The hydrogen energy industry is showing symptoms of subsidy dependency, with leading firms posting losses and billions in subsidies sparking corporate lawsuits. Recently, it was noted that Foshan Feichi has taken Sinohyc to court over a sum of 1.94 billion yuan. This is not an ordinary payment dispute, but a battle over who should receive a government subsidy fund. Just before Foshan Feichi filed the lawsuit, a subsidiary of Sinohyc had already sued Foshan Feichi in a separate action, demanding 1.62 billion yuan in payments. The scenario of "you owe me, I owe him, he owes you" reveals the cash flow chain in the hydrogen industry, long masked by subsidies, finally splintering in court.

This dispute is not an isolated incident. The entire hydrogen industry is repeating the same story: subsidies have created a market, but the subsidy distribution mechanism has, in turn, distorted it. In 2025, the combined revenue of four leading hydrogen energy companies fell, with total net losses reaching approximately 20.88 billion yuan. Sinohyc's revenue dropped to 2.59 billion yuan, while other firms saw declines of 32.2% or more. Losses are the norm, and profitability is the exception. When a listed company suffers losses for six consecutive years, accumulating nearly 17 billion yuan in losses, yet continues to explain it away as being "in the early stages of commercialization," the term "early stage" can no longer uphold the industry's dignity.

Why just four leading ASX 200 shares?

The core of this dispute lies in a government subsidy that is difficult to account for, dragging four companies into the same legal battle. The origin of the conflict dates back to 2022. Foshan Feichi purchased hydrogen fuel cell products from Qianchen Company while selling assembled vehicles to Hanyi Company. Under normal business logic, Hanyi would pay Foshan Feichi, and Foshan Feichi would pay Qianchen, keeping the transaction clean. However, hydrogen fuel cell vehicles are not ordinary commodities. Behind them lies a government subsidy fund, and how this money is claimed and distributed has turned a simple buyer-seller relationship into a tangled mess.

The four companies signed a "joint subsidy fund application consortium agreement." According to Foshan Feichi, after Qianchen, as the consortium's representative, applied for the subsidy funds, the money should have been distributed to Foshan Feichi to offset the overdue car payments owed by Hanyi Company. Hanyi Company had already received 1.94 billion yuan in subsidy funds, but the money was not transferred to Foshan Feichi as agreed. Sinohyc presents a completely different narrative, claiming that the 1.94 billion yuan sought by Foshan Feichi is not the same sum as the subsidy funds claimed by Qianchen. One subsidy fund, two companies, entirely different interpretations of ownership. The government subsidy, intended as a tool for industrial support, has now become the trigger for mutual lawsuits. The courts will need to decide where the money ultimately ended up. However, one fact is already clear: when subsidy misalignment becomes the core of the business model, companies lose the ability to clarify their commercial relationships.

Subsidies are industry-wide anesthesia

The "rewards instead of subsidies" policy was introduced in 2020 by five government departments. Instead of direct cash grants, it provides rewards based on the promotion targets of demonstration city clusters. The initial intention of this mechanism was "precise incentives," but in practice, the application and distribution of subsidies inherently involve multiple entities, including vehicle manufacturers, system suppliers, and operating companies. Who is eligible to apply, and how the funds are distributed afterward, all rely on the consortium agreement. The problem lies in the time lag. Companies must first invest their own money to produce and sell vehicles, then wait for the subsidy to arrive. This "pay first, collect later" model keeps cash flow perpetually tight. To survive this time gap, companies in the supply chain have to advance funds and owe each other. As of March 2025, the five major demonstration city clusters still had 45.4% of their reward funds undistributed. Without the money coming in, accounts cannot be collected, and without collecting accounts, the next business deal cannot proceed.

