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The battle over cars running on alternative fuel shifts up a gear this year. A record number of new models powered by electric batteries are due to be released in the coming months as manufacturers place their bets on greener solutions to petrol engines.

But two of the biggest carmakers, Toyota and Hyundai, are still driven by the belief that hydrogen will become a key source of clean energy for the future. That obsession with hydrogen fuel cell vehicles looks more justified now than it has sometimes appeared in the past.

Extreme volatility in natural gas prices in recent months and the need to find alternatives for Russian resources have renewed interest in the potential for hydrogen fuel. Large vehicles, such as trucks, need an alternative to battery electric power. The distances they travel mean electric alternatives require heavy batteries.

On the hydrogen-powered passenger car side, which is led by Toyota’s Mirai and Hyundai’s Nexo models, sales numbers are small, making up less than 0.1 per cent of global passenger car sales last year. Vehicles running on batteries accounted for 10 per cent.

But for hydrogen-powered commercial vehicles — buses and trucks — growth has been much stronger than expected. Hyundai’s Xcient trucks have expanded market share rapidly since last year, on the roads in Germany, Switzerland, New Zealand and South Korea. Deliveries arrive in the US and Israel this year. In China, hydrogen fuel-cell vehicle sales, led by buses, nearly tripled last year.

The increase in sales in China draws parallels with trends in early electric car sales in the late 2000s. As China’s share of global electric car sales soared — from 26 per cent of global market share in 2015 to 57 per cent last year — costs of charging infrastructure, batteries and car prices have fallen steadily.

There is good reason for the take-up in hydrogen-powered vehicles. The latest Xcient trucks and the Mirai, for example, can travel more than 800km on a single charge. They can be charged in minutes. Prices are going down.

The biggest change is that the cars can now be mass produced. Early models were hand assembled and the higher production is cutting costs. Like the batteries in electric cars, the hydrogen fuel stack, the heart of a fuel-cell power system which generates electricity, is the most expensive component of the vehicles that use them — costing more than $11,000 per car in earlier models. That expense has since been slashed with higher volumes.

But while the vehicles appear to be an environmental dream come true, emitting just water vapour as a byproduct, there is still work to be done to make the production of hydrogen fuel greener and less costly.

About 95 per cent of all hydrogen fuel is generated from fossil fuels, mostly natural gas. In the production process, this produces carbon monoxide and carbon dioxide, which offsets the reduction in exhaust pipe emissions from hydrogen cars.

In Asia, the proportion of fossil fuels in total energy consumption is high — 83 per cent in China, and 85 per cent in Japan and South Korea. That means even battery electric cars in these countries are not as green as planned.

That creates an incentive for governments to invest in the production of hydrogen from cleaner sources. Government subsidies that foot the bill for developing new technologies would help clear current hurdles to wider adoption. That could also speed up the shift to hydrogen in other industries such as shipping, aeroplanes and gas networks.

Meanwhile, subsidies for hydrogen car purchases and infrastructure will help expand the market. Beijing, for example, has launched an aggressive drive for hydrogen-powered rental cars and public buses. Locally made hydrogen-powered buses and commercial vehicles are already on the road. The country has a sales target of 1mn units by 2030.

Toyota and Hyundai have been developing fuel-cell vehicles since the 1990s and have decades worth of investment that must be recouped. The duo’s operating margins and net profit per car sold lag behind that of electric-only peers.

The rare coincidence of corporate needs and government policy this year means the opportunity to turbocharge investments in hydrogen fuel vehicles. Creating a market for hydrogen fuel cars will be a good start. But in order to make them a viable, and sustainable, alternative to petrol vehicles, the focus must now shift to finding greener ways to produce hydrogen fuel.


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