Navigant Research Blog

Toyota Bets on Fuel Cell Vehicles

Scott Shepard — October 26, 2012

Toyota declared in September that it’s watering down its battery electric vehicle (BEV) plans by cutting back the production of the small Toyota eQ (known as the Scion iQ stateside).  The company has been hesitant on the idea of powering a vehicle solely by battery and currently only has plans to sell the updated RAV4 EV in California, so the move is not that surprising.  Instead Toyota is emphasizing its plans for fuel cell development.  The company currently operates a test fleet of fuel cell vehicles based on the Highlander SUV, and plans to deploy its first mass-market FCV in 2015.  Pike Research’s 2011 Fuel Cell Vehicles Report forecasts that the North American market for fuel cell vehicles will grow from around 9,600 vehicles in 2015 to more than 53,000 in 2020.

In retreating on BEV development, Toyota is making the bet that hybrids and plug-in hybrids are the greatest growth opportunity in the near term, and hydrogen vehicles, not BEVs, will be the greater opportunity for the future.  Considering the lackluster sales performance of BEVs vs. hybrids (HEV) and plug-in hybrids (PHEV) over the last 2 years, it seems like a safe bet.

Sales of Plug in Vehicles, North America (2011 & 2012)

Type

2011

2012 (YTD)

(Since 1/1/2011) Cumulative

HEV

268,807

322,516

591,323

PHEV

8,272

25,944

34,216

BEV

9,966

6,802

16,768

Source: Pike Research

Most BEVs skirt the edge of a 100-mile range, stretching up to the $100,000 Model S, from Tesla, which can go nearly 300 miles on a single charge.  EV advocates and battery manufacturers have long insisted that a battery breakthrough on the horizon will triple battery ranges while drastically reducing battery costs.  Regardless of how far the BEV can go on a full battery, however, it still takes hours to recharge instead of the minutes it takes to refill a conventional gas vehicle.

Toyota’s hydrogen vehicles can already achieve ranges and refill times comparable to conventional gas vehicles, but they have challenges of their own, including high vehicle costs, high fuel costs, and a lack of refueling infrastructure.  The costs of the vehicle technologies and fuel can be reduced through economies of scale, but the real challenge lies in infrastructure development requiring hefty investments.  According to the U.S. Department of Energy’s Alternative Fuels Data Center (AFDC), there are nine publicly available hydrogen refueling stations in the nation, mostly in southern California.  By comparison, there are more than 4,600 publicly available EV charging stations.

The ultimate question is which technology will develop faster.  Will hydrogen infrastructure be added in a manner that makes advanced vehicle battery development unnecessary, or will batteries achieve a breakthrough that makes refueling with either liquid or gaseous sources obsolete?  Toyota’s actions indicate that its executives believe a battery breakthrough is unlikely.  If the company is right, its efforts will pay off handsomely; if not, the Japanese maker will cede increasing portions of the alternative fuel market share to smaller and more enthusiastic EV believers such as Nissan, Renault, and Tesla.

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