Sinohyc's financials are the most direct proof of this model. As of the end of 2025, the company's accounts receivable balance was 19.88 billion yuan, accounting for 29.50% of its total assets. Over 90% of these receivables were aged more than one year, and the company had accumulated 9.03 billion yuan in bad debt provisions. A company with annual revenue of only 2.59 billion yuan has nearly 20 billion yuan in uncollected accounts on its books. This is not a business problem; it is a breakdown of the entire industry's payment system. Other companies are not much better off. In 2025, the expected credit impairment loss for one firm surged by 232.3% to 73.1 million yuan, due to a large amount of new customer accounts expected to be unrecoverable. Another company's impairment losses on financial assets and contract assets increased from approximately 1.07 billion yuan to about 1.73 billion yuan. Among the four leading companies, the debt-to-asset ratios of two have exceeded 50%. The entire industry is "keeping alive" on subsidies, yet the subsidies themselves are one of the causes of the tight cash flow. Research indicates that three major bottlenecks—cost, infrastructure, and corporate cash flow—are hindering the promotion of fuel cell vehicles. The long distribution cycle of subsidy funds and the accumulation of accounts receivable will pressure company operations. National People's Congress representatives also pointed out that the central reward funds take a long time to be disbursed, local supporting funds are not distributed in a timely manner, and companies generally have high proportions of accounts receivable.

Industry is not "early stage," but "subsidy dependency" in late stage

Sinohyc attributes its losses to "the phased characteristics of the hydrogen fuel cell industry being in the early stages of commercialization." However, "early stage" cannot forever serve as an excuse. In 2025, the average price of Sinohyc's fuel cell system dropped to 2163.56 yuan/kW, and the gross profit margin of its system business turned negative, recording -19.82%. A price war to this extent indicates not "early stage," but oversupply, insufficient demand, and a business model that has not been validated. More critically, the market itself is shrinking. In 2025, the production and sales of fuel cell vehicles fell by 47% year-on-year. The five city clusters set a target of 33,000 vehicles for promotion but only achieved 15,800, a completion rate of less than 50%. The market is getting smaller, and companies are losing more money. An increasing number of companies are "voting with their feet." In November 2025, Meijin Energy terminated its "hydrogen fuel cell power system and hydrogen commercial vehicle parts production project," permanently diverting the remaining 1.79 billion yuan of raised funds to supplement working capital. The project's cumulative investment was only 734.3 million yuan, with an investment progress of 29.37%. The choice made by a listed company with real money is more convincing than any industry report.

The problem lies in the subsidy policy directing companies' attention towards "how to get the subsidy" rather than "how to sell the product." Institutional designs like consortium agreements, subsidy fund applications, and points-based assessments have led companies to spend significant energy on policy arbitrage, rather than on technological breakthroughs and cost control. The dispute between Foshan Feichi and Qianchen Company is a microcosm: four companies signed a consortium agreement, but no one could clearly explain the ownership of the subsidy funds. When subsidies become the business model itself, companies lose the ability to find real market demand.

Policy is shifting, but companies cannot wait

In March 2026, three government departments raised the four-year reward upper limit for a single city cluster to 16 billion yuan, replacing "direct cash subsidies" with a "points-based system." The policy design is improving—from "subsidies upon purchase" to performance linkage. The direction is correct, but the pace is a problem. After the previous demonstration policy expired at the end of 2025, the industry experienced a significant policy vacuum. Companies continue to lose money while waiting, and they wait while continuing to lose money. Companies are adopting different strategies to find a way out. In December 2025, Sinohyc invested 30 million yuan to establish an energy storage subsidiary, entering the long-duration energy storage sector, and signed its first order in March this year. Another company narrowed its losses last year by cutting costs—administrative expenses fell by 55%, and R&D expenses fell by 42%. These attempts are still small in scale, but the direction is correct: instead of suing each other in the subsidy quagmire, it is better to find real demand in the market.

The 1.94 billion yuan subsidy dispute has not yet been heard in court. But more significant than the verdict is the signal this case itself sends: when a government subsidy can be claimed by two different companies simultaneously and taken to court, it indicates that the subsidy-dependent business model has reached a crossroads where change is inevitable. Subsidies will not exist forever, and companies cannot survive indefinitely on accounts receivable. This dispute may be just the tip of the iceberg. Beneath the surface, it is unclear how many subsidies are circulating among companies, how many accounts receivable are on the books, and how many companies are maintaining superficial operations through "triangular debts." But one thing is certain: as long as subsidies remain the primary "business model" for this industry, similar lawsuits will not be the last.

Below is the original announcement from Sinohyc: