engineering degrees and a Masters in Business and was lucky enough out of that to land a job with Ford Motor Company in Michigan, where I worked for 13 years in product development and product strategy, really on all the nameplates that we know well in North America, whether it's Mustang or Expedition, Navigator, so forth, F-150 Super Duty. In 2003, about almost 2 decades ago now, I switched teams to General Motors and moved to Europe and worked on the diesel engines for General Motors in Europe, working with our partners, Fiat and Isuzu and our customers, Renault and Saab and all the brands that GM had. Very interesting job, a very interesting opportunity with that company for a period of time. I came back from Germany to Chicago. Actually went to work with Navistar, the truck maker based out of Lisle, now part of the TRATON group, part of the Volkswagen brands of trucks and worked there for a couple of years on military vehicles and export markets around the world, very interesting also. And then just before joining Westport Fuel Systems 3 years ago, I was the CEO of a start-up company based in San Diego, who's developing a new kind of engine technology, clean and efficient, but an opposed piston, a very interesting technology also and really a thrilling time with that company. But I saw -- I was pleased to have the chance to join Westport Fuel Systems, as I mentioned, 3 years ago, and glad to walk you through who we are and what we're doing and where we're going today. So of course, obligatory statement around our forward-looking statements that I'll be talking about today. But just to introduce the company to you. We are a Tier 1 supplier of fuel system components and fuel systems. So basically, from the tank to the injector, and I'll show you some of the parts and components and systems that we sell at the moment, but we are a global company. And so you can kind of think about us as the Bosch for gaseous fuels. So Bosch is well known German -- big, big German company that provides gasoline and diesel, fuel injection systems and other components to the automotive industry, major Tier 1 supplier. But our specialty is a relatively small part of the market today, but growing, which is focused on gaseous fuels, gaseous fuels means basically propane, which we know well, otherwise known as liquid petroleum gas, LPG; all the forms of natural gas so that we have fossil natural gas and compressed or liquefied forms of CNG or LNG; as well as renewable natural gas, which comes from landfills and dairy and agriculture; and then we also are providing components and systems for hydrogen. So hydrogen I think everybody understands today has a very promising future, but this is an area of expertise that we've been working on for a couple of decades. So we have built this global company, as you mentioned in your intro, through mergers and acquisitions. So this has been a part of our company for a long, long time. We have, in our portfolio of companies and products and brands and facilities, companies that were started in the '70s. So 20 years before Westport Innovations was founded. And so we have decades of experience in markets around the world, delivering these cleaner fuel systems or fuel systems for cleaner fuels to the automotive industry through a couple of different channels, and I'll come to that. So this is -- just to get right to it, these are our products. This is what we sell to customers around the world, and I'll talk about our channels in a moment. But basically, it's everything you need to manage gaseous fuel from the storage container, the fuel tank, if you will, to the device that uses that fuel. And I say device that uses that fuel because we're also a supplier of fuel systems for fuel cells. So companies like Ballard Power Systems in Vancouver and others around the world that are developing fuel cell vehicles need a supplier like us to manage the fuel from the tank, the hydrogen in that case, from the tank to the fuel cell stack. We're also in the business of developing engines that run on hydrogen. So we'll provide that same kind of fuel system for an internal combustion engine to run hydrogen. I'll talk more about that later. I'd like to spend a fair bit of time on this next slide because I think it really is the fundamental of what we're doing and why it's worthy of your investor audience to pay attention to our company, the potential that we have as a growth company in the clean tech space. The first category, first box in this slide is about emissions regulations. And the emissions regulations really come in 2 categories and tend to be complicated, but the fundamental is lower quantities of, I'll call it, noxious materials coming out of an engine or a vehicle and lower CO2. And I do put those in 2 different categories because, of course, CO2 by itself isn't necessarily a problem. The problem with CO2 is the concentration of CO2 in the atmosphere. CO2 is quite normal. It's just having too much of it in the atmosphere, which is a problem for greenhouse gas emissions or, excuse me, the greenhouse gas effect. So these tightening emission standards actually are a good thing for Westport Fuel Systems because our technology enables cleaner transportation. So we enable lower particulate emissions from diesel engines, for example, as you switch to natural gas and lower particulate emissions. We lower CO2 emissions because natural gas is inherently lower in carbon, about 20%, and we enable the use of renewable fuels, whether that's renewable natural gas, otherwise known as biogas, or whether it's renewable hydrogen, green hydrogen. These kinds of technologies or fuels are enabled by our fuel systems. And so as the regulations for emissions on vehicles get tighter, our offer to the marketplace become stronger and more in demand. Second point I was...

When you say natural gas has 20% less carbonate, does that mean -- like has way more particulates and other, it's less clean, but does it basically produce 20% less CO2 per horsepower or unit of measurement, so to speak?

Yes. So it gets super complicated, but I'll try to keep it simple. But when I talk about natural gas has lower carbon, the real, I'll say, figure of merit is kind of how much carbon is in an equal quantity of energy of that fuel. So if you have a quantum of energy in diesel fuel, it has 20% more carbon than the same quantity of energy combining it to natural gas. And it's all about the molecule. Molecule for methane is 1 carbon atom and 4 hydrogen atoms so it's CH4 versus diesel, which has a very long carbon chain and a lot of carbon. And it's also true of our, let's say, next largest fuel, which is gasoline or petrol, right? And this has very high carbon, again about 20% more on an energy equivalent basis. It's important to separate the energy from how we use it.

Yes. And like LNG is basically methane, right? And like methane, it's way better to burn methane, especially if you're doing something productive with it, than to release it out into the atmosphere because methane is way harder on the atmosphere and sticks around way longer and so forth than just CO2.

Right. You're exactly right. So liquefied natural gas or compressed natural gas is all the same molecules, just to kind of how dense is it, how cold is it, right? And so those 2 fuels are essentially in the same molecules. When those molecules come out of the ground as a fossil fuel, they offer about this 20% reduction of carbon versus gasoline and diesel. When those molecules come from a dairy farm, it's really the circular economy in terms of environmental, circular environment where we're basically taking something that would otherwise go into the atmosphere and putting it into a vehicle and cutting it from methane into CO2 emissions. And that's hugely beneficial for our challenge with respect to the environment in terms of greenhouse gases because as you say, methane is bad when it's in the air. It's great when it's in an engine.

Yes. And you actually do something productive with it.

Correct.

It doesn't just float up. You stop using diesel or some other fuel with it as well. So it's got sort of a 1,2 punch.

