Toyota Admits Cutting Costs of Hydrogen Fuel Cell Technology Further Will Be Tough

When Toyota’s all-new 2016 Toyota Mirai Fuel Cell Sedan debuted last week at the 2014 Los Angeles Auto Show, it showcased the latest in almost twenty years of research and development at Toyota into hydrogen fuel cell technology.

The 2016 Toyota Mirai Hydrogen Fuel Cell Sedan will go on sale in  California next year from $57,500. But it will cost Toyota far more to build.

The 2016 Toyota Mirai Hydrogen Fuel Cell Sedan will go on sale in California next year from $57,500. But it will cost Toyota far more to build.

At a cost of about one-twentieth the cost of its previous-generation fuel cell vehicles from just six years ago, the Toyota Mirai also represents the first time hydrogen fuel cell technology has been cheap enough for Toyota to consider bringing a hydrogen fuel cell vehicle to market. But with the Toyota Mirai’s fuel cell technology still far more expensive than it needs to be to bring hydrogen fuel cell technology to the masses, one of Toyota’s top fuel cell engineers admits that further reductions in cost to Toyota’s fuel cell technology won’t happen as quickly as it has in recent years.

Instead of a further 95 percent reduction in cost between the technology in the Mirai and Toyota’s next-generation fuel cell technology — which Toyota aims to showcase at the 2020 Tokyo Olympics in just six years’ time — Toyota’s goal is a little more modest.

Talking with Automotive News, Toyota’s Yasuhiro Nonobe, general manager for fuel cell vehicle system design says that continuing massive drops in fuel cell technology costs on the same  generation-by-generation basis we’ve seen so far is unlikely and impractical. Instead, he says, Toyota’s engineers predict they will be able to reduce the cost of its next-generation fuel cell technology by between two-thirds to three-quarters the cost of the Mirai’s fuel cell technology.

In order to truly reach profitability and make hydrogen fuel cell car technology as ubiquitous as hybrid drivetrain technology is today however, Toyota needs more than a three-quarters reduction in costs to make it appealing to car buyers. More pressing, it needs to cut costs to turn a profit.

That’s because the price Toyota is due to sell the 2016 Mirai at — $57,500 before incentives — isn’t’ the actual cost to Toyota of building the car. In reality, it currently costs Toyota far more to build the Mirai than it makes selling it.

Toyota has massively reduced the cost of the Mirai's fuel cell stack from previous generation vehicles.

Toyota has massively reduced the cost of the Mirai’s fuel cell stack from previous generation vehicles.

 

Back in 2007, when Toyota build around 100 examples of a prototype Highlander FCV, the cost of building each and every fuel cell system totalled nearly $1 million per vehicle. Take today’s 2016 Toyota Mirai and assume that the cost to build its hydrogen fuel cell is five percent of the cost of the fuel cell in previous generation Toyota fuel cell vehicles, and you’re left with a cost to Toyota for building each and every fuel cell of around $50,000 — and that’s before you’ve accounted for things like the vehicle itself, its small traction battery pack, interior, suspension, drivetrain or electric motor.

A two-thirds reduction in that price would result in a fuel cell stack costing around $16,666 per vehicle for a 2020 model-year Toyota FCV, while a reduction by a quarter would make a more palatable cost of $12,500. Even then, Toyota would likely still be heavily underwriting the cost of its fuel cell vehicles to customers.

Underwriting the cost and playing the long game isn’t a new strategy to the Japanese automaker, and it’s one that has proven successful in the past with hybrid drivetrain technology.

Early examples of Toyota’s Prius hybrids cost so much to produce that Toyota was essentially underwriting the entire brand until more than two million cars had been made. In fact, it took more than ten years and three generations of Prius before Toyota broke even on its hybrid drivetrain investment.

It took Toyota more than 10 years to make a return on its investment in hybrid drivetrain technology.

It took Toyota more than 10 years to make a return on its investment in hybrid drivetrain technology.

While it appears Toyota is happy to repeat its highly-successful hybrid strategy with hydrogen fuel cell technologies, aiming for a total vehicular cost that’s comparable by 2025 to the cost between gasoline and hybrid cars today, there’s a small fly in Toyota’s ointment this time: electric cars.

By 2025, optimistic analysts predict lithium-ion battery technology will be available for around $160 per kilowatt-hour, while pessimistic ones target a price nearer to $200 per kilowatt-hour. Even on a car with a 200+ mile range, that translates to building and supplying lithium-ion battery packs that are noticeably cheaper than Toyota’s own estimates for hydrogen fuel cell technology.

Let the marketing battles and longterm investment competitions begin.

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