Toyota Eyes Hydrogen Success

Toyota Eyes Hydrogen Success

Toyota will start selling its Mirai fuel-cell vehicle for 7.24 million yen (R697,731) which Japan will subsidise with the aim of repeating a bet that paid off with the world’s most popular hybrid – the Prius.

Early buyers of the Mirai, which runs on hydrogen and emits only water vapour, will be entitled to about 3 million yen (R284,304) in subsidies in some areas, government officials have said. The support mirrors the inducements Japan has offered to purchasers of hybrids including the Prius, sold since 1997. Toyota and Japan have since dominated global hybrid sales and production.

“Hydrogen can encourage new industrial development that can have the impact of changing our society’s structure, creating new jobs and improving our global competitiveness,” Mitsuhisa Kato, a Toyota executive vice president, said today in Tokyo.

Toyota is receiving government support to popularise what it sees as the next-generation technology for autos, just as it did with cars running on both gasoline and electricity. The Prius and other Japan-made models have been eligible for domestic tax breaks and incentives that have helped the nation’s companies achieve scale and lower costs, paving the way for Toyota to sell 7 million hybrids cumulatively as of September.

Prime Minister Shinzo Abe has called for forming a “hydrogen society” in Japan after the nation’s 2011 nuclear disaster led to surging oil imports and record trade deficits. The energy predicament for the world’s third-largest economy, which has slumped into its fourth recession since 2008, adds to Japan’s motives for supporting hydrogen-powered cars.

Energy Objectives

“You heard energy diversity, energy security mentioned several times,” Christopher Richter, a Tokyo-based auto analyst at CLSA Ltd., said after attending Toyota’s presentation today in Japan. “You didn’t hear as much about carbon reduction or climate change or global warming, which was kind of revealing of what their objectives are here.”

Toyota plans to build 700 Mirai fuel-cell cars in the next year from the Motomachi plant near its headquarters in Toyota City, Japan. Output will rise to tens of thousands annually during the 2020s, Chairman Takeshi Uchiyamada said in Newport Beach, California, before the Los Angeles auto show.

“Gasoline has been the primary fuel for the first 100 years of the automobile,” said Uchiyamada, known within Toyota as the father of the Prius. “I believe that hydrogen will be the same for the next hundred years.”

Toyota rose 2.5% to 6,998 yen at the close in Tokyo. The shares have advanced 9% this year, outpacing the 7.1% gain for Japan’s benchmark Topix Index.

US Price

In the US, Toyota will charge $57,500 (R637,330) for the Mirai, which can travel 483 kilometres on a hydrogen tank that can be refilled in less than five minutes. Federal and state incentives could reduce the price by as much as $13,000 (R144,092) and Toyota plans to provide free fuel to early buyers. Customers can also lease the car for three years for $499 (R5530) a month.

Automakers are under pressure in California, as well as across the US, Europe, Japan and South Korea, to offer vehicles that emit little or no carbon pollution and reduce petroleum use.

Eventually, Toyota and its affiliates also plan to sell trucks, buses and forklifts that run on fuel cells.

For now, hybrids are the top-selling vehicles powered by alternative powertrains. Carmakers will build almost 2.2 million of them this year, with Japan accounting for 70% of worldwide production, IHS Automotive estimated as of August. The researcher projected two of every five cars assembled in Japan will be hybrids by 2020.

Facing Skeptics

Toyota faces skeptics among analysts and electric-car advocates including Tesla Chairman Elon Musk. IHS Automotive projects fuel-cell vehicles will need until 2019 to top 5,000 units per year and sees output failing to exceed 15,000 annually through 2025.

The researcher predicts automakers will produce more than 30,000 electric cars in 2015. Musk, who has criticised using fuel cells to power cars, forecasts Tesla alone will deliver 50,000 battery-powered Model S sedans that year.

Competitors also loom, with Honda competing against the company to get a fuel-cell car to market, just as the Insight hybrid battled the Prius in the 1990s. Honda yesterday showed a five-seat concept car in Tokyo, previewing a production model that goes on sale by the end of March 2016.

The planned arrival for Honda’s car is later than the 2015 introduction date set by the company as of last year. The automaker needs more time due to the complexities of the technology, Honda President Takanobu Ito said yesterday. Kiyoshi Shimizu, the vehicle’s chief engineer, said recent recalls of Honda’s Fit compact and Vezel crossover also have led to added scrutiny of the fuel-cell car’s development.

Five Seats

“Our strong point is this car is a five-seat sedan,” Shimizu said. Honda’s hydrogen system is installed under the hood rather than beneath the car to improve roominess compared with Toyota’s four-seat Mirai, he said.

Both Toyota and Honda are introducing their models after Hyundai, which started retail leasing of its hydrogen-powered crossover in June in California. The company also sells the vehicle to government fleets in South Korea and Europe.

Hyundai’s model is priced at 150 million won (R1,518,508) in the Seoul-based company’s home market. The nation’s environment ministry is providing subsidies of about 60 million won, or half the incremental cost of the fuel-cell Tucson compared with the gasoline-powered model.

Japan’s Subsidies

Japan’s fuel-cell subsidies are bigger than the incentives China, the US and Europe offer for electric-vehicle buyers.

In Beijing, buyers of an EV can get as much as 114,000 yuan (R199,512) off the sticker price after central and local government rebates. The US offers a $7,500 (R83,130) per vehicle federal tax credit to electric vehicle buyers, before additional state incentives. In Europe, Norway has provided the most generous incentives, amounting to as much as $8,200 (R90,888) per car.

In Japan, the subsidies for Toyota’s Mirai will be more than triple the 950,000 yen of incentives offered for buyers of Mitsubishi’s all-electric i-MiEV.

According to Clynton Yon, product communications manager at Toyota South Africa, there are no current plans to introduce the Mirai to our market.