Hyundai Admits H2 Tuscon FCV is Just a Compliance Car for Now, Will Lose it Money

Last week, South Korean automaker Hyundai imported its first Hydrogen Fuel Cell Tucson CUV vehicles into California. In a few weeks’ time, those same vehicles will be delivered to carefully selected lease holders within the state as part of a limited-run hydrogen fuel cell test fleet program.

Hyundai admits that its FCV vehicle program is purely to earn ZEV credits.

Hyundai admits that its FCV vehicle program is purely to earn ZEV credits.

At $499 per month for 36 months — including unlimited fuelling at any one of ten public hydrogen refuelling stations within the state of California — Hyundai’s Tucson FCV beats Toyota’s promised ‘affordable’ 2015 FCV sedan to the market, but says Hyundai, the launch of the Tucson FCV isn’t about being first to market.

It’s about playing the compliance car game.

We’ll explain.

Under Californian law, specifically the Zero Emissions Vehicle (ZEV) mandate, automakers wanting to sell cars within the state must produce a specific percentage of zero emission vehicles. The more conventionally-fuelled vehicles sold, the more ZEVs are needed.

Under the regulation, the Californian Air Resources Board awards a certain number of credits to each automaker for every zero emission car they make. It can be powered by electricity or other alternative fuels like hydrogen fuel cells, but the credits awarded to the automaker do the same thing: they let the automaker sell a certain number of conventionally-fuelled vehicles.

What’s more, depending on type of ZEV, the number of credits awarded can vary. For Hyundai, making just 100 Hydrogen FCV Tucsons available in California equates to earning an estimated $130,000 worth of ZEV credits.

Because CARB offers higher credits to FCV vehicles than EVs, Hyundai's compliance car of choice is a fuel cell vehicle.

Because CARB offers higher credits to FCV vehicles than EVs, Hyundai’s compliance car of choice is a fuel cell vehicle.

Essentially, the credits produced by leasing just 100 Hydrogen FCV Tuscons is all Hyundai needs to comply with the Zero Emissions Vehicle mandate. And if it wants to, Hyundai can sell those credits to other automakers who are unlikely to meet ZEV mandates on their own.

“So just by selling the fuel cell (vehicle) we could get a lot of credit points, which you could sell at a later time if you want, like Tesla does,” Byung Ki Ahn, director-fuel cell group for Hyundai, told Wards Auto earlier this week.  “It could be a good business model.”

But said Ahn, despite earning money from the credits, Hyundai would still lose money on each and every FCV it sold…at least for now. And it has no plans to sell its ZEV credits to rival automakers for cold, hard cash.

Which raises the simple question: why hydrogen fuel cell cars with just ten refuelling stations in the whole of California versus more mainstream, more readily refillable electric cars? To find the answer, we have to look at the number of credits awarded to each vehicle.

Hyundai will use sales of the Tucson FCV to enable it to sell its more polluting models.

Hyundai will use sales of the Tucson FCV to enable it to sell its more polluting models.

In short, CARB rewards hydrogen fuel cell vehicle production with more credits per vehicle than electric or plug-in vehicles. At 26 credits per FCV vehicle, Hyundai can earn more than twice the number of credits for producing a hydrogen fuel cell car than it can with an electric car.

Despite losing money on each vehicle, Hyundai will then use those accumulated credits to let it continue to produce its current line up of vehicles, including its larger luxury models with poor fuel economy.

Like Toyota, Honda and Fiat then, Hyundai’s zero emission vehicles are simply a solution to a regulatory problem. And like all compliance cars, Hyundai will only make as many as it needs to.

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  • Ad van der Meer

    At $500/month incl. hydrogen, it’s basically a free car for 36 months.nnWell, that will be a serious amount of ZE credits wasted. These cars will be shredded after 3 years and regulators can ask themselves if this investment will ever have a return. Spoiler alert: NOT!!

  • Andrew Campbell

    It’s a wonder the fxxxxg world runs at all with these deadheaded politicians running the show.

  • CDspeed

    It is also loosing them money because they can’t lease it to just anyone, you have to live within a certain distance to a hydrogen infrastructure. That’s why this is stupid, we all have electricity, why would we not just tap into the existing infrastructure.

  • Surya

    So they can make an EV, make at least a small margin on those and still get enough credits, or make a FCEV and lose money on them and get just enough credits. I’m not a CEO, but for me the choice would be quite easy, especially since making an EV requires far less development as it is proven technology. And if the EV was about as good as the other EVs, it would probably sell itself, demand is high enough. Getting someone to buy an FCEV with no infrastructure on the other hand will take some convincing.nAll this to say that I think there must be something else than just those credits. Or the guys in charge are nuts.

  • Michael Thwaite

    In other news today, scientists speculate that earth may be round.

    • D. Harrower

      Teach the controversy! ; )

  • D. Harrower

    What I want to know is why you get twice as many credits for a FCV as for an EV? Is this a “dirty power” FUD thing?