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Will Toyota's (TM) Hydrogen Push Redefine Sustainable Mobility?
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Amid considerable excitement about Toyota’s (TM - Free Report) recent announcement on solid-state batteries for electric vehicles (EVs), another equally significant revelation was somewhat overshadowed. The company's strategic move toward selling its hydrogen technology in Europe and China is also worth paying attention to. Toyota’s intention to expand its hydrogen technology business outside Japan promises significant advancements for the global decarbonization effort, even as the automaker faces headwinds at home.
This article explores Toyota's pivot, highlighting the potential of hydrogen-powered vehicles, the challenges faced in the Japanese market and the company's ambitious goals.
The Battle Between Hydrogen and Batteries
With Japan heavily reliant on energy imports, the country has long placed a significant bet on hydrogen as an alternative to fossil fuels. While Japan and its biggest carmaker, Toyota, have been steadfast supporters of hydrogen as a fossil fuel alternative, hydrogen-powered vehicles are yet to gain traction, primarily due to high production costs and inadequate infrastructure. But Toyota, undeterred, has identified a business opportunity to sell its fuel cells to larger economies such as Europe, China, and North America, which are racing to achieve their decarbonization goals.
The Japan Paradox
Although Japan led the charge by rolling out a national hydrogen strategy in 2017, it has since been outpaced by the United States, Europe and China. These economies have set more aggressive targets for hydrogen utilization and are investing heavily in the technology. Japan, meanwhile, has struggled to meet its own goals, having sold only about 7,700 hydrogen cars against a target of 40,000 by 2020. Despite constructing 164 hydrogen stations, Japan has failed to meet its objective of having 100 of them provide green hydrogen generated from renewable energy sources. Since introducing the hydrogen-powered Mirai in 2014, the company has sold less than 22,000 fuel-cell vehicles, with only 3,924 units sold last year.
In response, Toyota emphasizes the need to bring down costs by scaling up production in Europe and China before transferring positive outcomes to the Japanese market. TM and other Japanese companies like Panasonic are increasingly seeking to sell their hydrogen technologies abroad. While the Japanese government aims to supply about 3 million tons of hydrogen annually by 2030, other nations have much loftier ambitions, with China targeting 40 million tons and the United States and Europe each aiming for about 25 million tons.
Toyota’s International Hydrogen Strategy
Toyota’s global orders for its hydrogen system, mostly for commercial vehicles, have already reached 100,000 units for 2030. Through partnerships with truck makers in Europe and China, the company aims to double these orders, thereby halving the unit cost.
In this context, Toyota's latest announcement signals a strategic shift. The Japanese automaker, a key advocate for hydrogen fuel-cell vehicles, will now concentrate on selling these vehicles in Europe and China, with an ambitious target of selling 200,000 units by 2030. This decision marks a significant departure from its previous North American focus and an emphasis on passenger cars.
The establishment of a dedicated fuel-cell unit, the Hydrogen Factory, signals Toyota's intention to expand the application of fuel-cell technology into industrial power generation and commercial trucks. By concentrating efforts in regions with higher hydrogen production and demand, Toyota aims to reduce costs and strengthen partnerships with other companies. The company foresees the global fuel cell market to expand to around $35 billion by 2030 (15 times higher than 2020 levels), citing a forecast from market research firm Fuji Keizai.
Challenges and Opportunities
But Toyota's hydrogen push does come with its own set of challenges. Corporate executives are concerned about a lack of clear government vision for reducing carbon-free hydrogen production costs, and they fear a repeat of previous technological rivalries where Japan was outpaced by lower-cost Chinese competitors.
Despite these challenges, Toyota is determined to leverage its decades-long experience in creating fuel-cell stacks. The company's chief technology officer, Hiroki Nakajima, is optimistic about achieving their sales targets. Toyota believes that focusing on markets where hydrogen production and demand are higher, such as China and Europe, will help reduce costs and stimulate demand.
Final Thoughts
Toyota’s aggressive hydrogen strategy serves as a testament to the company’s commitment to decarbonization, despite the odds. This plan demonstrates how automakers can potentially adapt and innovate amid the broader global shift toward sustainable and renewable energy sources. The company’s move toward hydrogen-powered vehicles in Europe and China marks a significant turning point for the company. While challenges persist in the Japanese market, Toyota recognizes the enormous potential in the global race to decarbonize and secure energy supply chains. By leveraging its expertise, strengthening partnerships and focusing on cost reduction, Toyota aims to make hydrogen-powered vehicles a prominent force in the automotive industry.
Though success is not guaranteed, the potential payoff is huge. If Toyota can leverage its technological expertise and strategic partnerships effectively, it may succeed in turning a once-niche technology into a mainstream solution, driving the company, and potentially the world, toward a more sustainable future.
The Zacks Consensus Estimate for F’s 2023 sales estimates implies year-over-year growth of 6.6%. The current-year EPS estimate has been revised upward by 4 cents in the past seven days. Ford has gained around 31% year to date.
