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Toyota's Hydrogen Holdup Means New Englanders Miss Out on Mirai

July 24, 2017
The timeline “changes all the time,” said Bob Oesterreich, director of the U.S. hydrogen-energy business at Air Liquide, which Toyota recruited to help build the stations that need to be in place before it can start selling Mirai.

Toyota Motor Corp., off to a slow start selling its car of the future on one U.S. coast, is struggling even to get started on the other.

Hangups getting enough hydrogen fueling stations opened in California have undercut early sales of Toyota’s fuel cell vehicle called Mirai, the Japanese word for “future.” But states on the East Coast, including New York, Connecticut and Massachusetts, are still waiting for their first stations to open at all. The automaker and partner Air Liquide SA had hoped to have a dozen ready on the East Coast this summer. Now, they’re aiming for just three or four to be finished by year-end.

The timeline “changes all the time,” said Bob Oesterreich, director of the U.S. hydrogen-energy business at Air Liquide, which Toyota recruited to help build the stations that need to be in place before it can start selling Mirai. “We’re dealing with government officials and planning boards and everyone’s got their own priorities, and sometimes hydrogen refueling stations aren’t at the top of their list.”

The delays getting hydrogen stations opened are troubling for Toyota’s wager on fuel cell vehicles over battery-electric cars. While sales of all zero-emission autos are still in their infancy, Tesla Inc., General Motors Co. and Nissan Motor Co. are making much faster headway getting plug-ins into consumers’ garages. Public charging points to replenish their batteries also have taken off far more quickly.

Hydrogen Bet

Toyota sold 708 Mirai fuel cell sedans in the first half of the year in the U.S., with deliveries limited to select California dealerships. GM and Nissan each sold 10 times as many Chevrolet Bolts and Nissan Leafs, respectively. Tesla, which doesn’t report monthly sales, probably delivered about 23,550 of its electric vehicles in the U.S. in that same period, according to an estimate by researcher Autodata Corp.

The leisurely pace of sales for Toyota is in part explained by the fact that only 28 retail fueling stations operate in the lone state where Mirai is being sold, according to the California Fuel Cell Partnership. The state’s powerful environmental regulator, the California Air Resources Board, originally estimated back in 2015 that 44 stations would be open by the end of that year.

Infrastructure efforts in California have been behind schedule despite the full backing of Governor Jerry Brown and CARB Chair Mary Nichols, who bought one of the first Mirai sedans in late 2015. In addition to helping coordinate hydrogen efforts, the state has doled out grants to support companies spending on fueling stations.

Station Obstacles

Negotiations between station developers and city planners, plus coordination with local utilities and permitting issues, have bedeviled companies including Air Liquide.

“The experience on the West Coast so far makes it abundantly clear that infrastructure is going to be perhaps the largest hurdle to hydrogen,” said Eric Noble, president of The CarLab, an automotive consulting firm.

The East Coast is proving even more challenging, with hydrogen backers having to jump through the same hoops without the benefit of as much full-throated buy-in from state and local governments.

“If you look at it compared to California, the Northeast is really a leap of faith,” said Andrew Temple, director of government affairs at Air Liquide’s U.S. unit. “If this doesn’t come together all at the same time, we’re going to take a pretty big hit.”

Fire Codes Need Updating

In June, a team of Washington lobbyists and officials from California Governor Brown’s office descended on state capitals across the northeast in the hopes of breaking through log jams and bureaucratic delays, Oesterreich said.

A big hurdle is updating local fire codes to accommodate hydrogen gas that dissipates in the air, rather than liquid gasoline that would pool on the ground if a nozzle leaked while a driver was filling his or her tank.

Stations in two cities -- Providence, R.I., and Hartford, Conn. -- are under construction and the French industrial-gas giant still expects a dozen to be built by next year, Oesterreich said.

Toyota has remained steadfast in its fuel cell vehicle bet because hydrogen-powered cars like Mirai have superior driving ranges and can be tanked up in three minutes, rather than the hours it takes to charge battery-electric autos. The automaker is planning a 10-fold increase in global fuel cell sales to 30,000 a year in or shortly after 2020. That’s the year the Japanese government, with Toyota’s help, plans to turn the Tokyo Olympics into a global showcase for fuel cell vehicles and the country’s hydrogen refueling stations.

Transition Technology

“This is the transition technology from gasoline,” said Craig Scott, director of Toyota’s advanced technologies group in the U.S. While fueling up at a hydrogen station will feel a lot like your gas-station experience today, he said it’ll take time. “You don’t get everybody on the first wave, especially if you have something outside-of-the-box. It literally takes decades to move people.”

Air Liquide declined to say how much money it’s investing to build the East Coast fueling stations and said Toyota is ensuring demand certainty for the stations, without elaborating on how.

There’s also a regulatory calculus driving the infrastructure bet. Nine states have adopted clean-air rules that mirror California’s, including New York and Massachusetts. Those 10 states make up about 30% of the U.S. vehicle market, making it crucial for automakers to stay in compliance with their standards.

Today, automakers can transfer credits they earn from sales of green vehicles in one state to satisfy requirements in another. Barring intervention by the Trump administration, transfer credits for fuel cell vehicles will be phased out by 2025, forcing automakers to sell more hydrogen cars on the East Coast.

Reluctant Tax Dollars

While state grants would help speed fueling-station development -- and Air Liquide has been indirectly lobbying for it -- this seems unlikely to happen anytime soon. States on the East Coast are reluctant to use tax dollars to support the construction of hydrogen stations that may not take off without California-like mandates, said Matthew Solomon, the transportation program manager at NESCAUM, a non-profit association of Northeast states that coordinates clean-air policy.

Honda Motor Co. is also studying how to support infrastructure on the East Coast, said Steve Center, vice president of environmental business development at the automaker’s U.S. unit. While the Japanese automaker showed off its new Clarity fuel cell at the New York International Auto Show in April, he said it’ll probably be a couple of years before dealers in the Northeast start selling the hydrogen-powered car.

Toyota, meanwhile, aims to beginning selling the Mirai on the East Coast as soon as the first fueling station comes online.

“There are a lot of things that could go wrong, mostly things we don’t know,” Scott said. “We will have to wait and see how it turns out, but it won’t be for lack of trying.”

By Gabrielle Coppola

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