Just on that topic, sometimes people say, gosh, there's not enough biomethane. There's not enough renewable natural gas to do all the things we need to do. I'm like so what? Who cares? The reality is, we should use every molecule of CH4 that comes from a cow, a landfill, a dairy, a food processing, any of these places where there's CH4 that would otherwise get in the atmosphere, we should grab it and put it into a truck or a car because that will make it better for greenhouse gas.

And tor me, I always see that as being like just the lowest hanging fruit in the whole application of everything.

Yes. It's so obvious. And so there are some great start-ups in Vancouver who are working along this line to say, let's continue to grow the quantity of renewable natural gas. Methane that would otherwise go into the atmosphere and now put it into our pipelines and deliver it to our homes and cars and trucks and so forth. And these are -- this is really that. And this isn't just a Vancouver or a U.S. or a Canadian thing, it's happening around the world. So just this past year in California, they certified the first carbon negative use of renewable natural gas where they've used not renewable natural gas, but actually -- It's actually taking greenhouse gas out of the atmosphere as a result of using these real natural gases. Europe has about 20% natural gas. U.S. has more than 40%. It's renewable content. It's a really, really great thing to do. And the more of what we do, the better everything gets. And all of our fuel systems are fully compatible with renewable natural gas. To us, it looks like natural gas, we don't care where it comes from.

Yes, the molecules and so -- and even some of your alumni are at Greenlane doing...

Absolutely. Absolutely. And that's beautiful good work, and we're fully supportive of that, and glad to have them doing that.

All right. Thanks.

So that's about the regulation. The next thing that's really important to understand, I would say, on a big picture, global industry basis is that the affordability of products is absolutely critical. Just to give you a flavor. In the world today, we, the industry, we make about 100 million cars and trucks every year. New cars and trucks, about 100 million every year. And the vast majority of them, I'm going to hypothesize a number like 95% of those, maybe 98% of those are vehicles that are bought and it's the most expensive thing a person buys or it's something that a trucking kid is buying to do business. And so the acquisition cost of those vehicles as well as the operating cost of those vehicles is one of the most important aspects in the buying decision, right? And listen, if we create a great vehicle in the world, the industry, that has zero emissions, everything else, but nobody can afford it, it doesn't do anything for the environment. And if we want to have an effect on the environment, and, of course, we do, we need to do it at scale. So if we affect 1 million or 2 million of those 100 million vehicles sold every year, we will not make the progress we need to make. So we need affordability, and this is, I think, a really important aspect of Westport Fuel Systems is that our products are very affordable. They're much less expensive than many of the alternatives that are being discussed and pushed on the marketplace today, and they pay back. So we have a clear analysis and case studies of fleets buying vehicles that use our products and they use lower-cost clean fuels and they actually save money on a total cost of ownership basis. And that is a really key ingredient and why our technology and our products and our company will continue to grow and scale to be a meaningful impact on the environment and good for the customers that are buying our products and their customers who are buying with vehicles with our [ class ] on them.

David, on the affordability and the total ROI on that, is the -- like a retro or -- instead of a diesel engine having a natural gas engine supplied by you, is the up-front cost a little bit higher but then you save through the energy out of LNG is cheaper? So you save it over the long run. Is that kind of how the economics works on it?

Yes, absolutely correct. So in every case, there's some incremental cost versus the standard gasoline or diesel vehicle today. So just like on electric vehicles and fuel cell vehicles, there's some incremental cost. And in the case of natural gas and propane, we for sure have this payback, which is -- can be as short as 6 months. So we have customers around the world who buy our kits to convert their existing vehicles that run today on gasoline or petrol and convert them to run on natural gas or LPG. And when they do that, it costs them maybe $500 or $700 or EUR 700, something on this order, it depends on the market and the technology and a lot of details, but they tend to get that money back in about 6 months. So just to give you a flavor, I was in Europe in the fourth quarter of last year. I filled up my LPG vehicle with our product on it, and it saved me EUR 50 on one fill-up. So it pays back really quick, and we see this also in trucking where fleets are buying these trucks. The trucks that use our equipment tend to be more expensive. We can talk about that more later. But fundamentally, again, the payback is about 18 months, and it's because of the price differential at the pump between natural gas and diesel, or between LPG and gasoline that drives the customer behavior to buy our products and -- or buy products that use our products and then use them and save money in operation.

When I was working back at dealers in the 2000s, the traders would use Westport to sort of arbitrage or trade the differential between natural gas and diesel or oil. What is the -- because if diesel or oil goes way up, but natural gas hasn't gone up, there is way more incentive to buy one of your trucks. What is the rough like diesel to LNG differential price where it makes sense? Because if the price of diesel got really cheap all of a sudden and LNG went up, then you would lose those economics. What is the ratio or whatever of how to measure that when Westport, it becomes more efficient or cheaper?

Yes. Basically, we see in the marketplaces where we're very successful today a price differential between 30% and 50%. So it's really important to look at the pump price differentials, not the commodity price differentials in the marketplace. Of course, the commodity price is in it, but in markets around the world, governments are recognizing that if they want to clean up their transportation and lower their carbon output, they need to incentivize or otherwise -- incentivize gaseous fuels or otherwise disincentivize diesel and gasoline. So this idea of carbon pricing, which, of course, isn't adopted in too many places, but is affected by the way governments put taxation in place is really a key ingredient. And my view is that, that will persist, right, that basically governments around the world have recognized this fact, and they're increasingly recognizing that they need to do something about global warming. And one of the things they can do is set up the economic table, the rules such that gaseous fuels that are lower carbon fuels that can be used by our technology are more economic for the people who buy those vehicles.

There's also like 20 years ago, LNG was really a local market where there wasn't a lot of global trade in LNG. But as the LNG truck ships and transportation has improved, I think that's kind of leveled out over the year. But it's still -- there's more variance in a BTU of LNG around the world than there is of, let's say, a BTU of diesel. Is that fair to say?

So I'm, let's say, not an expert on the commodity markets on that. What I can tell you is that over the long run, it is getting better and getting more stable as the volumes are rising. So just to give you a flavor, just in the last 3, 3.5 years, the number of stations for LNG in Europe has more than doubled. And we're not talking about more than doubled from like 50,000 to 100,000. We're talking about going from a few hundred, 250, 300 to 500 and 600 stations. So we're really in the early stages of having LNG available in Europe. It's not so available in North America, I would say, even less than in Europe. But in China, there's more than 6,000 stations. So we do have very big differences in how the markets have been developed around the world, and it really does depend on what governments do in terms of helping companies, incentivizing companies, setting the table, I like to say, setting the table that says, hey, natural gas is a cheaper fuel. Here's the fuel, here's the vehicle, build the infrastructure, let's go. One of the things that is actually a fact and can be paid attention to and should be paid attention to by everyone is how many fuel stations there are, what are people doing, governments doing around the world with respect to incentives and disincentives and how is the table set. And so we see that the main markets for our business right now based on the way that the economies are run, the regulations are put in place, Europe, China and India. North American market is still a bit of a struggle, frankly. We see that sometimes, there is this price differential between natural gas and diesel and other times not so much. And so this really does make a difference in terms of how our business develops.

