BMW’s Fuel Cell Plans Are Doomed to Fail

By Dylan Khoo | 3Q 2024 | IN-7526

Registered users can unlock up to five pieces of premium content each month.

Log in or register to unlock this Insight.

In September, Toyota and BMW announced an agreement on collaboration in the hydrogen sector. They will collaborate on a third-generation fuel cell system, sustainable hydrogen supply networks. BMW plans to launch its first mass-produced Fuel Cell Electric Vehicle (FCEV) in 2028. Toyota's only global FCEV is the second-generation Mirai, first sold in 2020.

Toyota has long been a champion of hydrogen technology as part of its multi-pathway approach to decarbonization that also includes Battery Electric Vehicles (BEVs), Plug-in Hybrid Electric Vehicles (PHEVs), and Hybrid Electric Vehicles (HEVs). The Toyota Mirai was the first commercial FCEV and remains one of the world's most popular hydrogen cars, featuring prominently in Toyota's marketing campaign for Paris 2024. BMW has experimented with hydrogen test vehicles in the past, but has not seriously committed to the technology, making this a noteworthy update to its long-term strategy.

FCEVs and BEVs are the only fuel options with zero local emissions. It has long been recognized that the zero-emissions car of the future will rely on one of or both of these powertrains. Up to a decade ago, there was a legitimate debate around which of these technologies would win or if they might be complementary technologies in the automotive sector, but this time has long passed. The conversation is now about how long electrification will take and what interim solutions will be required; there is no serious doubt over the direction of travel.

BEVs have, in many ways, already won. In 2023, 82% of car sales were BEVs in Norway, the global leader in electrification, while 24% were in China and 8% in the United States. This contrasts massively with FCEVs, which achieved a market share of 0.3% in South Korea, 0.03% in China, and 0.02% in the United States. Even in California, the United States' decarbonization leader, just 0.2% of cars sold in 2023 were FCEVs.

Much has been made of issues with EV charging, and it remains a key barrier for mass adoption. The situation for hydrogen filling stations, however, is far worse. There are currently just 65 hydrogen filling stations in North America, of which 57 are in California. Germany has more hydrogen refueling stations than any other European country, but this still only amounts to 113, which it aims to increase to 300 by 2030. There are currently nearly 2,000 ultra-fast chargers in Germany, capable of delivering over 350 Kilowatts (kW) and recharging a car in 15 minutes.

Toyota and Hyundai are the leading hydrogen car Original Equipment Manufacturers (OEMs). In 2023, Toyota sold 104,018 BEVs, a figure that is much greater than not only the 4,023 FCEVs it sold in the same year, but the 27,000 FCEVs it has sold in its history. Even Toyota's own targets, which it has self-described as "very high," are to achieve a total of 200,000 FCEV sales by 2030, including passenger vehicles, Light Commercial Vehicles (LCVs), and Heavy-Duty Vehicles (HDVs). In 2023, Hyundai delivered just 4,552 units of the NEXO. It aims to achieve a 500,000-unit fuel cell system production capacity by 2030 for passenger and commercial vehicles.

Whatever OEMs may claim, their passenger FCEVs will not succeed. They are in direct competition with BEVs, a technology that now has a huge head start and is receiving orders of magnitude more investment in research and production. BMW is planning to release its first hydrogen car in 2028, when ABI Research expects that over 110 million BEVs will be on the road. Even in the worst-case scenarios, BEVs will be cheaper and have a greater range than today, and their charging infrastructure will be more plentiful and faster. Passenger FCEVs will not be able to compete in this environment.

The inclusion of commercial vehicles in Toyota and Hyundai's targets is critical. Hyundai sold 183,500 LCVs and 8,400 HDVs in 2023, while Toyota's HINO brand of commercial vehicles sold 135,200 units. As discussed in ABI Research's The Economic Viability of Green Hydrogen for Industry and Enterprises report (AN-6267), hydrogen may play a role in these segments, and these OEMs could use their experience with passenger FCEVs to produce fuel cells for their own commercial vehicles or supply them to other OEMs. Other OEMs such as General Motors (GM), Ford, and Stellantis are explicitly pursuing fuel cells for their commercial vehicles. BMW, however, does not have a commercial vehicles business.

Hyundai's FCEV Vision 2030 is optimistic, but based on solid foundations. It aims to achieve a production capacity of 700,000 fuel cells by 2030 with 500,000 for FCEVs, but crucially, it is also aiming to act as a supplier and sell to other non-automotive manufacturers in sectors such as vessels, forklifts, and rolling stock. Notably, Hyundai Motor Group is directly involved in the construction, steel, and rolling stock sectors through its subsidiaries, while the related conglomerate HD Hyundai produces all kinds of ships, machinery, and heavy equipment. Without these options, there is no reason for BMW to spend resources developing hydrogen vehicles; a major pivot in its broader strategy would be required to reap the benefits of fuel cell technology.

Fuel cell development is best left to businesses such as Hyundai. Battery electric powertrains will be the dominant solution for passenger cars, LCVs, and for many medium-duty and heavy-duty commercial use cases. Without supplying sectors outside of road transport, it will be difficult to achieve the economies of scale necessary to manufacture fuel cells competitively. BMW is already investing billions to address the challenges it faces with electrification, software development, and pressures in the Chinese market. It cannot afford to pursue the dead end of passenger FCEVs.