Toyota’s New FCV – The Car That Will Kill Tesla?
Toyota’s new fuel cell vehicle (FCV) – which shall be known as the “Mirai” – hasn’t even hit the ground yet, and it’s already convincing some stock analysts to advise selling Tesla shares. Here’s why:
- The fuel cell has the investment and backing of all the major automakers. Toyota and Hond have plans to sell FCVs in the short term. GM, VW, Ford, etc. all have plans to develop and sell FCV vehicles this decade. Hyundai is actually selling a fuel cell powered Tucson now.
- It’s high-tech, polarizing, and “green.” If Tesla’s rapid growth as an automotive brand is any sort of blueprint, than Toyota’s FCV needs to be packed with technology, it needs to evoke strong feelings, and it needs to be green. The Mirai hits all three notes.
- It’s backed by one of the world’s largest car companies. This is a tremendous advantage, and it’s the same sort of advantage that the Prius had when it first hit the scene in 1999.
While there are certainly problems with the FCV – not the least of which is the limited availability of hydrogen – there are reasons to be optimistic about FCVs relative to battery electric vehicles. Depending on how optimistic you are about fuel cell technology, you may even see the Toyota FCV as the car that will kill Tesla.
Why FCVs Have Such A Bright Future
Toyota’s $69k asking price for the first gen FCV is often cited as “proof” that fuel cell vehicles are too expensive to be commercially viable. However, fuel cell production costs are expected to drop like a rock in the near term. The DOE guesses that fuel cell costs will fall to as little as $30 per kW of output by 2017. At that price, an FCV with a 120 kW fuel cell will cost about as much as a new Prius.
In fact, by 2020, the Prius may even offer a fuel cell power package, as Toyota is designing their fuel cell powerplants to “drop in” to existing vehicles.
To be sure, there are a lot of problems with FCVs that need to be solved.
- Hydrogen isn’t easy to come by, and while Toyota is working with other automakers to solve that problem by funding new hydrogen station construction, it’s not as if thousands of hydrogen fueling stations are going to “pop up” overnight.
- Hydrogen – especially hydrogen from electrolysis powered by renewable energy – isn’t much cheaper than gasoline, even after accounting for the higher efficiency of the fuel cell.
- Fuel cell production costs are widely expected to fall, but they haven’t fallen yet. The Mirai is going to be a $70k car, after all.
However, when you compare the FCV’s problems to the battery electric vehicle’s problems, things aren’t so bad…
Why Battery Electric Cars Are Probably A Dead End
Fundamentally, battery electric vehicles have four problems:
- Battery packs are pricey. A “small” battery pack (like the one found in a new Chevy Volt or Nissan Leaf) is far more expensive to produce than a traditional gas engine.
- Battery packs are heavy. If you’re trying to make an electric car that will travel hundreds of miles between charges, you need to reduce weight. Battery packs, however, are very heavy.
- Battery packs are bulky. Simply stated, it’s hard to design a battery-powered vehicle without a clean sheet design. You can’t just put battery packs where a vehicle’s gas tank and engine would be and call it a day. You need to design the battery pack, then build the car around it.
- Battery performance is highly variable. Temperature, driving habits, and the age of the battery pack itself all determine how far an electric car can go between charges. New Nissan Leaf owners, for example, have reported considerable battery capacity losses after just a few thousand miles of use.
While these problems aren’t “insurmountable,” they’re not easy to solve. The electronics industry has been working on all of these problems for years, and the pace of innovation has been slow. Today’s phones and laptops – for example – have batteries that are only marginally better than those available years ago.
Of course, battery developments are on the horizon…but will they address ALL of the problems above? And will batteries evolve more quickly than fuel cells? It’s hard to say.
