By Stephen Wilmot

The truck industry is starting to take the other kind of electric vehicle more seriously.

Daimler and Volvo, the world’s two largest makers of heavy trucks by revenues, said Tuesday they would team up to develop fuel cells. Germany-based Daimler, which makes Mercedes-Benz DMLRY 0.57% cars as well as Freightliner trucks, is carving out all its fuel-cell activities, including those once intended for Mercedes, into a new unit in which Sweden’s Volvo will purchase a 50% stake for roughly €600 million ($652 million). The companies will each plow at least €100 million into the project.

There are two types of electric vehicle. Those powered by smartphone-style lithium-ion batteries, such as Tesla’s, are now the primary technological focus of manufacturers of cars, vans and light trucks. Those that use stored hydrogen together with fuel cells to power the electric motor, though, is increasingly seen as the technology most likely to help the road-haulage industry cut greenhouse-gas emissions.

That is because lithium-ion batteries aren’t powerful enough to carry heavy trucks very far before needing a lengthy recharge. Hydrogen tanks can simply be topped up like today’s gas tanks. This is one of the disadvantages of fuel-cell electric vehicles, too: They have always been held back by the absence of refueling infrastructure, as well as the expense of producing clean hydrogen made using renewable electricity.

Volvo is betting at least €700 million that this will change. Chief Executive Martin Lundstedt quipped on a call with media that for most of his 30-year career fuel-cell vehicles had been 10 years away. In 2008 Volvo spun a previous fuel-cell venture off as an independent company, PowerCell Sweden. Now, though, Mr. Lundstedt expects deployment in the late 2020s.

The new time frame has much to do with European rules introduced last year that will force truck manufacturers to reduce the emissions of their fleets substantially by 2030. If regulation makes everyone move, affordable infrastructure is more likely to emerge—whatever the incentives created by more volatile factors such as oil prices.

The deal isn’t such a ringing endorsement of fuel-cell technology for Daimler, which is essentially selling half its business to Volvo. But the German automotive giant has reasons of its own, being in the midst of a far-reaching operational overhaul following a string of profit warnings last year. The current Covid-19 crisis, which compounds an already dire outlook for truckdemand, piles more pressure on even the largest manufacturers to share mounting product-development costs.

Stocks related to this technological niche have had a riotous time on markets lately. PowerCell Sweden, now backed by components giant Bosch, is up 345% over 12 months. Soon there will be a pure-play electric-truck stock, too: Nikola Motor Company. This startup, which has also received funding from Bosch as well as Fiat’s truck-making spinoff CNH Industrial, is applying Tesla’s playbook to heavy trucks and has plans to launch a fuel-cell product in 2023. It is going public this quarter via a merger with a Nasdaq-listed shell company, VectoIQ Acquisition Corp.

The truck industry’s road to a greener future is a long one, but it is already revving up for radical change. Investors need to follow suit.