Navigant Research Blog

More Automakers Are Revisiting Fuel Cell Vehicles

— January 5, 2016

Consumers are waiting for the next big thing in clean transportation, yet nobody has a clear idea of what it may look like. While battery electric vehicles (BEVs) are a popular option in this niche market, fuel cells vehicles (FCVs) offer similar environmental benefits. Though the buzz surrounding FCVs has waned over the years, many believe that growing government incentives and advancements in the technology position this class of vehicles for a major breakout in the coming years.

Fuel cells are devices that convert chemical energy into electrical energy, much like a battery. Proton exchange membrane fuel cells (or PEMFCs) have been the leading type of fuel cell for light duty vehicles (LDVs) and buses due to their shock resistance, compact construction, and fast startup time. Toyota made headlines a few months ago with its rollout of the Mirai FCV in the United States. The fuel cell stack utilized within the car is Toyota’s proprietary stack with W.L. Gore’s polymer exchange electrolyte. Preorders well exceeded expectations, totaling just under 1,900 units by October. Toyota plans to sell 3,000 units in the United States by the end of 2017. Navigant Research documented the market for FCVs in its recently published research brief, Fuel Cell Vehicles.

New Developments in FCVs

In 2015, the Tokyo Motor Show served as a platform for auto manufacturers to showcase their efforts within the FCV space. Toyota made further news with its Lexus LF-FC Concept, which utilizes a fuel cell electric system that drives the rear wheels and also can send power to front in-wheel motors for all-wheel drive. Honda revealed its new production version of the Clarity set to go on sale early this year. The Clarity’s entire fuel cell stack and drivetrain is now packaged under the hood. This model will likely be the basis of Honda’s new BEV and plug-in hybrid electric vehicle in the next few years. Additionally, Daimler showcased its Vision Tokyo concept at the show, an autonomous-capable lounge on wheels with a plug-in hybrid fuel cell drivetrain similar to the F015 Concept shown at the Consumer Electronics Show. There is no lack of technological innovation in the transportation sector, but other issues like infrastructure and cost must be resolved before widespread FCV adoption can occur.

Research institutions, automakers, and cleantech manufacturers continue to push new developments with fuel cells, and new ways to improve them are underway. Through nanotechnology and advanced microscopy, scientists have found ways to decrease the amount of platinum used in PEMFCs by up to 84%, possibly even eliminating the need for it all together. This would translate to a significant decrease in vehicle cost if it is able to be fabricated at scale. Companies like Ballard Power Systems and Hydrogenics are frequently enlisted to have their fuel cell modules utilized in different applications (e.g., defense, aerospace, and stationary power), and have made developments to incrementally improve roundtrip efficiency. Furthermore, key partnerships (like BMW and Toyota and Daimler, Nissan, and Ford) dedicated to researching and improving fuel cells technologies will continue to be important in decreasing costs.

Electric drive is the leading opportunity to improve our transportation system’s efficiency. With fuel cells there is one more way to generate that electricity. Fuel cells also help ensure that there is an option for everyone as the push toward electrification and efficiency continues throughout the transportation sector. The years 2016 and 2017 should prove to be a breakout year for FCV announcements and deployments. Increased government, private sector, and public sector support will determine how deeply integrated FCVs will become in the global transportation fleet.


Tax Incentive Uncertainty Surrounds Fuel Cell Vehicles

— December 23, 2015

It’s no secret that incentives continue to play a key role in the progress of alternative energy technologies. Witness the significant media attention given to the last-minute U.S. federal funding legislation, which included a long-term extension for solar energy tax credits out to 2020. The solar industry association is claiming that the tax credits will help solar installations in the United States reach 100 GW by 2020. What’s unusual about this extension is the 5-year timeframe. In recent years, Congress has been loathe to pass legislation establishing long-term energy tax credits. Coupled with Congress’s tendency to pass annual spending bills at the last possible hour, this has led to a constant state of uncertainty regarding energy tax credits.

