Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Imagine a world where your commute is fuelled by the universe’s most abundant element: hydrogen. Emitting nothing but water vapour as a byproduct, when produced using renewable energy, hydrogen has long held promise as the fuel of the future. Yet for all its potential, hydrogen still seems stuck in the realm of what might be.
Not all energy solutions regarded as revolutionary alternatives to fossil fuels have lived up to expectations. Ethanol for example, once seen as a viable replacement for petrol, fell short of its hype. Now, with Donald Trump having signed orders to promote fossil fuels on his first day back as US president, critics see hydrogen-powered cars heading down a similar path.
Carmakers in Asia, however, have refused to give up on the dream of hydrogen powering the future. South Korea’s Hyundai Motor Group has set aside a record $16.7bn for next-generation products, including hydrogen fuel-powered products and infrastructure this year. Japan’s Toyota is still betting on hydrogen cars after investing in hydrogen fuel cell technology for more than three decades. Government subsidies in the region are also going strong. This week, South Korea started offering additional subsidies for hydrogen vehicle purchases, including $20,500 in subsidies for a Hyundai Nexo passenger car.
Despite the bold spending, the reality is sobering. Take Toyota’s Mirai and Hyundai’s Nexo, the poster children of hydrogen-fuelled passenger cars, which have struggled to gain traction. Despite years of development and marketing, Toyota has sold just 27,500 hydrogen cars in a decade — compared with 17mn electric vehicles sold last year alone. Hyundai’s sales of its fuel cell vehicles have been declining, down 43 per cent in the first half of last year, according to SNE Research.
Hydrogen, for all its theoretical appeal, faces several practical challenges: high costs, safety concerns and competition from battery electric cars. Of them, the price of hydrogen fuel remains one of the most significant factors in the total cost of ownership for fuel cell vehicles. Prices in the US have been particularly high, with the monthly average price of light-duty hydrogen fuel in California hitting a record $34.55/kg in October, according to Platts data.
Rough estimates using US retail diesel prices and a Hyundai Nexo model highlight the significant cost gap. For comparison, let us assume an average retail price for diesel fuel at about $3.50 a gallon and that vehicles using it run at 20 miles a gallon. Contrast that with a fuel economy of 60 miles per kilogramme of hydrogen for a 2021 Hyundai Nexo model. To match the diesel cost per mile, hydrogen would need to be priced at around $10.80 a kilogramme.
The political landscape adds another layer of complexity. Among a flurry of executive orders on his first day back as US President, Trump suspended federal funding for hydrogen projects pending a comprehensive review.
Yet, when looking beyond the US and passenger cars, there are signs of hydrogen quietly gaining traction in Europe and Asia, particularly through buses. Zero-emission heavy duty vehicle sales in Europe, including hydrogen models, rose by 54 per cent in the first half of 2024. In China, sales of commercial hydrogen fuel cell vehicles grew nearly 30 per cent in the first three quarters of last year.
Hydrogen’s quick refuelling times and lightweight nature make it particularly well-suited for commercial use and industries that batteries struggle to reach, including long-haul trucking, shipping and heavy machinery. Hydrogen-powered vehicles are also less affected by cold temperatures than batteries, which lose efficiency in freezing conditions.
Meanwhile, hydrogen refuelling infrastructure has been expanding rapidly in Asia, which is projected to account for more than half of global hydrogen demand by 2050, with China, Japan, and South Korea currently the largest markets for hydrogen refuelling stations. Adding to the appeal, hydrogen prices are also significantly lower in the region with prices in South Korea for instance, at just $7/kg. This positions carmakers such as Toyota and Hyundai well to capture growing demand for heavy-duty applications, offering a complement to battery EVs.
Ultimately, hydrogen’s promise may lie less in revolutionising our daily commute and more in reshaping how people and goods move across continents. Hydrogen is yet to become the fuel of the future, but its potential is far from exhausted — and in the right applications, could still play a transformative role.
june.yoon@ft.com