Why Tesla Is Flirting With The Danger Zone
Tesla’s success to this point has been nothing short of incredible. They went from a billionaire’s crazy dream in 2008 to a viable global automaker (albeit a niche automaker) by 2014. Tesla enjoys a strong brand name, they make an excellent (albeit expensive) vehicle in the Model S, and they have plans to offer a crossover next year that should grab a lot of sales away from competitors like Porsche, Mercedes-Benz, and BMW.
If Tesla was aiming to be a luxury automaker that sold a limited range of expensive yet capable vehicles, they would be in the home stretch. All they need is a couple more products and they can pop the champagne.
However, Tesla wants to be a mass market company, and that desire could be their ultimate undoing. Tesla’s plan is to unveil a mass-market battery electric car for about $40k sometime in 2015, and perhaps to start selling that car in 2017. This mass-market car (which may be called the Model III) could be Tesla’s Alamo:
- Tesla’s track record of launching products on time is poor. Tesla’s new crossover Model X has been delayed nearly 2 years, the Model S was over a year late, and the Roadster was years late as well. A delay on the Model III could mean the car doesn’t hit the market until 2018 or 2019, which would likely trigger a massive drop in stock value as well as expose the new Model III to increasingly stiff competition.
- To support the Model III, Tesla needs to build a giant battery factory first, as that’s the only way they’re going to hit their “around $40k” price target.
- Tesla needs to figure out how to sell and service vehicles in all 50 states, something that they can’t currently do for a variety of reasons (some beyond Tesla’s control)
- Tesla needs to fend off challenges from BMW’s luxurious (and well reviewed) I8, and Nissan’s increasingly cost effective Leaf (which is due to get more range very soon), and of course FCVs from Toyota, Honda, and Hyunda-Kia.
The last point is key. Musk has all but bet the company on the success of the Model III, and even a short delay could be devastating. Every month that Tesla waits to launch the Model III is another month Toyota, Honda, and Hyundai have to reduce costs of their FCVs and grow infrastructure. Not to mention GM, VW, and others will be offering their own FCVs by that time.
Basically, when Tesla finishes their multi-billion dollar gigafactory and actually puts the Model III on the ground, they could be facing very stiff competition from mass-market FCVs backed by the world’s biggest automakers. That’s a scenario that’s almost completely unlike the launch of the Model S, when most of Tesla’s competitors were completely out of the picture.
How You’ll Know When Tesla Is In Trouble
If you’re looking for signs of the Tesla apocalypse, you need look no further than Tesla’s own Elon Musk.
Musk is a genius – I’ve been told first hand by a senior engineer at Space X that Musk himself reviews drawings and plans for rockets, does the same for cars, works 20 hours a day, etc. etc. It stands to reason that Musk understands the technology behind FCVs as well as anyone, and that Musk has a good idea of what FCVs can ultimately become.
Musk is also an incredible marketer. He’s developed a marketplace for his product despite all sorts of high profile failures, from a Roadster that disappointed on the BBC’s test track, to a Model S that ran out of juice during a NY Times review, to numerous reports of Model S vehicles with drive unit failures (including one unit that was being tested by Edmunds.com), to general reports of quality issues.
Which leads us to one question: If Musk knows that FCVs are unworkable, what are the odds he’d publicly mock them? A crafty genius like Musk would probably just ignore FCVs, or make some off-hand comment about them that elicited giggles (like Musk’s comment that fuel cells are “so bullshit” to a crowd of Tesla fans in Germany). After all, there’s no point in talking about a technology that doesn’t compete.
So far, Musk has only gone on record about fuel cells a couple of times – once to call them “so bullshit”, and once to call them “mind-boggingly stupid.” But if Musk continues to make negative comments about hydrogen powered vehicles, well…that will say more about how Tesla views the FCV threat than anything else.
Personally, I see a future where Tesla survives as a luxury automaker, while Toyota, Honda, VW, GM, and Ford sell the world affordable gas-powered hybrids, diesels, and FCVs. However, if Tesla puts everything on the line when they launch the Model III, they could very well put themselves out of business.
Filed Under: Auto News