A sense of certainty is critical for potential adopters or investors, and this extends to knowing whether or not tax credits will be in place. This is not what happened for fuel cell vehicles (FCVs), which are among the technologies that received yet another short-term extension of the federal tax credit through 2016. As a practical matter, this incentive will do little to truly push the FCV market, since there are very few of these vehicles currently available in the United States. The FCV market is just beginning to enter the early commercial phase, with the Toyota Mirai and Hyundai’s fuel cell crossover vehicle (called the Tucson in the U.S. market). Both are available in California, but at limited volume. Toyota has indicated its plans to sell around 3,000 fuel cell Mirai models in the United States through 2017; the Mirai had close to 2,000 pre-orders in California as of October, so Toyota could reach that goal. However, the company has also set a production cap of 3,000 units annually. Honda will be next in the U.S. market with a new commercial FCV, the Clarity, set to be introduced in 2016.

The U.S. fuel cell car market will be in limited supply mode through 2016 while the tax incentives are in effect. Any real impact would be felt closer to 2020, when the market will need to ramp up to sales in the tens of thousands, as noted in Navigant’s most recent Fuel Cell Vehicles report. This next phase of the market is when incentives will be critical, unless the price premium for a fuel cell car has dropped close to parity with a hybrid.

Setting an Example

By contrast, the South Korean government is making a major move to encourage FCV adoption in the long term, announcing a huge new subsidy of around $23,250 for purchases, around a third of the price of a Hyundai FCV in the country. The government plans to build out hydrogen stations with an eye toward building the FCV market to 630,000 vehicles by 2030. It’s surprising that it took the government this long to develop an aggressive FCV adoption strategy, given Hyundai’s commitment to fuel cells and the incentives in place in South Korea for other fuel cell technologies. Nevertheless, it looks like the country is putting in place a long-term strategy of subsidies and investment to promote FCVs domestically.


New Momentum for Fuel Cell Vehicles

— December 15, 2014

Somewhat unexpectedly, fuel cell cars were in the spotlight in November, with Toyota and Honda each unveiling their fuel cell vehicles (FCVs) in Tokyo and several FCVs displayed at the Los Angeles Auto Show.   The media responses ranged from skeptical interest to disbelief that FCVs will ever become a reality.  So let’s look at what happened and what it says about where FCVs are going.

The biggest announcement was Toyota’s presentation of the Mirai, a four-seat fuel cell coupe that will be available to Japanese consumers in early 2015 and later in the year in the United States.  Although Hyundai is first to market with a production fuel cell car, Toyota generates the most excitement, mainly because the company is assigned almost magical powers to create a market for new clean technology thanks to its launch of, and continued dominance of, the hybrid vehicle market.  Toyota is clearly swimming against the tide on zero emissions technology by going with fuel cells instead of batteries, and the company’s moves attract attention.

5 Minutes or Less

Toyota’s announcements were the most positive of the recent announcements.  I’ve said before that two remaining hurdles for the fuel cell car market come down to cost (of the car) and infrastructure, as the technology has largely been proven.  Toyota demonstrated this with the Mirai, which will have a 300-mile range and will refuel in under 5 minutes.  While Audi has said it is going the plug-in hybrid fuel cell route because a pure fuel cell car would be underpowered at just 130 horsepower (hp), the Mirai will have 153 hp, in line with Toyota’s conventional vehicle lineup.  Toyota announced that the sticker price for the Mirai in the United States will be around $57,000.  When tax credits are added in, the price will drop below $50,000.  That’s still a high-priced car, but at this price point, it’s at least competitive with the high end of battery vehicles.

Toyota also said that it will support infrastructure investment in the northeastern United States.  The company is already investing in hydrogen station deployment in California through California hydrogen infrastructure startup FirstElement.  While this move can be seen as simply supporting the introduction of zero emissions vehicles (ZEVs) in the Northeast states that have adopted the ZEV mandate, it’s the first sign of real progress on U.S. infrastructure buildout outside of California.

