Profiting from Fuel-Cell Vehicles

Brian Hicks

Written By Brian Hicks

Posted November 25, 2013

Hydrogen-powered fuel-cell vehicles are being touted as the next wave of environmentally friendly automobiles to hit the consumer market. But are they worth the hype?

Major automakers seem to think so – three of which rolled out plans for the future last week, contending that the time for waiting around for fuel-cell technology to take off is over.

These zero-emission autos have been talked about and played with for years in an effort to reduce harmful greenhouse gas pollution and meet strict standards in places like California. But while automakers have poured billions of dollars into fuel cells since the 1990s, they’ve done little but sputter, crash, and burn.

Critics would say fuel-cell technology is too complex, not as clean as it should be (most hydrogen is generated from natural gas), and too costly to be worth the trouble.

But competition is heating up.

A fuel-cell vehicle, which creates electricity by combining hydrogen with oxygen from the atmosphere, has been used in NASA spacecrafts since the 1960s, and while they generate electricity, the only thing they emit is water vapor.

Today you can find a handful of fuel-cell test cars and fleet vehicles on the road, but last Wednesday’s unveiling by Toyota (NYSE: TM), Honda (NYSE: HMC), and Hyundai (OTC: HYMTF) at the Tokyo and Los Angeles auto shows will mark the first time hydrogen-powered vehicles are made available to the public.

This makes us wonder how they will fare against electric vehicles (EVs), which are easing into commercial success.

At the onset, it will likely just be one more alternative for an earth-friendly option, but it’s also worth noting that battery-powered EVs require lengthy recharging times, whereas your single hydrogen fill-up can be done in a matter of minutes.


toyota fuel cell car
Source: NY Times

The most significant of the three to roll out plans last week has to be Toyota. The company kicked off the whole “earth-friendly” initiative when it introduced the Prius to the world in 1997 (2000 in the U.S.). Today, Toyota is the biggest auto manufacturer in the world.

The Prius was the first hybrid vehicle to gain popularity in a market that has always been dominated by the combustible engine, and now Toyota is at it again with its commitment to fuel-cell technology.

We won’t see Toyota’s fuel-cell model, which it’s calling the FCV, until 2015. In Tokyo, it showed off a bright blue sedan shaped like a droplet of water, putting added emphasis on its hydrogen-power and the water that emits through the tailpipe, according to NY Times.

The car will have a range of 310 miles on one hydrogen fill-up. There is no indication for price yet, but we can assume that Toyota will model its efforts after the success of its Prius.


Honda also has plans for 2015, this time with a restyled version of its hydrogen-powered FCX Clarity, which was offered in limited leasing numbers dating back to 2008.

honda fuel cell car
Source: USA Today

For now, this vehicle is nothing more than a concept, but hope is to have it ready in U.S. and Japanese markets in a couple years.

The concept gives us a clear indicator that Honda, too, has high aspirations for its fuel cell.

The FCEV, as it’s being called, has a futuristic look and goes beyond the FCX Clarity model that the company introduced in 2002, with an updated powerplant that is 33 percent more compact than the FCX and puts out 66 percent more power at 100 kilowatts, according to USA Today.

Like Toyota’s FCV, Honda’s FCEV will have a range of about 300 miles on one hydrogen fill-up.

In July, Honda also teamed up with General Motors (NYSE: GM) in a joint agreement to share fuel-cell technology.


hyundai fuel cell car
Source: Bloomberg

Of the three companies to give us a glimpse into the future, it’s Hyundai who will be the first to offer its version of a fuel-cell vehicle, arriving sometime in the new year.

The South Korean auto maker will base its vehicle on its Tucson sports utility vehicle and will lease the vehicle to U.S. customers for $499 per month, targeting California, where there are the most hydrogen fuel stations and it stands the best chance for success, according to Bloomberg. The monthly lease agreement will require a $2,999 down payment, which includes unlimited fuel and no-cost maintenance during the 36-month lease period.

Like the other two, the Tucson fuel-cell vehicle will have a range of roughly 300 miles.

The Investment

The three all seem relatively similar to me. The real concern is how they will fare up against the growing popularity of EVs. While fully electric vehicles still remain a niche market, 78,000 were sold in the U.S. through three quarters of 2013, compared with 423,000 hybrids, according to the NY Times. We’re only likely to see about 1,000 of these fuel-cell vehicles sold worldwide in 2015.

But you’ve got to start somewhere, and it is expected that these new vehicles will get modest attention to begin with.

But we’re also going to see more of the fuel cell, as most of the big players in the auto industry have some kind of project in the works.

The downfall is with hydrogen filling stations – they simply aren’t there. And then there’s the argument that production of hydrogen releases greenhouse gases; but then, most EVs use carbon-based fuels to generate electricity.

The debate will go on for the ultimate environmentally-friendly vehicle. There’s no clear winner, which is why manufacturers have decided to diversify their portfolios.

You can use these vehicles to diversify your portfolio as well.


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