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Japan keeps auto industry's hydrogen dreams alive

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Toyota's hydrogen-powered Mirai has been relaunched in Japan and California with an extended range and lower price.
Source: Toyota Motor Corp.

Toyota Motor Corp.'s newly relaunched Mirai sedan signals its ongoing commitment to hydrogen fuel cell vehicles, but the technology will need more government backing along the lines of that provided in Japan if it is to gain mass appeal, analysts say.

Manufacturers and consumers alike have been reluctant to embrace hydrogen-powered cars. The first Mirai model, launched in November 2014, sold just 11,000 units worldwide.

The main impediment is the lack of hydrogen refueling stations, an issue that requires the participation of oil and gas companies and local governments. But with such low sales numbers, the incentives to build out such costly infrastructure are lacking.

"Do we first have the cars from the industry, and then the infrastructure players think that it is an attractive opportunity to invest in the station? Or do you first build the stations that have no business case because they are not utilized?" said Bernd Heid, senior partner at McKinsey & Co., who leads the consultancy's hydrogen service line.

Japan leading the way

Toyota initially released the Mirai only in California, home to the majority of the U.S.'s hydrogen refueling stations, and Japan, one of the global leaders in hydrogen technologies.

Japan has the world's largest hydrogen refueling network with 137 stations as of December 2020, according to Japan's Next Generation Vehicle Promotion Center. The government has set aside ¥70 billion to promote hydrogen in the fiscal year starting April, with ¥30 billion allocated to purchase subsidies of hydrogen fuel cell vehicles, or FCVs, and the construction of refilling stations.

The Japanese government is banking on hydrogen vehicles to achieve carbon neutrality by 2050. It has set an ambitious target of having 200,000 FCVs on the road by 2025, compared to about 3,600 in 2019, along with 320 hydrogen filling stations under its third Strategic Roadmap for Hydrogen and Fuel Cells.

Japan-based Toyota and Honda Motor Co. Ltd. have been the pioneers in commercial passenger hydrogen models, but South Korean rival Hyundai Motor Co. has also entered the fray, encouraged by its own government's plans to produce 6.2 million FCVs and build at least 1,200 refilling stations by 2040.

However, Japan's initiative in stimulating the hydrogen value chain beyond the auto sector makes it a more successful example than others, Heid said.

"I think Japan has been better than others in trying to showcase the whole hydrogen society where you have different applications, like for heating in housing, decarbonization of the industries. This whole ecosystem of an integrated hydrogen society is what Japan has showcased best," Heid said.

Furthermore, Japan has over 50 years of experience in liquid natural gas imports with extensive expertise in gas production, liquefaction plants and shipping. The nation's position as the world's largest importer of LNG can be leveraged to develop the hydrogen supply network, according to S&P Global Platts.

Size matters

China has prioritized developing hydrogen-powered heavy-duty trucks. The government in November 2020 launched a 15-year plan to develop its fuel-cell supply chain and hydrogen-powered trucks and buses with a goal of having 1 million FCVs in operation by 2030.

Medium- and heavy-duty fuel cell electric vehicles are less restricted by the limited refueling stations as they can fill up along designated long-haul routes or at central hubs, said Michael Whiston, post-doctoral research associate in the Department of Engineering and Public Policy at Carnegie Mellon University. Using them in controlled environments, such as at ports and factories, also present a better scenario in risk management, said John Zeng, director of China forecasting at LMC Automotive.

"Some countries push for [passenger] cars like South Korea and Japan, others start with trucks. I don't see that as a problem because in 10 years from today, you will see both," said Heid.

Almost all carmakers have put battery-electric vehicles at the center of their electrification strategies thanks to their lower cost and better charging infrastructure. There are about 30,000 electric-vehicle charging stations in the U.S. compared to about 50 hydrogen refueling stations, said Whiston.

But Heid believes that the battery and hydrogen debate is not an either-or proposition. It will be difficult for Europe to achieve its 30% decarbonization target without the deployment of hydrogen-powered trucks, he said.

For now, the Mirai's relaunch offers Toyota another opportunity to whet the appetite of hydrogen car enthusiasts. Its range has been extended to 850km from 650km and it will sell at a more compelling price.

Japanese buyers will have ¥1 million shaved off from the ¥7.1 million starting price tag, thanks to subsidies. In California, the Mirai starts at $49,500, but a $4,500 state rebate plus further incentives including zero-interest financing and complimentary fuel credits can bring the cost down much further.

"Lower price and longer range are the biggest benefits of the 2021 Mirai. Because cost-competitiveness is key to market penetration, this price reduction could accelerate consumer adoption substantially," said Whiston.

As of Feb. 9, US$1 was equivalent to ¥104.66.