Full Speed Ahead, Slowly

Honda’s news was more mixed.  Honda unveiled a five-seater fuel cell concept car – a positive step in showing that FCVs won’t have to start small like battery vehicles did.  In addition, Honda joined Toyota in supporting FirstElement in California through a letter of intent to invest $13.8 million.  But the company took a step back by announcing that it would not release its first commercial FCV offering until 2016.  Moreover, Honda’s president, Takanobu Ito, said that his vision was of FCVs in significant numbers on the road in 30 years.

At the Los Angeles Auto Show, other OEMs that have largely stayed out of the fuel cell development path had concept vehicles on display.  The Volkswagen Group showed a hydrogen Golf and a plug-in A7 e-tron for Audi; both are still concepts, so this looks more like hedging against future need for a FCV once Toyota, Honda, and Hyundai have tested the waters.

So progress continues on the two major challenges for FCVs, but it continues to be slow.  The price points are the most positive development, and may leave hydrogen infrastructure as the final obstacle for fuel cell cars.


Fuel Cell Vehicles Set to Arrive – with Fueling Stations

— September 5, 2014

Heading into the 2015 launch of commercial fuel cell vehicles (FCVs) from Toyota and Honda (Hyundai’s is already out), California and Japan appear to be leading the race to build infrastructure.  In the past 12 months, the governments in California and Japan have each made a firm commitment to support extensive refueling networks.  Japan set a target of building 100 stations by March 2016.  California has committed to providing up to $20 million annually in support of a 100-station network.

Those timelines are aggressive given that, up to now, hydrogen stations have taken 18 months or more to build.  In California in particular, the timeline for building a hydrogen fueling site has been very lengthy, 24 months and even more.  This is one reason that the state has lost its leading position as a first market for FCVs.  A year ago, it looked like Europe was going to step up, with the United Kingdom announcing its own H2Mobility program to follow on the one that Germany established to develop and execute a hydrogen roadmap.  However, both of these programs are moving rather slowly.  By contrast, California secured a funding commitment from the state of up to $20 million per year in September 2013.  Now, the state is moving forward at a much faster pace.   In May, the California Energy Commission (CEC) announced awards for 28 stations, to be built by November 2015, for a total of around $46 million.

New Entrants

Of course, being first also means being a guinea pig for this market, which still faces a good deal of uncertainty in terms of potential demand.  I’ll be outlining FCVs sales prospects through 2023 in my upcoming report, 2014 Fuel Cell Annual Report.  Participants in the buildout of California’s first nine stations learned some lessons that are now being implemented.  One of the most critical differences is that the CEC is using its funding to provide support for operations and maintenance in addition to station construction.  This represents a tacit admission that the stations will be a cost center for owners and operators for the first years of the market.  The CEC awarded $300,000 to four current stations to support ongoing operations.

Another striking difference with the new 28 stations is that only 3 of the 28 awards are going directly to industrial gas companies (IGCs).  In place of IGCs, new entities have sprung up specifically to build and manage retail hydrogen fueling; these entities were given 23 awards.  Startup FirstElement Fuel received awards to build 19 stations.  The company was launched with funding support from Toyota and IGC Air Products but is open to working with any IGC that wants to use a third party to operate a retail station.  The company plans to become an operator of hydrogen fueling networks, similar to electric vehicle (EV) charging network operators.  FirstElement secures a retail gas station where there is real estate available to add a hydrogen pump and takes responsibility for the station once it’s up and running.  This removes risk from both the gas station owner and from the IGC providing the hydrogen.

Quite a bit of risk remains for the CEC in placing much of the responsibility for stations needed in 2015 on one company.  But the good news for the FCV market is that some early lessons learned are paying off in terms of new ways to tackle the problem of providing fuel to potential FCV drivers.


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