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VW says fuel-cell cars doomed to struggle beyond Japan

Volkswagen AG, vying with Toyota Motor Corp for the lead in the global auto industry, said cars powered by hydrogen fuel cells will probably struggle catching on beyond Japan’s borders.

Government subsidies of as much as 3 million yen ($28,500) a vehicle offered in Japan will probably be too high for other countries to match, Volkswagen Group Japan President Shigeru Shoji said in an interview last week. Even in Toyota’s home country, refueling will be impractical because handling hydrogen is challenging and building out infrastructure will be costly, he said.

“It may fly within Japan, but not globally,” said Shoji, 51. Fuel cells could become another example of the “Galapagos syndrome” that plagues Japanese companies for making products that are only popular at home, he said.

Shoji joins Tesla Motors Inc Chief Executive Officer Elon Musk among skeptics of fuel cells and his comments illustrate the growing divide within the auto industry over which technology will prevail in replacing traditional gasoline and diesel cars. In Japan, fuel-cell vehicles have won government financial support, paving the way for such cars to benefit just as hybrids including Toyota’s Prius have.

“In order to survive, you need to come up with new products, better products,” said Thanh Ha Pham, a Tokyo-based analyst at Jefferies Group Inc. “It’s not nationalistic.”

‘Relatively expensive’

Fuel-cell cars, which only emit water vapor, offer one of the best solutions to reduce carbon emissions in Japan, said Dion Corbett, a Toyota spokesman based in Tokyo. He declined to comment on Shogi’s remarks.

“Fuel-cell system costs are still relatively expensive so we need subsidy support from the Japanese government,” Corbett wrote in an e-mail. “It’s difficult to imagine that FCVs will become widely used in the next couple of years alone.”

In June, Toyota said it expects Japan, Germany, California and the U.S. East Coast to generate the highest demand for fuel-cell vehicles.

Prime Minister Shinzo Abe, leader of Japan’s ruling Liberal Democratic Party, has outlined a vision for creating a “hydrogen society,” with fuel cells powering homes and office buildings, as well as cars made by the Toyota-led auto industry.

“It’s an Abe and Toyota deal,” said Yasuo Maruta, a Volkswagen Japan spokesman. “It’s an industry giant and the most powerful LDP party, and they are working very close. It’s sort of difficult to complain about it.”

Maruta subsequently said the comments on Abe reflected his personal opinions, rather than Volkswagen’s.

Hybrid domination

Volkswagen Chief Executive Officer Martin Winterkorn said last year the Wolfsburg, Germany-based company would sell 14 hybrid and electric models by 2014 and may offer as many as 40 depending on demand, without specifying a timeframe.

Toyota’s lineup of hybrids dominates the market for gasoline-electric cars, with more than 4 million Priuses sold since the model’s debut in 1997. Japan has provided subsidies to buyers of hybrids that helped spur early demand for such models.

The Japanese government’s plans to support hydrogen cars go further than through rebates for the vehicles. The New Energy and Industrial Technology Development Organization aims to make hydrogen the equivalent price of gasoline and to have 100 hydrogen fueling stations in place by about 2015.

Toyota has cited US government estimates that predict hydrogen fuel will initially be more expensive than conventional gasoline in the US.

68 stations

Toyota’s fuel-cell car going on sale next year, initially in California, will cost about $50 to fill up for about 300 miles of range, Bob Carter, senior vice president at Toyota’s U.S. operations, said Aug 12 at a JPMorgan Chase & Co conference. The cost will eventually fall to about $30 based on Energy Department estimates, he said.

Toyota partnered with the University of California to model the specific locations that would be needed to handle a population of more than 10,000 fuel cells and believes it needs only 68 stations initially, Carter said last month. The state plans to spend $200 million to build at least 100 stations by 2024, with 40 ready by the end of 2016, he said.

“There are still a lot of questions lingering about how practical it is even though Toyota launches next year,” said Maruta, the Volkswagen spokesman. “By the time it gets very usable by the normal customers, it’s maybe still a decade or two decades away.”

Still, Volkswagen is hedging its bets. The company is monitoring Toyota’s progress with the aim of staying within no more than three years of development work behind its Japanese rival in matching its fuel cell technology, Shoji said.

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