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.

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.

In 2009 the new U.S. Energy Secretary, Steven Chu, gave an interview stating that fuel cell powered light-duty vehicles were in need of a few miracles to make them viable in the market place.  Earlier this year, Chu did a 180-degree spin, saying that, thanks to newly abundant natural gas supplies in the United States, fuel cell vehicles now – officially – have potential.

In the intervening three years Germany, the United Kingdom, and more recently France have all launched their own versions of H2Mobility to coordinate and promote the adoption of fuel cell vehicles in 2015.  At the start of 2012, Japan detailed a map of future hydrogen refueling stations that will serve the majority of the Japanese population, and China laid out targets for local production and adoption of fuel cell vehicles.  In other words, the United States was pretty much out of step with the rest of the world.

But now the American government is back on board in supporting the fuel cell vehicle (FCV) option.  Is this really a good thing? Probably.  But…

The fuel cell industry is still plagued with large, government-backed R&D projects that tend to shield companies from market realities.  The most successful companies to date, such as Bloom Energy, FuelCell Energy, Altergy, and SFC Energy, have focused on commercialization and not feeding on government handouts.  The government focus on targeted R&D in the early days was vital, and the U.S. Department of Energy, along with Japan, led the world.  But now an increasing number of countries are being weaned off of R&D subsidies as the technology becomes increasingly commercial.

My worry is that the shift in U.S. policy will re-open the door again to large-scale, long timeline R&D projects.  July 25^th, 2012 saw the announcement by the U.S. DOE of a 2-year program to monitor and evaluate hydrogen infrastructure performance data.  Assuming the fastest possible kickoff, the program will launch in 2013, with a 2-year program out to 2015, say 6 months to write up the first draft report, and the wrap-up likely coming in 2016.  Four years from now.  By that time all the car companies should have fleets of fuel cell vehicles on the road, probably in Europe and Asia Pacific.

So unless this about-face includes a realistic roadmap to commercialization that focuses on the market and not R&D, the Energy Secretary’s support could actually delay the roll-out of FCVs in the U.S.

In spite of many efforts to declare fuel cell cars dead, top automakers are moving ahead with plans to produce commercial fuel cell vehicles (FCVs).  That was one of the key messages from the World Hydrogen Energy Conference, held last month in Toronto.

Granted, it’s not surprising that a group of people willing to spend time and money to get together and talk about hydrogen are, in fact, bullish on hydrogen.  But from the automakers’ media panel, where representatives from Daimler, Toyota and Honda sat for a long Q&A with the press, and from the hydrogen plenary and a panel on hydrogen market demand that I participated in, it’s clear that companies are still committed to this effort even though there are real hurdles in the way.

The automakers once again stated their commitment to releasing commercial FCVs roughly in the 2015 timeframe.  Some are more specific than others.  Honda’s Steve Ellis said the Japanese maker has not announced a hard date, but the company is working on a full model change from its current offering, the FCX Clarity.  Daimler reiterated that it will have a next generation FCV on the road in the 2014/2015 timeframe, and Toyota gave 2015 as its target.

Even though they have been talking up this timeframe for a couple of years, to be honest, I was half expecting the manufacturers to start walking back their dates, since enthusiasm for FCVs in some parts of the world has waned.  But they did not.  What has been pushed back is the timeframe for large-scale uptake, which OEMs are now saying likely won’t happen until  close to 2020.

Daimler’s Christian Mohrdieck said his company plans to get the price of the fuel cell drivetrains down to around that of a diesel hybrid, through volume production and some materials cost reduction.  Here I think he is talking about platinum, and it would behoove the platinum industry to think about making that happen.  I don’t think Mohrdieck was including the cost of hydrogen tanks in this estimate, in which case you have to bump up the FCV price further.  Hitting a competitive price point is still a concern for OEMs, from what I see.

It’s clear that hydrogen infrastructure is still a thorny issue.  The three OEM representatives at the conference were unanimous that they should not have to foot the bill for infrastructure buildout.  Even though Daimler has partnered with Linde to build 20 stations in Germany, Mohrdieck referred to this a “triggering” signal of the company’s intent to produce cars that can use hydrogen fuel.  Toyota also noted that it’s partnering with energy and gas companies in Japan to build stations, which will be placed in the same regions where Priuses are popular.

From my conversations with hydrogen companies, it is clear that they’re enthusiastic about the potential market from fuel cells.  While they’ve been involved in building infrastructure, especially in terms of materials handling but also with early passenger cars and buses, the fact remains that distributed vehicle fuelling is not their traditional business.  Eventually retail gas station operators must step in if the FCV market is to become viable.  This is happening in Germany, where Total Germany is part of a new initiative to build 50 stations by 2015.