Okay. Perfect.

Yes. So moving on, the fuel availability, we kind of touched on already. So I'll move to the next box in terms of the renewability of our fuels. This is really important. We've talked about it a few moments ago. The fact that if there's natural gas, methane, coming off a dairy farm, we should capture that and put it into vehicles and turn it into CO2 instead of CH4. So this is really an important ingredient for us, and we see this renewable build-out, too, as companies around the world, be they start-ups in Vancouver or the likes of Shell, are increasingly building out infrastructure and the support systems and the mechanisms for gathering the CH4, the methane off a dairy farm or a landfill and putting it back into the fueling infrastructure for vehicles. So that to us is a very important part, and of course, you can go all the way to green hydrogen. The transition we're going to make in this world where hydrogen becomes increasingly a fuel we use is about the transition from gray to blue to green. And it's a really important thing, but the nirvana, if you will, the vision of having green hydrogen created from solar and wind through electrolysis that then feeds the transportation infrastructure is hugely compelling from an environmental standpoint. And now we just need to get that also installed and economic, but all of our field systems, we're ready. That's an area of expertise for us, and we're producing those components and systems today and expect significant growth as the hydrogen infrastructure builds out around the world. And then finally, product availability. A lot of the companies that you may have on your channel, Martin, are start-up companies with good ideas and really exciting potential to change the world. We're a company that has had that vision now for some decades, as you mentioned, our IPO and some of the founding years of our predecessor companies that we merged with. We're in this business today with significant revenues, product around the world, distribution, customers. I'll say we're a going concern company with profitability around the corner as we grow our HPI business. And so let me move to that now. The market for our business is really on the order of $100 billion. And I'll tell you, just to kind of calibrate, that's about split about 50-50 between passenger cars and commercial vehicles. So -- and today, I mentioned a revenue figure a moment ago last year, 2021, $252 million. We expect some growth this year. We've put up some big quarters already in the first part of 2021. And so overall, we're in a growth trajectory, but we're still a small portion of the total market. So how much of that $100 billion we have today is relatively small. Also, the potential for growth is huge. And we are today already the leading supplier in the world for these gaseous fuel systems covering the full range of vehicles from small single-cylinder engines on 3-wheeler vehicles in India to large over-the-road 18-wheeler tractor trailer, tandems, the whole thing, where basically we're supplying systems that enable those vehicles to run on gaseous fuels. So -- go ahead.

There are all sorts of propulsion systems out there from fuel cells to EVs, and there is not one solution that's going to be everyone's solution. Like heavy-duty trucks are going to have -- they have different requirements than like a motorcycle or a scooter and that. I believe your sweet spot or your best economics is in the heavy transportation or the heavy-duty truck, but you mentioned smaller vehicles as well. Do you provide those same kind of payoffs on the smaller side? Is there opportunity for you in the like passenger vehicle market as well?

Yes, not just opportunity; we're doing it today. So there are OEMs in the world today that have gaseous fuels, both propane and natural gas, as really important parts of their product portfolio. And there are markets where that's true. So as an example, it may not be obvious to us here in North America, but in Turkey today, 40% of the vehicles are running on propane. In Argentina today, 10% of the vehicles are running on natural gas. In Algeria, today, they have the lowest LPG prices in the world and a significant portion of their car park is running on LPG today. It's one of our biggest markets. So the markets are not all the same around the world, for sure. But as we look at passenger vehicles, this is an important part, and so maybe it's a good story to tell about what's going on in India today. India is a very cost-conscious market. I think everybody knows. Really challenging in terms of the price competition in the marketplace, and this goes all the way to fuels. So the Indian government has -- is on a path that within this decade, they'll grow their refueling infrastructure for natural gas from just 1,000 stations just 2, 3, 4 years ago to 10,000 stations by the end of the decade, and this is actually happening. I think the station count in India might already be up to around 2,500. And so they're building out. And the reason they're building on is because they have access to the fuel and it's lower cost for them, and it's environmentally friendly in terms of the air quality. They have huge air quality problems in India, and it's cost effective. They can afford it. So as an example, the largest manufacturer and seller of passenger vehicles in India is a company called Maruti Suzuki. This company has more than 50% market share. So you can kind of think of them as the General Motors from 1950s in the U.S. They are that company in India today, Maruti Suzuki. They're our customer. We supply them with natural gas fuel systems. And just, let's see, what is it now, 20 months ago, in April of 2020, the emissions regulations changed in India, and they went all the way to what is effectively the Euro 6 emission standards. And when they did that, their favorite technology for low cost of operation in the past has been diesel because it's so efficient. But when they added this Euro 6 emissions, the diesel costs rose dramatically. And so our customer, Maruti Suzuki dropped their entire line of diesel power plants across their entire line of vehicles. That diesel penetration for Maruti Suzuki was like 30%, 35% of their total sales mix. They dropped that product, and they're replacing it with natural gas vehicles. And so we've seen a dramatic rise in our sales and their sales of natural gas vehicles in response to this regulation, which made diesels more expensive and natural gas the preferred alternative to gasoline. So this is the kind of thing that's happening around the world and really what compels us to come in every day and drive the business, and we see ourselves on a significant growth trajectory with respect to our business. We're on this $250 million, $300 million, we had $305 million of revenue in 2019 before the pandemic and the supply chain challenges that have challenged the whole industry in this past year, 2021. And so we see ourselves growing to be a $1 billion company by mid-decade with industry standard kind of 20% gross profit margins and 10% operating margin, EBIT margin. So we're really excited about this. It's all about building the business and growing into this suit of being a $1 billion company. So I talked earlier, I just want to make it clear here with this slide, that basically we have 2 channels. I talked earlier about customers bringing their vehicle to a workshop and saying, please convert my vehicle so it runs on propane or natural gas. We do that in markets around the world. We have customers in places like Poland, in Turkey, in Italy and Netherlands as well as India and Argentina, where customers bring vehicles in and we convert them. We call that independent aftermarket business. We've been doing it for a long time, and I'll tell you, the drive there is saving money. So customers are investing some -- a few hundred, 500, 700, depends on the technology, again, LPG, CNG which market, and then they're getting payback with the access to lower-cost fuels that are also cleaner for the environment. The other -- sorry?

