Westport Fuel Systems Still Faces Uphill Battle Even After Weichai Agreement Sends Shares 21% Higher

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What happened

Shares of Westport Fuel Systems Inc. (NASDAQ: WPRT), a manufacturer and supplier of advanced clean fuel systems and components, are jumping 21% as of 11:40 a.m. EDT Wednesday after announcing a deal with China's Weichai.

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So what

Wesport Fuel Systems entered into a definitive agreement with Weichai Westport to develop and market a heavy-duty natural gasoline engine using Westport HPDI 2.0 technology. The technology will be based on one of Weichai Power's engine platforms -- Weichai Westport and Weichai Power are affiliates of Weichai Holding Group. The new engine will be designed to meet China VI emissions standards and is scheduled for launch during the second half of 2019.

"It really is a continuation of the successful relationship between Weichai and Westport Fuel Systems. These agreements demonstrate the viability of our market-ready, clean technology solutions; secure the value of our Westport HPDI technology; and provide protection to our intellectual property," said Nancy Gougarty, Chief Executive Officer of Westport Fuel Systems, in a press release.

Now what

Ideally, this partnership will deliver a commercially available natural gas engine solution that can take advantage of China's liquefied natural gas fueling infrastructure, as well as help solve the region's pollution problems, and become a leading powertrain option for heavy-duty long-haul trucks.

Despite today's pop, investors have to keep in mind the stock is still down roughly 8% year to date and has shed a vast majority of its value over the past decade. Further, investors have rightfully questioned its long-term growth strategy as management focuses on cutting costs, reducing operating expenses, and selling assets such as its compressor business for $14.8 million. Taking a step forward in China with this agreement is a positive development, but Westport has a lot of work to do convincing investors it can grow into a long-term winner.

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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.