Honda prefers hydrogen as U.S. pushes battery autos

Honda Motor Co. is backing hydrogen power for the cars of the future, a stance at odds with the Obama administration’s decision to drop automotive fuel-cell technology in favor of battery-run vehicles.

“Fuel-cell cars will become necessary,” said Takashi Moriya, head of Tokyo-based Honda’s group developing the technology. “We’re positioning it as the ultimate zero-emission car.”

Honda, the only carmaker leasing fuel-cell autos to individuals, opened a production line last year in Tochigi prefecture to make 200 FCX Clarity sedans. The Energy Department sought to eliminate hydrogen-station funding and instead lend $1.6 billion to Nissan Motor Co. and $465 million to Tesla Motors Inc. to build electric cars, and give $2.4 billion in grants to lithium-ion battery makers.

“Honda has a propensity to think very long term,” said Ed Kim, an analyst at AutoPacific Inc. in Tustin, Calif. “It’s also part of the company culture that if they’ve made a decision they think is correct, they’ll really stick with it.”

Honda isn’t alone. Toyota, Daimler, General Motors and Hyundai say hydrogen, the universe’s most abundant element, is among the few options to replace oil as a low-carbon transportation fuel.

U.S. Energy Secretary Steven Chu said in May his department would “be moving away” from hydrogen as it’s unlikely the U.S. can convert to the fuel even after 20 years. Nissan Chief Executive Officer Carlos Ghosn predicts electric vehicles may grab 10 percent of global auto sales by 2020. Honda hasn’t announced plans for a battery-powered car.

Hydrogen, made mainly for industrial use from natural gas, costs about $5 to $10 per kilogram for vehicles in California, more than double an equivalent amount of gasoline. Fuel-cell cars also have at least double the efficiency of gasoline models, with Clarity averaging 60 miles per kilogram.

The Energy Department estimates future prices for hydrogen will fall to $2 to $3 a kilogram, Toyota said Aug. 6.

The fuel also can be made from solar and wind power and even human waste.

Toyota President Akio Toyoda said Aug. 5 that his company plans consumer sales of fuel-cell cars within six years. Toyota, like Honda, is making “exponential progress” with the technology, Justin Ward, manager of Toyota’s U.S. advanced powertrain program, said in an interview.

Battery cars, however, are further along in the market. Mitsubishi started selling the i-MiEV last month. Tesla sells a $109,000 Roadster, and Nissan unveiled its electric Leaf this month, with sales to start in Japan and in the U.S. next year.

A budget crisis slowed plans for more hydrogen stations in California, home to the biggest fleet of cars using the fuel. At the federal level, Chu sought $333.3 million in May for battery and advanced gasoline autos in the 2010 budget, up 22 percent. Hydrogen funds were cut 60 percent to $68 million, slashing money that would have gone to transportation projects.

The Clarity is available in the U.S. only in Los Angeles, where drivers can use as many as 16 hydrogen stations. The five-passenger car has a top speed of 100 miles an hour and goes 240 miles, more than double the 100-mile range of Nissan’s compact electric car.

The need for a network of hydrogen stations is a problem.

“We cannot do infrastructure alone,” Moriya said. “We’ve been developing the cars on our own without government support.”

The Senate and House voted in July to restore the funds. President Barack Obama must approve the final budget.

Honda and Toyota will have to reduce production costs to win over consumers. Fuel cells need platinum — a precious metal that costs more than $1,200 an ounce — and current durability is half that of gasoline engines, according to Moriya.

Honda plans to offer hydrogen-fueled cars at prices comparable to midsize gasoline autos by 2020, down from a company estimate that Clarity’s 2005 hand-built predecessor cost about $1 million. Moriya wouldn’t discuss the Clarity’s price.

Honda’s hydrogen push has been undermined by plunging sales in the U.S., its main market. Last quarter, profit at Japan’s second-largest carmaker fell 96 percent to $79 million. Its research budget is down 8.5 percent. Funds for fuel cells were cut and some spending shifted to other “priorities,” Moriya said, without elaborating.

Honda probably spends “a few tens of billions of yen” a year on fuel cells, said analyst Mamoru Kato at Tokai Tokyo Research Center in Nagoya.

“Maybe, just maybe, fuel cells will be the future,” said Edwin Merner of Atlantis Investment Research in Tokyo. “And if you’re not in there, then you have a big disadvantage.”