So between the OEM and the aftermarket, in the OEM, your customer would be, let's say, a Volvo or a Scania. Like the engine manufacturers, they put it in, so when you buy it off the lot, it's already in there. And the independent aftermarket, is it like individual guys saying, Yes, I want to retrofit my engine? Or someone like a FedEx saying, Hey, we've got this fleet of trucks, and we want to create a more efficient fleet?

We do both, but I would say, primarily, so maybe it's on the order of 90% of that business is individual consumers that are going to workshops, distributors through our distribution channel. We have a number of brands. Again, through our mergers and acquisitions over the year. We have a brand BRC. We have a brand Zavoli. We have a brand TA in Argentina. So these different -- we have Prins in Western Europe. So these brands are global brands but have some regional strengths and weaknesses, but we serve customers directly. And so you're basically looking at people saying, whether it's a taxicab driver or whether it's a family with a vehicle where they put a lot of miles on or a salesman that drives a lot of miles, and they're looking to save money operating the vehicle and accessing cleaner fuels. And you know what happens, Martin, is people get introduced to this because they pull into a station to fill up on gasoline, and they see at the island next to them, someone filling up on LPG. And when the guy's done filling up on LPG, he has to pay EUR 20 or EUR 15 to fill his car up, but the guy who pulled in running on gasoline has to pay EUR 80 or EUR 90. They go, how do I get that? That is the real dynamic that happens in these markets around the world. And then they see you and I love this. I flew into Buenos Aires and as you pull away from the airport, you see all the taxi cabs lined up to fill up on natural gas. They're all driving on natural. They're queuing for it because it saves them money. These -- by the way, all these vehicles are biofuels. They also have a gasoline tank. So they could fill up on gasoline, but then they can't offer the fares to their customers, and they can't have a business that makes money. So they have to have natural gas in Buenos Aires in their taxi cabs in order to be competitive with the other taxi cabs, and it's cleaner to boot. So it's a great business for us. We're really excited about it, and we do it also for trucks in places like Africa. So Africa has like no emission standards in most of the countries in Africa. And we come in with natural gas, and we can clean up those vehicles substantially and help save fleets save money because the natural gas is cheaper. So it's really very, very interesting in the aftermarket, but a different story in every market around the world.

But in Africa, it sounds like it's not driven off of a regulatory environment. It's strictly economics. Natural gas is cheaper. We're going to convert over and we'll get our payback.

Yes. But instead -- but you get the environmental benefits along for the ride. So it's really great. So in places like Algeria, they have substantial LPG reserves. In places like Egypt, they have substantial natural gas reserves. Nigeria, Tanzania, these are countries that we're doing business in today. South Africa is interested in gaseous fuels and is growing. So all these places are seeing the opportunity to leverage their local resources for the economic benefits and getting the side benefit, which is really important for us, of cleaner air for the location.

Are there -- like obviously, how many tanks you put in your car, your truck, but is like the energy density different than on diesel or gasoline? It does -- like when you say filling up for EUR 20 as opposed to EUR 80, does that kind of -- does a tank of gas get you as far?

Yes. It really depends. For sure, first of all, the gaseous fuels are less dense than liquid fuels. So you need more volume. But in general, what customers do is, they put that kind of equipment on. So where you might have 1 gasoline tank, you might have 2 or 3 CNG tanks in order to have the same range. And it all depends on the application and how much refilling there is. This is one reason on our HPDI systems that we use liquefied natural gas because it offers the most dense form, therefore, the most range that you can get. Whereas, if you use compressed natural gas, you need multiple tanks and the tank systems become very expensive then.

Okay.

So let me talk about the OEM business and HPDI specifically. So our OEM business does go from Maruti Suzuki in India through Volkswagen and Ford and many of the names you know around the room, but all the way up to commercial trucks where our HPDI product is that product that was the foundation of the original Westport Innovations in Vancouver, spun out of the University of British Columbia. And this technology essentially allows us to operate a diesel engine, I'll say, just like a diesel engine, which is what a truck fleet wants, but with the benefits of natural gas. So that is the lower cost and the cleaner operation. So we use liquefied natural gas to get as much range as possible because otherwise, the fuel is even less dense in the compressed form. And with the liquefied natural gas, we actually gasify it and we inject it into the engine in place of diesel. And so this -- our proprietary and patented injector, the HPDI injector, allows us to do that and basically run the engine just like a diesel, and that's really important because it allows us to provide all the torque and all the power and all the efficiency that is the hallmark -- as well as the durability, it's the hallmark of the diesel engine, but on the cleaner fuel. So you're getting the economics and the environmental benefit, but not giving up anything with respect to torque, power and efficiency and that's really important for fleets.

And so on these diesel engines, you basically swap out the fuel injector and then the whole fuel management system has to be changed as well. But on the engine itself, it's basically just the fuel injector that gets swapped out?

Yes. So swapped out is maybe not the right word, but it's the right idea. So basically, we go to a manufacturer of vehicles and engines for the commercial vehicle industry, be that Daimler or Navistar or Volvo or any of those companies. Basically, what we do is we work with them to engineer our injector in place of the diesel injector. And so we're providing this on an OEM basis. They're building the vehicles from the start and the engines from the start with our injectors, but the injector physically takes the space of where the diesel injector is. Typically, there are some modifications to make it work perfectly, right? So it's not like a swap-out situation, but it is the same place. I would say, it's dramatically easier to integrate our HPDI hardware into a vehicle. Very little change to the architecture, very little change in the vehicle architecture or the engine architecture, and basically, engineer these components in. But these are real engineering projects with validation and proof and emissions tests and all that, and we do that work right in Vancouver and with our customers.

So they don't have to redesign the old engine. There's some tweaking after you, but the core of the engine is the same and just some of those components around the injector are sort of reworked?

