Japan readies fuel cell subsidies in bet on Toyota's next big thing

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23/07/2014 22:00

(Repeats story first published on Wednesday with no changes to 
text) 
    By Yoko Kubota and Maki Shiraki 
    TOKYO, July 24 (Reuters) - Japan is readying subsidies to 
help Toyota Motor Corp  7203.T  and key suppliers take the lead 
in hydrogen-powered fuel cell vehicles that could top $400 
million over the next several years if the most bullish 
projections for the technology play out. 
    Prime Minister Shinzo Abe's planned consumer rebates of at 
least $20,000 per vehicle would be the largest government 
support plan for hydrogen vehicles yet, raising the stakes for a 
commercially unproven technology with roots in the space race 
that Toyota and others see headed for the mainstream over the 
coming decades. 
    The taxpayer-funded programme would bring down the cost of 
Toyota's soon-to-be-launched hydrogen-powered fuel cell car to 
around $50,000 in Japan, about the cost of a small luxury sedan 
such as the BMW 3 Series. 
    Abe announced the outline of the plan last week and details 
are still being finalised. 
    The cost savings could be enough to make the Toyota vehicle 
affordable for taxi operators and other companies with fleets of 
vehicles within driving range of the 100 hydrogen fuelling 
stations that Japan expects to have built by March 2015. 
    "It's still difficult to make these cars popular among 
ordinary consumers, but the subsidy has certain effects on 
companies interested in promoting themselves as green," said 
Tomohide Kazama, Senior Consultant at Nomura Research Institute. 
"It's a move to plant a seed for future growth." 
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    GRAPHIC-Fuel cell vehicles    http://link.reuters.com/pum58v 
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    Fuel cell vehicles, which run on electricity made by cells 
that combine hydrogen and oxygen, have been in testing since the 
1960s, when the technology was also being developed by NASA. 
    Since the vehicles emit only water and heat, they have been 
seen as an environmentally friendly alternative to those powered 
by combustion engines.  
    It could also help Japan shift to hydrogen energy as the 
country, dependent on imported fossil fuel as an energy source 
after the 2011 Fukushima nuclear disaster, seeks to cut carbon 
emissions. While much of the hydrogen used in the country now is 
made from fossil fuel, the government hopes to implement 
carbon-free production by 2040. 
    Promoting the technology last week, a smiling Abe test-drove 
Toyota's fuel cell sedan, set to go on sale in Japan by 
end-March, and fuelled hydrogen into a Honda Motor Co  7267.T  
FCX Clarity car, currently leased to governments and some 
companies. 
     
    COMMERCIAL CHALLENGES 
    The challenges to commercial use of fuel cell cars have been 
the lack of a hydrogen fuelling infrastructure and their high 
cost. Abe's government has taken aim at both barriers in the 
hope of protecting an area of emerging technology where 
automakers and suppliers believe they have a lead over rivals in 
the United States and Europe. 
    The $20,000 rebate per car means taxpayers may support 
subsidies of up to around $200 million a year. Annual sales 
forecast for fuel cell vehicles in the early years of market 
introduction vary from several hundred to 10,000 vehicles. 
    To put 100 hydrogen fuel stations in urban areas by 
end-March 2015, the ruling party has suggested a subsidy of up 
to $2 million per station - which cost $4-5 million each to 
build - meaning another $200 million in taxpayer money. 
    The government plans to continue offering subsidies and tax 
breaks so that fuel cell cars can sell at around the same price 
as gas-electric hybrids in the 2020s. 
    "The subsidy is a huge driving force for sales, but it won't 
be offered forever and I think the message here is that we need 
to continue cutting costs," said Koichi Kojima, a senior Toyota 
engineer who has been involved in fuel cell vehicle development 
for a decade. 
    The hydrogen supply chain has been benefiting from growing 
interest in the technology. Shares in Iwatani Corp  8088.T , 
which opened the country's first commercial hydrogen station in 
western Japan this month and plans to build a total of 20 
stations by 2015, jumped nearly 50 percent this year, while 
hydrogen tank maker JFE Container  5907.T  rose 14.3 percent. 
    Besides Toyota, Honda also plans to start selling its fuel 
cell vehicle in 2015. Automakers including General Motors Co 
 GM.N  and Ford Motor Co  F.N  have been working on fuel cells 
for years and Daimler AG  DAIGn.DE  and Hyundai Motor Co 
 005380.KS  lease fuel cell cars in the United States, but so 
far there are no plans for sales in Japan. 
    That means the subsidy will be offered exclusively to Toyota 
and Honda for the time being. 
    The announcement came as Washington and Tokyo are deadlocked 
over U.S. access to the Japanese auto market in talks for the 
Trans-Pacific Partnership (TPP), a regional trade pact. 
    "I don't see it being a friction in terms of a trade issue," 
said Ron Cogan, editor of Green Car Journal. "I see it being a 
useful subsidy to help automakers that are going to be grappling 
with very high costs in developing very advanced vehicles." 
 
 (Editing by Alex Richardson) 
 ((yoko.kubota@thomsonreuters.com)(+81 3 6441 1886)(Reuters 
Messaging: yoko.kubota.thomsonreuters.com@reuters.net)) 
 
Keywords: JAPAN AUTOS/FUELCELLS