China's fuel cell vision gives Toyota chance to expand hydrogen footprint

Singapore — The immense potential that China's commercial transport sector offers for hydrogen has prompted some companies in Asia's top energy consumer to tap the expertise of leading automakers, such as Toyota Motor Corp, to jointly pursue opportunities in the fuel cell electric vehicles, or FCEV, space.

Unlike Japan and the US, where the FCEV market is largely dominated by passenger cars, the vast majority of fuel cell vehicles in China are commercial vehicles, such as buses, trucks and utility vehicles.

"In accordance with the technology roadmap for energy-saving and new-energy Vehicles announced by China in 2016, the FCEV market, primarily for commercial vehicles, is growing at a pace not seen anywhere else in the world," Toyota Motor Corp said in a recent statement announcing the creation of a new joint venture between Toyota and five Chinese companies.

The five Chinese companies are China FAW Corp., Dongfeng Motor Corp., Guangzhou Automobile Group Co., Beijing Automotive Group Co. and Beijing SinoHytec Co. The new joint venture -- called United Fuel Cell System R&D (Beijing) Co. -- will help to promote the spread of FCEVs and develop competitive fuel cell systems that comply with regulations in China.

The move by Toyota comes at a time when other auto makers are also stepping up efforts to capture the commercial transport space. Recently, Hyundai Motor opened its first charging station for hydrogen-powered commercial vehicles, while adding that it would push ahead with plans to develop and produce hydrogen-powered buses and trucks for the domestic market.

Unlimited potential

"Due to H2 characteristics such as fast re-fueling, similar to that of internal combustion engine vehicles, and higher energy density than standard battery-charged vehicles, FCEVs are the most attractive solutions for heavy duty and commercial vehicles in both technical and economic terms based on currently available technologies," Peter Godfrey, managing director for Asia Pacific at The Energy Institute, told S&P Global Platts.

"And of course there's an increasing momentum towards building a hydrogen economy as the foundation for a de-carbonized future," he added.

Toyota and the five companies aim to engage in discussions to formulate product plans and create a single structure to develop a series of technologies. These will range from components, including FC stacks that satisfy performance needs in China and FC system controls that support those components, to vehicle installation, Toyota said.

"The companies believe that by doing this, the lead time from development to commercialization will be substantially shortened, making it possible to dramatically increase the pace of each stage of FCEV proliferation in the Chinese commercial vehicle market," it added.

"They will tackle the challenges of developing low-cost, competitive fuel cell systems and their key components with superior product strengths including the drive performance, fuel efficiency, and durability that will be essential for the widespread adoption of FCEVs," it said.

The cost challenge

A recent report in Sinopec's official media stated that the cost of a fuel cell bus with a 46 KW fuel stack was Yuan 1.95 million ($276,000), while a delivery truck equipped with a 32 KW stack would cost Yuan 1.30 million ($184,000), making them 3-5 times the price of the same type of diesel vehicle. Driving down the cost of fuel cells, as well as the cost of the hydrogen itself, will be key to seeing greater adoption of fuel cell vehicles over conventional diesel vehicles.

"It is important to find partners to promote the electrification of cars, and by working with companies that have considerable influence in China's commercial vehicle market as well as SinoHytec, which has reliable technological capabilities, I believe that we will be able to establish the foundations for the widespread use of FCEVs in China," said Shigeki Terashi, Operating Officer at Toyota.

China is increasingly making its thinking on fuel cell vehicle subsidies clearer, with Beijing recently formulating some draft policies and consultation documents giving insights to the country's strategy on how to develop and expand the sector.

A recent Draft Development Plan for the New Energy Vehicle Industry 2021-2035 was realized at the end of last year. It places a focus on the development of hydrogen vehicle technology and the construction of hydrogen fuel infrastructure and storage.

Bernstein Research said in a recent note that the global fuel cell market had grown at an annual compound growth rate of 44% over the past decade to reach 1.2 GW in 2019. Asia is the largest end-market, accounting for 60% of global fuel cell sales market.

"We believe the fuel cell market will grow at 53% CAGR over the next decade to reach 133 GW by 2030. PEM (Proton Exchange Membrane) fuel cell manufacturers have the best growth outlook. Given the dominant role transport will play in development of the H2 economy, we see the best opportunities for PEM fuel cell manufacturers," it said.

Outside of the major auto manufacturers, such as Toyota and Hyundai, Ballard, Plug Power, PowerCell are leading players along with Ceres Power and Doosan Fuel Cell.

"At some point we expect a Chinese champion," Bernstein said.