Exactly. And all the way to hydrogen. So what we did just this last year was we ran one of our natural gas HPDI engines and just fed it hydrogen, and this worked exceptionally well. We actually got more power and more torque and better efficiency with hydrogen and our existing fuel system, HPDI fuel system, than the diesel engine and than the natural gas engines. Now you're getting all the environmental benefits of green hydrogen and you're getting more power and torque and efficiency than you would get with diesel or natural gas. So we think the story of hydrogen and HPDI is even more exciting, and I'll come to that in a few moments. So when we think and focus in on commercial trucking and just to kind of give your audience a flavor, basically, commercial trucks in the world are about 5% of the vehicles on the highway. In places like China, it might be more like 7% or 8%. In places like North America, it's more like 4%. But on that order, it's not 30 or 50 or 1, it's on this order of 5%. But yet, these are the vehicles that actually produce about 1/4 of all the CO2 emissions from road transportation. So they have an outsized weighting factor because they carry so much load and they go so many miles. So these 2 factors, the load and the mileage are what really drive the economics and then the environmental impact a trucker can have as we change from diesel to natural gas or something else that's clean. That's why it's such a focus for us. And because, as I mentioned a moment ago, our technology allows the engine to basically operate just like a diesel engine, we don't take away any performance and you can fuel up at the station in the same amount of time it takes to fuel up on diesel. So it really is operating-wise very, very similar to what everybody is used to and everybody wants and everybody likes. And on the OEM side, they don't have to go off and build motor factories, battery factories, fuel cell factories. The existing factory they have to make engines, instead of grabbing injectors from the diesel box, they grab injectors from the HPDI box, and they install them in the engine, right? And by doing that same thing in the vehicle plant, instead of grabbing a diesel fuel tank, they grab an LNG fuel tank, it bolts in the same location. So that means all those investments that have been made by those companies around the world, billions and billions of investments can be preserved and yet, we can access cleaner gaseous fuels and renewable gaseous fuels for a huge impact on the environment and do it in an economic way, both on the investment side, vehicle acquisition side and the operating cost side. That's different than some of the competitors out there that you mentioned earlier, electrification and fuel cells, and we really think that sets us apart and gives us the opportunity to grow tremendously because of the economics that come along with the environmental benefits.

Great. I do want to ask you about HPDI 2 and how that's different from the -- is now a good time? Or do you have some slides later on where we should discuss that?

Yes. No, let's talk about HPDI 2. So basically, HPDI 2 is, I'll just say, a next generation. So if you imagine how engines develop, engines have been developing for more than a century, since the late 1800s through now. And every year, they're making them better. And part of making engines better is increasing the working pressure of the engine. We access better materials and better engineering and better sealing, and so we can up the working pressure. When you up the working pressure of an engine, it makes it more efficient, but it also means that the fuel injection system has to be upgraded. So our HPDI 2.0 is the system that we designed and engineered to match engine technology today, whereas, our HPDI 1.0 was really what came out of University of British Columbia and was our first-generation product, which was designed for earlier technology engines. And currently now, we're working on HPDI 3.0, and that will be for the next generation of engines. So this is just the progression of our product to match with the demands of the engine and primarily with respect to working pressure, but also emissions requirements that have been notching up and up or down and down, as you like to see it.

So it's more efficient than the HPDI 1, which gives you more power and torque and all the good stuff that drivers want and then essentially is more efficient as you need less fuel to get that power?

Yes. So I would say, across the board, from 1 to 2 to 3, we're targeting better efficiency, more power, higher quality. So I would say, the same attribute targets that you have for diesel and gasoline. So as the engines get better, the fuel system needs to get better and match it and complement it.

And HPDI is High Pressure Direct Injection?

Correct. Well deciphered. High Pressure Direct Injection. So this means that the natural gas is being injected directly into the combustion chamber just like diesel on the diesel engine is injected directly into the combustion chamber. This is important to actually match the attributes of diesel. If you -- the other way to do it is you inject the natural gas into the manifold. So you basically mix natural gas and air before that goes into the engine and that is possible. That's exactly what we do in our spark ignited natural gas engines and LPG engines, but it's not as efficient and capable as diesel or as HPDI. So the HPDI technology, I say, offers kind of 2x the benefit versus spark ignited. So we get a 20% reduction and would get like all the benefits of methane with HPDI; whereas, if you use natural gas in the spark ignited engine, you get benefits, but it's about 10% lower. So you don't get all the benefits that methane brings because a spark ignited engine is not as efficient, it doesn't produce the torque and power that the diesel engines do.

And how much more efficient or better is HPDI 2 versus 1? Like is it a 10% improvement and/or like...

I don't have a figure for you, Martin. The HPDI 1.0 was before my time, but fundamentally, the HPDI 2.0, our selling point is that basically, with HPDI 2.0, you have parity with the diesel engine. So that performance you get with a diesel engine, we match it with HPDI 2.0. And as the diesel engines get better, which they're doing all the time, we need to raise our game with HPDI 3.0 to make sure we at least match the performance. By the way, as I mentioned earlier, with hydrogen, we actually get better performance with HPDI, about a 25% improvement in power, 25% improvement in torque and about 4.5, 5 percentage points of improvement in fuel efficiency.

And I guess if you get that much better improvement, if people need whatever, 300-horsepower on their truck, and you're getting 25% improvement, they could actually then engineer or spec in a smaller engine because you're sort of capturing that bigger improvement, and I presume a smaller engine would be less expensive and then you'd get some cost benefits out of that.

You said it so well, I don't need to say anything. That's exactly correct. Yes, so it really has big benefits down the road as we look at, okay, so as the future hydrogen economy becomes the dominant economy and dominant fuel for transportation, say that happens, then all this optimization can be done and the economies that come with that will be very meaningful to the industry and to all the consumers that need to be buying vehicles in the world.

And sorry, I guess, like in the world of internal combustion -- ICE engines, internal combustion engines, like a 25% improvement is a massive improvement. They've been high-fiving over 1% and 2% over the years, and they've been progressing. This is a -- that's a pretty radical improvement, right?

Yes. So just to give you a flavor, right? So when we talk about natural gas, we talk about spark ignited natural gas engines and HPDI natural gas engines, we've gone out quite strongly saying, "Hey, our technology allows parity." And that's really important for the buyers because when you go in and you say, I've been driving a diesel truck and pulling these loads and doing this work, and now you're going to give me natural gas engines. These are spark ignited natural gas engine actually takes performance away from the vehicle, which is money out of the fleet operators' pocket in terms of what they can do with that vehicle. It's a limitation, which they don't want to do. So when we talk about, now I'm going to offer you hydrogen and you can have 25% more. Well, my goodness, I can access capability I never had before. So it's a really, really important thing. And you're right, these figures of a 25% more power and torque are huge. Yes, and 5 percentage points of efficiency will really help in the economics of the equation because it all comes back to, okay, how much fuel am I using.

Yes, because especially -- well, we all do, but especially, commercial operators, it's all about the economics. They've got to follow their guidelines, but if they can save $5 here, $5 there with -- they'll take it.

