Investing in Fuel Cell Vehicles

Electric Car Competition

By Jon Carter
Wednesday, August 21st, 2013

Herb Morrison was the reporter who provided commentary as the Hindenburg burst into flames in 1937.

“Oh the humanity!” he shouted, as the airship collapsed in on itself, with a frantic crowd rushing to the chaotic scene.

Sadly, the explosion of the Hindenburg has been seared in the minds of many for generations, and hydrogen power is still suffering from a degree of negative publicity.

But precautionary measures have been taken since the 1930s, and hydrogen fuel cell vehicles are stepping onto the scene.

fuel cell vehicle
Source: EnergyDigital.com

Car makers like Toyota (NYSE: TM) have addressed the safety issue by using sensors that will stop the flow of hydrogen in case of an accident. And the tanks are made of carbon fiber, the same material used in bullet-proof vests.

Hydrogen vehicles can be a genuine competitor against electric cars and gasoline engines.

Hydrogen is more expensive than gasoline, but if developed over time, it can prove to be a cheaper source of fuel, according to the Department of Energy.

And these vehicles are easy to fill, very similar to filling a regular gas station. It only takes a few minutes at most.

This could work to the advantage of fuel cell vehicles over electric cars, which normally take hours to charge. A fuel cell vehicle would even beat Tesla’s (NASDAQ: TSLA) one hour charge time for its Model S.

The hydrogen process works by combining hydrogen with oxygen, which yields electricity. What you’ll get is a clean-sounding engine with limited emissions aside from water vapor and droplets.

Now, there are some emissions involved, since the fuel source can be extracted from natural gas, and some environmentalists are making the case that fuel cell vehicles will only increase the reliance on fossil fuels. Hydrogen can be extracted from water, but it requires a massive amount of electricity to do so.

But it can be a money-making venture for natural gas producers, if and when hydrogen vehicles make a more pronounced appearance on the market.

Fuel Cell Interest

Fuel cell technology sounds promising, but there are some major barriers.

As of now, the hydrogen sector is in a state of grid-lock. Car manufacturers will not introduce more fuel cell cars, and there is not enough entrepreneurial drive to construct more fueling stations until more hydrogen cars are on the road.

But if you’re looking to invest in alternative energy, the fuel cell vehicle industry is definitely worth following, and here’s why.

Toyota has been working with BMW (OTC: BAMXY) on an unnamed hydrogen car that is set to make a debut at a Tokyo auto show in November, with an expected commercial entrance date in 2015.

Nissan (OTCMKTS: NSANY), Renault (PA: RNO), Daimler (OTCMKTS: DDAIF), and Ford (NYSE: F) will also share costs for the development of fuel cell vehicles that could be on the road by 2017. And Hyundai (KRX: 005380) is looking to lease 1,000 hydrogen cars beginning in 2015.

Honda (NYSE: HMC) will be releasing a next-generation version of the Clarity in 2015, a fuel cell car that can be spotted on California roads.

There are several reasons why fuel cell technology is becoming popular among big-name companies.

For one thing, it is a way of conforming to California state quotas, which state that 22 percent of car sales must be from energy efficient vehicles by 2025.

And since California dealers are required to sell electric cars, fuel cell technology will prove to be an effective alternative.

With the exception of the Model S, electric cars are simply not gaining traction in sales. And fuel cells will outlast electric motors on the road.

A DOE report concluded that fuel cell vehicles can drive at least 254 miles on the road, the equivalent of Tesla’s Model S, which can go on an EPA-certified 254 mile range. Tesla has the highest vehicle range of any electric car on the market, but in order for hydrogen cars to compete with the likes of Tesla, the price of hydrogen cars would need to come down.

Platinum is a source used to begin the chemical reaction in fuel cell vehicles, but it adds thousands of extra dollars to the price of a car.

According to CBS News, Toyota is planning a fuel cell sedan for 2015, which is expected to cost $50,000 – a high price for some. But it is still cheaper than a Model S, which starts at $62,400. Toyota's prototype fuel cell Highlander can run over 400 miles – the same as gasoline cars – with no need for refueling.

Most electric car makers have failed to equip their vehicles with enough road range, and this is where fuel cell automakers can make an effective case against EVs.

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Fuel Cell Investing

You’ll mainly want to stick with California, New York, and New Jersey for fuel cell investing. I told you about California, but the Port Authority of New Jersey and New York has been testing fuel cell cars as well, and both have a steady supply of the energy source. California only has nine fueling stations in development, with another 19 in the works.

Former Governor Arnold Schwarzenegger wanted 250 hydro stations in the state and 20,000 fuel cell vehicles on the road. Obviously, that didn’t happen. As with the EV sector, the government may need to step in to give this sector a helping hand.

California is already offering $20 million to help build at least 20 fuel stations around the state. A typical refueling station normally costs $3 million to construct.

And pay attention to the private sector as well.

GM (NYSE: GM) and Honda are looking to add fueling stations that would cost $1 million to build – $2 million less than typical construction costs.

We’ll see if these auto titans can make it happen.

But one particular fuel cell maker to watch out for is Plug Power Inc. (NASDAQ: PLUG), a provider in clean energy products. Mercedes-Benz International Inc. ordered 123 fuel cells to power forklifts for a new warehouse in Tuscaloosa, AL.

These fuel cells would effectively eliminate the need for battery recharging stations, and they are cheaper than acid batteries. Last year, Mercedes ordered 72 of these cells.

If fuel cell makers like Plug Power can manufacture cells cheaper than conventional batteries, I’m betting auto companies and cell manufacturers will find the means to make fuel cell technology cheaper than electric vehicles and maybe even gasoline.

Hydrogen cell technology is not big right now, but its time will come in one form or another.

 

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