No one doubts the major obstacles ahead.  But the OEMs are spending a lot, in terms of money and reputation, to forge ahead with fuel cell cars.

Plunging headlong into 2012, it’s a good time to pause and look back at our predictions for what Pike Research forecast would happen in the world of electric vehicles in 211.  Here’s a quick rundown of what Pike Research predicted for 2011 along with analysis of where we hit and missed:

1. The majority of people who drive a plug-in vehicle won’t own it.   

This prediction was on the money as GM and Nissan allocated a good percentage of their vehicles to dealers to make them available for test drives and to corporations for fleet use.  As predicted, car sharing programs are incorporating EVs into their fleets to enable many consumers to get their first taste of electric motoring, and we expect that trend to continue in 2012. 

2. Automakers will get pushback from EV owners regarding the length of time it takes to fully charge a vehicle.

We haven’t heard as much negative feedback on charging times as we anticipated, partly due to the fact that most consumers are buying faster Level 2 charging equipment rather than plugging vehicles into a standard outlet.  However, Nissan decided that offering a 3.3-kilowatt onboard charger was a competitive disadvantage for the Leaf and therefore doubled the speed for the 2012 model.   

3. Stop-start vehicles will arrive in the United States, albeit in small numbers

Sales of non-hybrid vehicles with stop-start technology were indeed minuscule in 2011.  During 2011 Ford and Volkswagen announced they were bringing stop-start to their North American lineups by 2012, and Wisconsin-based Johnson Controls announced it was investing more than half a billion dollars globally in stop-start battery manufacturing capacity. 

4. Many EV charging stations will spend the majority of their time idle

We didn’t exactly go out on a limb with this prediction.  Despite the fact that public charging stations installations have lagged, in many cities there are more public chargers than EVs today.  We’ve heard many anecdotal stories of charging stations that are rarely if ever servicing vehicles and we can expect that to continue in 2012. 

5. Fuel cell vehicles (FCVs) will be sold to fleets and consumers in small but growing numbers.

Automotive companies are continuing to slowly push forward towards commercialization of FCVs, but the quantities sold were very limited in 2011.  Based on the lack of availability of vehicles during the year, we sharply reduced our expected sales of FCV for 2011 to less than 700 globally – but that’s up from less than 200 the prior year. 

6. Someone somewhere will have a bad EV experience and the media will overreact.

Fortunately for automakers the only negative EV experience that received significant media attention was at a NHTSA test facility.  The web and media did play up the event and some reports accused NHTSA of not responding quickly enough.  However, the coverage avoided overreaction.  Fisker also has an issue about potential fires due to coolant leakage within the battery pack, so we’ll see if the “EV batteries are a fire hazard” follow up stories continue. 

7. The advanced battery category will heat up with M&A activity.

Way off.  There were no significant acquisitions or mergers during the year, and the biggest news was actually of an “anti-merger” – the dissolution of the Johnson Controls and Saft joint venture.  We expected some of the smaller companies to be acquired, but the independent battery startups managed to survive on their own despite sluggish EV sales.  Lithium-ion battery maker Boston Power received the most interest from investors as the company is shifting its focus, and its operations, to China. 

8. “Range anxiety” will prove to be more fiction than fact.

The accuracy of this prediction is hard to quantify, but the hypothesis that EVs would become stranded as drivers would not be able to cope with the shorter driving ranges appears to be false.  The media attention to range anxiety is slowly subsiding and should continue to fade from view in 2012. 

9. The best-selling EVs won’t have four wheels.

This one was a gimme.  Global sales of electric bikes and motorcycles are continuing to grow rapidly, and are finally making inroads in the United States.  Two-wheeled electric vehicle sales far outpace all forms of hybrids and EVs, and with companies such as SRAM getting into the game, the gap will continue to widen. 

10. The landscape for charging equipment will undergo a seismic shift as the category swiftly moves toward becoming a commodity market.

We were on target in predicting a seismic shift in EV charging equipment, but we picked the wrong one.  Prices didn’t fall as quickly as expected due to lower than expected sales of EVs and chargers.  But an emerging business model where third-party companies own and operate the charging equipment at no cost to the property owner has shaken up the industry.  These charging-as-a-service providers (350 Green, Car Charging Group, etc.) will help drive up volumes and drive down sales. 

Overall, six of Pike Research’s 10 predictions mostly hit the mark, while four were off or missed entirely.  Undoubtedly we’ll do better than 60% for 2012.