Yes. Yes. They run on pretty thin margins. And so those percentage points really matter and fuel is such an important part of their total income statement, that's absolutely critical. So just one more point on this slide and maybe I'd move on is the difference between HPDI and fuel cells. So if we think about hydrogen just for a second and we postulate this idea of, hey, here's an internal combustion engine that runs on hydrogen; here's a fuel cell that runs on hydrogen. So -- and if they have equal efficiency, then we take the fuel cost economics out of the equation, right? And we have some future hydrogen economy and hydrogen available then you're going to say, what's the best way to use that hydrogen in a long-haul heavy duty truck? My augmentation is going to be basically since we're able to demonstrate that our internal combustion engines with HPDI running hydrogen have the same efficiency as a fuel cell. And then you can access the lower acquisition costs and lower maintenance costs and so forth of the internal combustion engine and all the performance that customers are used to. So we think that's actually the superior solution for the long run. Sure, fuel cells will have their place in some applications, but we think the internal combustion engine with an HPDI fuel system is the better way to use hydrogen in long-haul trucking.

And you think your equivalent efficiency you get as much power out of a hydrogen molecule or as a fuel cell would?

So actually, we haven't even done that optimization, right? So basically, we've demonstrated -- and I think I've got a slide here for your audience coming up I'm going to speak to, we've demonstrated, published a paper last year with the leading engineering firm, AVL. And in this paper, we dimensioned that basically, we've run engines with our HPDI system, with hydrogen and demonstrated that the efficiency is on par with the fuel cell and ahead of even long-haul trucking application. And because of that, then you can access -- and that's -- again, we haven't taken into account the opportunity to downsize the engine, getting even more efficient, let's say, as from a cost perspective. So this means you can access the lower cost of acquisition of an interim combustion engine vehicle compared to a fuel cell vehicle, and therefore, this is the preferred way to use hydrogen in long-haul trucking.

And sorry, just to clearly state the obvious, what you're saying is that the cost of an ICE engine is cheaper than a fuel cell engine. So that's where, at the same efficiency, you're going to get a lot better economics.

Yes. So far, as I've known in every study -- and that's really why we work with AVL because they have greater insights into the fuel cell world than we do, but fundamentally, fuel cells are more expensive than internal combustion engines. I'm sure there's some cost down curve and maybe we can argue about it in the future. But for as far as into the future as I can see, the internal combustion engine -- and very importantly, Martin, we don't have to build internal combustion engine factories, we already have them, right? So the billions and billions of dollars that might need to be invested in fuel cells to replace -- fuel cell factories to replace internal combustion factories doesn't have to be spent. So in terms of capital efficient, in terms of time to market, huge advantages for the internal combustion engine with HPDI and hydrogen.

And I guess, mechanics and so forth, they under -- there's a different fuel injection system and fuel system, but the rest of the car or the truck is kind of the same. So like the whole knowledge base and the whole distribution partners with Cummins or Volvo or whoever is the engine, you just leverage that existing all the -- much of the existing infrastructure.

Right. And all of our capacity to make fuel injectors and to make regulators and other parts is all can be deployed also for the hydrogen economy. So it's -- I mean, the capital efficiency is really, really significant. So let's talk, since we're on this topic, of some views in the industry about where is the future going. So you've got 2 major companies here, Volvo and Cummins that have kind of come to the marketplace with their investor presentation saying, we think this about the future. And you can see, in both cases, there's a really important role for natural gas and hydrogen. And what I want to say is that, that role for hydrogen is going to rely heavily on the internal combustion engine with HPDI because of the superior performance and far better cost effectiveness of the internal combustion engine versus the fuel cell, right? Fuel cell will have a place, but we think the internal combustion engine with HPDI is a very important part of that mix, too. And these major companies certainly agree that these fuels are going to be far more important in the future, and that really sets the stage for the growth that we're already on. So on this page, I pull out 2 markets. One is Europe, the other one is China. These are 2 developing markets. China is, I would tell you, way out in front to the rest of the world with respect to developing refueling infrastructure and using natural gas in their commercial trucking. It's the largest trucking market in the world and the largest penetration of natural gas in commercial trucking in the world. But the important part here is to see this growth trajectory, and I told you that as we launched our HPDI in 2018, you can see how the market share and the volumes are growing. We're still, though, in the small numbers. And so it's an exciting time for us as we grow this business and really affect the industry in a positive way, both economically and environmentally. So then just to kind of wrap things up on the company. One of the things I like to echo within the walls at Westport Fuel Systems is that our company was founded on ESG, okay? It's a relatively new acronym in the investing world and in our communities, but fundamentally, every single entrepreneur that started a company that is now part of Westport Fuel Systems came to the table saying, "How can I help customers access this less expensive fuel that also has environmental benefits?" And so there's this dual benefit that's good for society in terms of economics and environmentally. And this is something that we've gone back now with the advent of ESG as kind of an investing framework and a compelling proposition for companies. And we've framed that up in the company, and we're driving forward with our ESG. We publish now 3 reports about sustainability and our ESG efforts, and we're very proud of our accomplishments and very eager to deliver more to the community in that regard. I've got a great team and a great Board, and I'm just thrilled with the opportunity to continue to lead the company and to grow us towards that $1 billion company I told earlier, and to have all the benefits on both the environment and the economy that our technology enables. The finances are already a little dated because they're from third quarter, and we're on a quiet period regarding financials. So I won't spend any time on it other than to say, I think we took some very important steps through the pandemic and the supply chain challenges that we had in 2021 to really put the company on a solid foundation. We refinanced almost all of our debt to lower cost and longer terms, and we raised the equity capital we need to bring the company and grow the company in terms of our capacity to deliver HPDI to our customers as they follow that growth trajectory. And so that, to me, is a really important foundational step. Post the merger, we did a merger in 2016 between Westport Innovations and Fuel Systems Solutions. We've been struggling as a company to be on a solid foundation, and now we're on that solid foundation with the steps we've taken through the last 2 years. And I'm really excited to then go and deliver for our customers in the marketplace and grow the company to a really important part of the industry. So that's what I had prepared for you today and certainly looking forward to further questions from your audience or from you, Martin.

All right. I've got a couple of questions. We have about 20 minutes left before I think you have to pull the ripcord here. So I just want to hit a couple of things very quickly. The Cummins Westport joint venture, which concluded at the end of 2021, what does that mean for investors of Westport here going forward? How much of a hit is that to you? And like did -- like that was, I guess, like in the vision there for a while here. Does that change your strategy? Or what is the strategy now that that's -- and how significant was that as part of your business?

