VW: Fuel-cell cars doomed to struggle outside of Japan

Craig Trudell
Bloomberg News

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. 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.”

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.

Volkswagen Chief Executive Officer Martin Winterkorn said last year the 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 U.S. government estimates that predict hydrogen fuel will initially be more expensive than conventional gasoline in the U.S.

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.