Fuel Cell Vehicle Investing

Brian Hicks

Written By Brian Hicks

Posted October 15, 2013

We know that vehicles running on alternative power have been gaining traction in the last few years as technology evolves.

For a while, electric cars have been in the spotlight thanks to Tesla’s (NASDAQ: TSLA) Model S – a car that has been the subject of rave reviews by consumers and critics.

fuel cell vehicleBut there are other green energy vehicles that are just as efficient and eye-catching, and today I refer to hydrogen-powered vehicles.

How do they work?

In a typical fuel cell, the primary function is to convert hydrogen to electricity. The protons and electrons are separated by a platinum conductor. The protons go through a membrane wall, but the electrons filter out through separate circuitry, which then translates into electricity for the motor and water exiting the exhaust pipe.

It sounds complicated, and when more hydrogen powered cars are introduced to the market, automakers had better take cues from Tesla by setting up an in-house sales program model, since I highly doubt that your average mechanic will be able to fix these types of cars anytime soon.

Hydrogen power still suffers from negative perceptions in the media and the public, but carmakers like Toyota (NYSE: TM) have not given up on this potentially viable source of fuel.

The Japanese company made a prototype of a hydrogen-powered vehicle, allowing test drives. An additional vehicle will be on display at the Tokyo Motor Show next month, according to Bloomberg.

Pricing has not been determined, but the vehicle can go 311 miles without refueling, matching that of Tesla’s (NASDAQ: TSLA) Model S, which can run up to 300 miles on a charge.

A car of this caliber may cost $50,000, according to reps from Toyota – a far improvement over the early 2000s, when a typical fuel cell vehicle amounted to $1 million.

The Germans also hope to introduce fuel cell vehicles by 2015, but 2020 may be a more realistic goal.


Where fuel cell vehicles really hit a bump in the road is infrastructure.

On average, it costs $1 million for a filling station, and the lack of infrastructure is not just a problem in the United States, but around the world.

Even an energy-progressive nation like Germany only has 15 stations. But there is an effort to get 400 stations online by 2023 in metropolitan areas.

Germany, Japan, and South Korea are some of the few nations investing in fuel cell infrastructure.

In America, the most effort for hydrogen fuel cell infrastructure you’re going to find will be in California, with an effort to get 100 stations underway within the next nine years. Currently, California only has ten stations.

But don’t count on spotting hydrogen stations in Kansas anytime soon. The rest of the country is falling far behind on investment.


Are Fuel Cells Worth the Risk?

Demand for these vehicles just isn’t there. Consumers are still getting acclimated to electric cars, and unless EVs fizzle out, fuel cell power will continue to remain in the background.

For the most growth, you’ll want to look beyond U.S. shores and into the aforementioned Germany and South Korea. These nations are investing most in fuel cell technology, and it will be an interesting experiment to see how well fuel cells stack up against electric cars and conventional motors in those countries. This will be a challenge, since there is still the problem of lacking demand across Europe and Asia.

But that isn’t to say fuel cell vehicles are dead in the water. There is room for growth because some of the biggest-name automakers are backing this technology. When it comes to mileage, fuel cell vehicles will outlast most electric cars and can even pose a threat to Tesla’s Model S.

And aside from Toyota, other automakers including General Motors (NYSE: GM), Honda (NYSE: HMC), and Daimler AG (OTC: DDAIF) have invested billions of dollars in fuel cell technology since the 1990s. Auto giants are making the rare move of fostering more fuel cell infrastructure.

If automakers want to introduce hydrogen fuel cell technology sooner, there must an effort to introduce a car that will match Tesla’s appearance and strength. We’ll see how Toyota’s fuel cell car fares against Tesla’s Model X – a sedan that is set debut in the same year. Toyota may have Tesla dead to rights in the mileage department, but will the car be eye-catching enough to convince customers who normally don’t buy green cars?

Supporters of fuel cell technology will also have a harder time making the case to purists in the green energy community. Hydrogen fuel may be a clean source within itself, but it still relies on natural gas to be generated.

And certain components of the car, like platinum, are expensive, which only results in higher costs for the car.

If you want to get in the fuel cell game now, you might want to shift your attention to the fleet industry.

Procter & Gamble (NYSE: PG) converted its traditional battery-powered fork lifts to fuel cell technology, thanks to Plug Power (NASDAQ: PLUG).

Another good company that squarely focuses on fuel cells is Ballard Power Systems (NASDAQ: BLPD).

And you’ll want to watch out for entrepreneurs and companies that are looking to join automakers and governments in constructing power stations.

Hydrogen fuel cells have many obstacles to overcome, but don’t count out the technology just yet.


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