Yes. So let's go back to the beginning on Cummins Westport. So that joint venture was formed 20 years ago when we were a different kind of company, a start-up company, Westport Innovations spun out of UBC, start-up company newly IPO-ed, as you mentioned. And it was really important for us to have that joint venture back in those early days as kind of a mark that said, "Hey, this major company Cummins is interested in our HPDI technology." I would tell you that in some way, that JV did not achieve its original vision of bringing HPDI to the North American market. We did have HPDI 1.0 in the market for a period of time, but not for the joint venture. And -- so nonetheless, the company has been successful with spark ignited natural gas engines and really shown that natural gas and trucking has tremendous potential, right? That joint venture had been selling on the order of 7,000, -- 6,000, 7,000, 8,000 engines per year. And that's meaningful, but frankly, just the start. And really what the marketplace needs, not just in North Aircraft, but around the world, is HPDI because of the superior performance it offers and the better efficiency. And so we're really bullish on the opportunities around the world, but including North America for HPDI, first with natural gas and also with hydrogen and the renewable nat gas, so that portfolio of products. In terms of our income statement, for sure, it's a hit because that's been a profitable JV for a long period of time. The future for our company is quite clear with respect to HPDI in commercial trucking and spark ignited in medium and smaller vehicles. And we're doing that today in markets around the world, and we'll continue to do that.

Currently, how much HPDI -- how much of that is your business right now? Because for the smaller -- you've still got a lot of spark ignited business, right?

Yes. So we have the full range of technologies and businesses around the world. Our HPDI business is a rather modest business today in terms of volume. So we have one customer launched in Europe, so one customer in one market. So we really have tremendous growth ahead of us. Nonetheless, that business is already a substantial portion of our income statement on the order of 20% or more. And so we really see a good start, but a lot more to do in terms of turning that business, that HPDI business into a global business and into a high-volume business was really an important part of our road map to a $1 billion company.

Last year, I think in June, you raised a bunch of money to help fuel the growth and that capital was essentially to build out the HPDI business in terms of like manufacturing, engineering, distribution and all that stuff?

Yes. I would say that was one of the uses of capital. We also allocated or identified opportunities there where we could do mergers and acquisitions. So -- and it's some cushion. So it's fixing our balance sheet. So there are a number of uses of capital, but certainly, a primary one was building up the capacity for HPDI to respond to the growth curves of our existing and future customers.

Okay. So you've got to get out there, work with OEMs and get them to integrate the HPDI into their engines and then launch it out in the world. Is there also an opportunity in the aftermarket for HPDI? Or is there something about that where that sort of lends itself to continuing with the Spark?

Yes. I would tell you that the aftermarket is not well suited for HPDI because -- and in general, for these vehicles, the integration that's required in terms of changing the fuel tank, changing all the software, it's not going to be so economic to do. I don't eliminate it as a possibility, but I would say, it's not the top priority for us. We see a much better economic cycle and benefits to our customers by doing the HPDI business on an OEM basis.

Got you. We have 15 minutes left here, and we have 54 questions here. Oh. You disappeared. You're back.

Yes, I was just turning -- I clicked the wrong button. Sorry about that. I just thought I'd turn off the presentation now, so...

Okay. Perfect. So yes, we've got 55 questions here and 15 minutes. So I'll start from the top here and try to pick out the best ones here. Apologies to whoever I -- whichever answers we don't get to. How many injectors have been sold from the joint venture with BorgWarner in China?

Yes. I don't have a number that we've released for that. So I'm going to be awkward with these questions for which the data is not already public. So I got to skip that one.

Fair enough. Is there any plans to deliver a CNG solution in Europe? This is a response to Amazon's plan to buy 1,000 Iveco trucks.

Yes. So I would tell you that we're really happy to have HPDI in Europe, and I wouldn't want to go backwards to a spark ignited solution in that marketplace. We think -- more than we think -- it's been demonstrated that the HPDI product is a superior product. And that's why you'll see our customer taking market share from, I'll say, the incumbents. So Iveco and Scania have had natural gas spark ignited engines for [ 4 ] years before our customer has. And with the advent of HPDI, we're taking share. And so I think actually you'll see it go the other way, where basically, we're hoping to help those other companies that have spark ignited engines get into the HPDI business.

All right. What's your most promising source of new revenue? That's the HPDI. That's where the growth really is targeted with Westport, correct?

Yes. I would say though that I don't consider ourselves a one-trick pony with respect to HPDI. Certainly, that is a very important part of our growth strategy. Another very important part of our growth strategy is in India, where the market is really taking off. And so our business is looking good there, and we're excited about the trajectory ahead. But in total, frankly, as I look across all the different kinds of business we do, including hydrogen, our GFI products, our aftermarket business, all of them have vectors for growth. HPDI is the most significant though.

Got you. Can you give us an estimate on the number of OEMs planning to use HPDI 2 this year? You currently have 1, is that correct? And then any ballpark you can throw out for 2022 on how many OEMs you hope or plan on signing up?

Yes. Hopes and plans are big numbers, but any announcements, I won't be making here today. But of course, we do have our business, which we're eager to launch with Weichai in China. Our partner, Weichai Power, is today already the leading supplier of spark ignited natural gas engines in the world, and they do that in the Chinese market where they're the dominant player in that technology. As mentioned and discussed, our HPDI technology is ready for launch in that marketplace, and we're eager to bring it to that marketplace and look forward to doing that and bringing that news to all of you in the investor community.

Weichai is, call it, the Cummins of China?

Well said. Cummins of China. It's well said. Cummins wouldn't appreciate it, of course, but yes.

Yes, they're the dominant diesel...

They're the dominant player, yes.

Got you. What is going on with your unique and novel natural gas tanks?

So yes, we are in the business of providing those tanks to our customers that buy HPDI systems. We're not currently supplying loose tanks, but we keep our options open, and we can consider doing that in the future.

Right. Do you see the economic, social and political climate in China as a headwind?

It's hard to read the tealeaves on that in general. So actually, when I read like the 5-year plans or get the synopsis of the 5-year plans in China, they have a significant effort and intent with respect to making natural gas and now hydrogen, an important part of their energy mix in the future. And so we think that's really an important part of what will help Westport Fuel Systems in the Chinese market is that push by the government to use more gaseous fuels in transportation.

Got you. Is Westport eligible for carbon credits?

Mostly no, I would say. So basically, I think the kind of carbon credits that one would be likely to be asking about and talking about are the ones that are associated with vehicles. So basically, people who sell vehicles and engines are able to access those credits and earn those credits by selling lower carbon vehicles and engines. But the fuel system suppliers, whether it's little Westport Fuel Systems or big Bosch, we don't necessarily get the carbon credits for those sales. It's going to go to the OEMs of the vehicles and engines.

Got you. We have a few questions here. It's always a little awkward people asking about the share price and the share performance over 2021. Is there kind of any general thoughts or perspectives you can give on that?

