Picture1When I was a kid, I thought by 2015 we would be flying around in cars like The Jetsons.  It appears we aren’t there just yet, despite my wish for us to be flying around by now!  However, we have come a long way in powering vehicles.

We have all seen many new hybrids and electric vehicle alternatives come out from a variety of manufactures and certainly seen their acceptance grow, especially as we saw gas prices increase over the last five years. This is coupled with the growing desire of the general public to be more “green.”  But, is the future of automotive electric or hydrogen?

What is FCV?

FCV stands for Fuel Cell Vehicle. One of the first mass produced hydrogen vehicles in the US will be the Toyota Mirai FCV. Toyota has spent twenty years on research and development, and it believes hydrogen will be a future source of clean energy.

Why not Hydrogen?

While stricter fuel economy standards by the EPA and the desire to be more environmentally focused will benefit all types of alternatives to traditional cars, there are several key barriers to FCV:

  • Price of the vehicle
  • Price of fuel
  • Availability of fueling stations
  • Overall safety

Toyota has worked to address each of the potential barriers by providing an affordable, commercially available vehicle that meets all safety concerns for their launch in 2015. Moreover, fuel providers have plans to develop many new hydrogen fueling stations. Specifically, there are plans to have 100 stations in California by the end of 2015.

In addition, Toyota just announced that they will be giving away its patents for free until 2020, propelling investment beyond this one original equipment manufacturer (OEM).

How Do Consumers Feel? Toyota

We at Ipsos independently sampled a representative mix of potential consumers about the Toyota Mirai FCV, just as we have done for every major auto innovation in the past ten years. The consumer intent to buy the Mirai is just a few clicks below the intentions for hybrids like the Toyota Prius and Nissan Leaf.  That bodes well in the “if you build it, they will come” sense.  There is a latent demand that needs to be served by infrastructure.

When we tested Prius it had a few advantages versus FCV:

  • Gas prices spiked above $4/gallon in the US in 2008, making the Prius (premium for a hybrid electric vehicle) more cost efficient than the traditional gas alternatives
  • 3rd generation Prius was launched in 2009, which consumers see as more advanced, plus ready for mainstream since earlier versions would have gotten the bugs out of the model
  • No additional infrastructure needed to take advantage of the added fuel economy

Given consumers are amenable, the success factors for the FCV are:

  1. Infrastructure / availability of hydrogen fueling options: Considering there are hundreds of gas stations in our cities today, adding an additional footprint of hydrogen fueling stations will be a challenge. Adoption can be accelerated if hydrogen can be available at gas stations, similar to how diesel is available at most gas stations today.
  2. Geopolitical/continued government incentives: Government support is critical with policy and pricing, as the technology is still way too expensive for the average consumer. If the government reduced the pressure for alternative fuels, then FCV will never go beyond a niche alternative.
  3. Continued rise of gasoline prices: With gas prices hovering around $2/gallon (record low prices that we haven’t seen since 2009), this will dampen excitement for any alternative fuel, but as prices increase, consumers will be willing to invest and try other alternatives.
  4. Safety Positioning: While not a key barrier for the “niche” target for FCV, for broad adoption there will need to be continued safety testing to ensure any FCV is safe under many different real market conditions.

While we won’t know for years whether the Toyota Mirai FCV will be successful, it is the right bet to make considering the continued desire for alternative fuel plus the general consumer desires for new innovation and something better.

Could hydrogen do the same to gasoline as gasoline did to the horse-drawn carriage? Or, is hydrogen yet another alterative such as diesel which remains a niche in the market? Hard to say, but it will certainly be one of the alternative fuel sources and will grow in acceptance in the years to come, especially in dense urban cities where fueling stations will likely be plentiful.

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