It appears now that Canadian fuel-cell developers and their investors will have to look for another route to profitability, at least in the short term.

"For the next 10 or 15 years, the potential numbers of cars on the road is going to be very, very, very, very small. That's a pretty bleak picture if you're spending a lot of money on development and not getting any significant return on it," said John Sheridan CEO Ballard of Power Systems Inc. (TSX:BLD).

"Maybe at some level, emotively, people find cars more alluring and more sexy, but when you think from an investment opportunity and where you can make a real impact on reducing greenhouse gas emissions, (commercial markets) are going to be where you can drive a large volume of clean energy products."

Fuel-cell cars are widely viewed as potentially the most pollution-free vehicles for the future because they are powered by electricity that's generated through the chemical reaction between hydrogen and oxygen and emit only water as a byproduct.

Yet despite a push to reduce green house gas emissions and produce environmentally friendly cars, fuel cell companies are no longer promising investors fleets of fuel cell-powered vehicles are just around the corner.

Instead, they are suggesting that that more practical niche markets like forklifts, backup power generators and co-generation for home and industrial use are the way to cash in on the clean technology.

Vancouver-based Ballard, one of the world's best-known developers of fuel-cell technology for cars, said recently it is selling its automotive fuel cell business to Daimler AG and Ford Motor Co. in a bid to shorten the company's time to achieve profitability.

Hydrogenics Corp. (TSX:HYG), meanwhile, said Wednesday it is cutting 50 more jobs, reducing its workforce to 150, in a "streamlining" that would entail a fourth-quarter charge of $3 million and will reduce costs for the hydrogen-generation and fuel-cell developer by $5.2 million annually.

"There's still a substantial cost reduction that needs to happen to support the automotive proposition," Hydrogenics CEO Daryl Wilson said in an interview.

"The automotive industry still strongly believes that ultimately we need to get to hydrogen as a fuel system and they're still very committed to working in that area, but that's not the appropriate focus for our company," Wilson said.

But despite the move away from fuel cells for automobiles, experts say investors shouldn't give up hope on the payoff of large-scale hydrogen car production just yet.

Thomas Weisel Partners analyst Jeff Osborne said he didn't see any of the smaller markets "being sustainability profitable," saying he considers fuel cell companies to be "more of a long-term proposition."

"I'm still positive that sometime in the 2012 or 2020 timeframe you'll start seeing fuel-cell vehicles and a hydrogen infrastructure, but in the near-term, the cost points aren't there," Osborne said.

Gas stations around North America may be branded as Shell or Exxon, he added, but they're typically owned by independent investors or mom-and-pop operations - not the oil companies themselves.

"Putting in a $1-million dollar hydrogen pump to take away from a cash cow typical gasoline pump is a challenging proposition (for those people)," Osborne said.

And even Sheridan, who calls automobiles "the most difficult challenge you can possibly pick for the commercialization of the technology," said he isn't willing to give up on the prospect altogether.

"It wouldn't be fair to say that Ballard is out of automotive for all time," he said in an interview.

"In the short-term, we're in automotive in a profitable way supporting this new company (through the Ford/Daimler deal). Longer-term, if it makes sense, and if it makes sense for our shareholders, then strategically we could play in the market."