JPMorgan’s Elaine Wu predicts that hydrogen fuel cell vehicles will become a major player in the Chinese commercial vehicle market.

“Currently, fuel cell vehicles account for less than 5% of the commercial vehicle market in China, and that share could grow to about a third of the total market share by 2050,” said Wu, head of Asia ex-Japan ESG and Utilities Research at the company said Monday the “Squawk Box Asia” from CNBC.

Fuel cell electric vehicles run on hydrogen, which can be used to store and provide energy from other sources. Hydrogen is a clean fuel and when consumed in a fuel cell only produces water.

One reason why fuel cell vehicles are a “very good option” for the commercial vehicle market is their refueling time of only about 10 to 15 minutes, said Wu. They also have a range of around 800 kilometers, around 50 to 100% over lithium battery electric vehicles.

Large automobile manufacturers such as Toyota, Honda and BMW are opening up the market for hydrogen fuel cells.

According to the JPMorgan analyst, China is already pushing for fuel cell vehicle funding.

“The [Chinese] The government is promoting what we call “city clusters” so that there could be demonstrative cities that tell successful stories of how fuel cell vehicles are used in different parts of the country, “Wu said.

“This is also a policy that we implemented about a decade ago when the central government tried to make electric vehicles using lithium batteries. And we’ve seen how successful it was.”

Beijing has announced that 20% of new cars sold will be new energy vehicles by 2025. Competition in the domestic electric vehicle space is fierce, with Tesla pitting against domestic companies like Nio and Xpeng.

China’s climate goals

With China’s promise to become carbon neutral by 2060, hydrogen is likely to play a role as a clean energy source in heavy industry, according to Wu.

“This heavy industry sector requires high heat content, so renewable electricity is not a good option to fuel the heavy industry sector – but hydrogen is,” she said.

The analyst said China leads the world in hydrogen production and accounts for a third of world production.

Read more about electric vehicles from CNBC Pro

“In the future, green hydrogen production could be promoted, using renewable electricity to produce hydrogen,” added Wu.

Hydrogen is currently made from coal, and the move to green production will only be possible if the cost of renewable electricity continues to fall, she added.

“We have seen in the last 10 years that the cost of producing solar power in China has decreased by 80%. The cost of producing wind power has decreased by 40%, ”she said. “If this trend continues – and we believe it will because of technological advances – it means that green hydrogen will be possible in the future when these things come into play.”

– CNBC’s Anmar Frangoul and Evelyn Cheng contributed to this report.