Yes. So I think it's been a tumultuous past 12 months for the share price for sure. And I'm with the investors who have, let's say, been up and down that curve as a shareholder myself. So -- but when I look going forward is that we have an opportunity and a need to differentiate ourselves from some of those other stocks that kind of traded among the same profile in the last 12 months, and I think we'll do that in the coming months as we increasingly are able to tell and make clear the story on HPDI and as hydrogen becomes an important part of what people associate Westport Fuel Systems with. We're already in the hydrogen business today, but what we showed last year, what we'll show in this year some more of is the potential that we have to leverage hydrogen and HPDI in combination to a huge benefit to the industry and also to the growth of Westport Fuel Systems.

And just as a macro perspective on it. A year ago and 10 -- 12 to 10 months ago, there was a huge boom in the green tech, clean tech stock. So just calendar timing-wise, after the market kind of blew off in that sector in what February, March, it's like you've been a good company with all sorts of green tech companies getting beat up badly, but you also had that big run-up ahead of it.

It's exactly what happened, and I think you can put 6 or 7 trucks on a map on a wall and look at them going, that's -- that all happened at the same, and it is that kind of sector move to a large degree that did happen. And I -- we can all speculate on what the causes were, but there was the Biden. There was all sorts of things in there, and yes, it happened.

Yes. Does the new Cummins 15-liter engine use Westport tech? Do you see -- do you receive royalties?

Yes. I don't have any comment on that at this point in time. That engine isn't on the marketplace yet and the announcements other than the existence of it haven't been very clear in that regard. So I can't clarify any further.

I'm going to throw in a question here, like Cummins and the big diesel engines also have a lot of applications in marine technology in that like giant engines. Is there any opportunity for Westport in that kind of market?

It's an absolutely great question and the answer is, unquestionably, yes. There are opportunities for those. And in fact, I would tell you that HPDI offers tremendous benefits in bigger and bigger engines, right? So where you use more fuel, HPDI is really a great technology. And so -- and the fact that we can take HPDI and apply it with hydrogen means that we have also applications. So rail, mining, marine, all those are possible applications for us. I'll tell you though, one cautionary note is that basically, these markets are really great, good applications for us. But the volumes are less and the price. So it's a different kind of market than commercial trucking and one that will take some time to develop. But we think it's important and it's part of something that we're working on.

It's obviously on the road map, but is that something that maybe we could hear some news on in the next 12, 24 months? Or is it sort of further out on the timeline?

Yes. I think it's really on our customers to decide, for the most part, when they'll be used on these things. But in some cases, there could be government funding, and that causes announcements to come out based on public funding. So that's always possible, too.

Right. When you say, 40% RNG in North America, do you mean that all NGUs in transportation, specifically versus percentage of RNG going to the home?

Yes. So these metrics are tough and they're not my specialty. So I'd refer you to other sources more than me, but what I've seen is announcements that have come out from various sources, primarily in California, saying that the percentage of renewable content in the transportation, natural gas refueling infrastructure has reached such numbers as 40%. And actually, that's a little bit old figure. It could be higher or lower now. I don't really know. It's not the -- it's not my Westport Fuel Systems metric, it's more a market metric, but it's really substantial. And we think -- I guess, Martin, what I would say, the reason and my point to renewable natural gas and try to help investors understand these metrics is because you can't see it, right? When you go to a fuel station and fill up, it doesn't say what it is, you can't see it.

So molecules -- it's exactly the same molecule, it's just how it's sourced.

Yes. And the pump is the same. And actually, the way they do it is if they put renewable natural gas into the system in Michigan or North Carolina, it gets counted in California. It's a very interesting system. But the important thing is the more renewable natural gas content we use in vehicles, the better off we'll be as an environment, right? And this is -- and basically, every vehicle or let's say, every fuel system my company produces for a vehicle is ready for renewable natural gas for right now. There's no additional work to be done. And even the systems we built last year and the year before in the vehicles, our customers built last year and the year before, a decade ago, they can use. So as the content grows, those vehicles just get cleaner and cleaner.

There's a question here. When do you foresee North America to begin adoption of HPDI? Two, just to clarify, you've got one OEM in Europe right now, and we're expecting new OEMs, North America, Asia, elsewhere over the coming months and years.

It's our normal business on a daily, weekly, monthly basis to be working with OEMs around the world to demonstrate our technology, to develop our technology and to help them bring that technology and our products to marketplace. But in our position as a Tier 1 supplier, it is infrequent that we get the opportunity to announce these on any timetable that we would like to do. So in general, we'd love to be telling you all about the developments we're doing with our customers, but primarily, our customers come first. We sign nondisclosure agreements with those customers. And so in many cases, our hands are tied. And so I don't have any news to share with you in that regard today.

Got you. There's a question you probably can't address it. What is the current status of MOU signed with Tata Motors in India? And I'm bringing that up because you did refer a few times to India and being a big opportunity there for you.

Yes. So I'm not sure the reference about an MOU. Basically, we do business with Tata every day. We're a supplier of theirs. We're helping them with both cars and trucks in the marketplace in India to bring natural gas to their customers and their vehicles. And so it's a really important part of what we do every day, but I don't have any update on MOU, doesn't -- I can't compute that one, honestly.

All right. Someone here is asking about there are thousands or hundreds of thousands of spark LNG engines -- natural gas engines in China. What is the percentage chance that China OEMs just stay with spark ignited and they don't progress into the HPDI market?

Yes. So hard to call the odds on that, but I would say the overriding factor will be in the end how do the vehicles perform. And what we've seen in our experience in Europe, where our customer entered the market, at the time they entered the market in 2018, the only -- 100% of the natural gas share was spark ignited engines, and they're the new entrant with the new technology. And there is an adoption curve, but that adoption curve is driven by the performance and the economics of the product. And so we go back to the performance and the economics of HPDI compared to spark ignition. It offers a significant advantage, and so we see HPDI as the winning solution in the long run. We've got to prove that. I showed you some data in the presentation that made it very clear that we're picking up share and our customers are picking up share as a result of having a superior product. We expect the same thing to happen in China.

Got you. We are a quarter to the hour here. Do you have to run at this point?

Yes, I should go. I really appreciate the opportunity, and I loved the dialogue and the questions you had. So thanks for giving me the opportunity and for your time and the time of your audience today. Greatly appreciate it.

David, thank you for a great amount of time to answer a lot of questions, a lot of great questions from the audience. So thank you all very much, and we would love to have you back in the future and continue the conversation as news comes out. So thank you very much, and have a great day.

Perfect. Thank you, Martin. Thank you, everyone.

Cheers.