The Zacks Consensus Estimate for PCAR’s 2023 sales and EPS suggests year-over-year growth of 15.6% and 36.5%, respectively. The current-year EPS estimate has been revised upward by 1 cent in the past 30 days. PACCAR has gained around 31% year to date.
The Zacks Consensus Estimate for GPI’s 2023 sales estimates implies year-over-year growth of 3%. The current-year EPS estimate has been revised upward by 5 cents in the past 30 days. GPI has gained around 48% year to date.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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Will Toyota's (TM) Hydrogen Push Redefine Sustainable Mobility?
Amid considerable excitement about Toyota’s (TM - Free Report) recent announcement on solid-state batteries for electric vehicles (EVs), another equally significant revelation was somewhat overshadowed. The company's strategic move toward selling its hydrogen technology in Europe and China is also worth paying attention to. Toyota’s intention to expand its hydrogen technology business outside Japan promises significant advancements for the global decarbonization effort, even as the automaker faces headwinds at home.
This article explores Toyota's pivot, highlighting the potential of hydrogen-powered vehicles, the challenges faced in the Japanese market and the company's ambitious goals.
The Battle Between Hydrogen and Batteries
With Japan heavily reliant on energy imports, the country has long placed a significant bet on hydrogen as an alternative to fossil fuels. While Japan and its biggest carmaker, Toyota, have been steadfast supporters of hydrogen as a fossil fuel alternative, hydrogen-powered vehicles are yet to gain traction, primarily due to high production costs and inadequate infrastructure. But Toyota, undeterred, has identified a business opportunity to sell its fuel cells to larger economies such as Europe, China, and North America, which are racing to achieve their decarbonization goals.
The Japan Paradox
Although Japan led the charge by rolling out a national hydrogen strategy in 2017, it has since been outpaced by the United States, Europe and China. These economies have set more aggressive targets for hydrogen utilization and are investing heavily in the technology. Japan, meanwhile, has struggled to meet its own goals, having sold only about 7,700 hydrogen cars against a target of 40,000 by 2020. Despite constructing 164 hydrogen stations, Japan has failed to meet its objective of having 100 of them provide green hydrogen generated from renewable energy sources. Since introducing the hydrogen-powered Mirai in 2014, the company has sold less than 22,000 fuel-cell vehicles, with only 3,924 units sold last year.
In response, Toyota emphasizes the need to bring down costs by scaling up production in Europe and China before transferring positive outcomes to the Japanese market. TM and other Japanese companies like Panasonic are increasingly seeking to sell their hydrogen technologies abroad. While the Japanese government aims to supply about 3 million tons of hydrogen annually by 2030, other nations have much loftier ambitions, with China targeting 40 million tons and the United States and Europe each aiming for about 25 million tons.
Toyota’s International Hydrogen Strategy
Toyota’s global orders for its hydrogen system, mostly for commercial vehicles, have already reached 100,000 units for 2030. Through partnerships with truck makers in Europe and China, the company aims to double these orders, thereby halving the unit cost.
In this context, Toyota's latest announcement signals a strategic shift. The Japanese automaker, a key advocate for hydrogen fuel-cell vehicles, will now concentrate on selling these vehicles in Europe and China, with an ambitious target of selling 200,000 units by 2030. This decision marks a significant departure from its previous North American focus and an emphasis on passenger cars.
The establishment of a dedicated fuel-cell unit, the Hydrogen Factory, signals Toyota's intention to expand the application of fuel-cell technology into industrial power generation and commercial trucks. By concentrating efforts in regions with higher hydrogen production and demand, Toyota aims to reduce costs and strengthen partnerships with other companies. The company foresees the global fuel cell market to expand to around $35 billion by 2030 (15 times higher than 2020 levels), citing a forecast from market research firm Fuji Keizai.
Challenges and Opportunities
But Toyota's hydrogen push does come with its own set of challenges. Corporate executives are concerned about a lack of clear government vision for reducing carbon-free hydrogen production costs, and they fear a repeat of previous technological rivalries where Japan was outpaced by lower-cost Chinese competitors.
Despite these challenges, Toyota is determined to leverage its decades-long experience in creating fuel-cell stacks. The company's chief technology officer, Hiroki Nakajima, is optimistic about achieving their sales targets. Toyota believes that focusing on markets where hydrogen production and demand are higher, such as China and Europe, will help reduce costs and stimulate demand.
Final Thoughts
Toyota’s aggressive hydrogen strategy serves as a testament to the company’s commitment to decarbonization, despite the odds. This plan demonstrates how automakers can potentially adapt and innovate amid the broader global shift toward sustainable and renewable energy sources. The company’s move toward hydrogen-powered vehicles in Europe and China marks a significant turning point for the company. While challenges persist in the Japanese market, Toyota recognizes the enormous potential in the global race to decarbonize and secure energy supply chains. By leveraging its expertise, strengthening partnerships and focusing on cost reduction, Toyota aims to make hydrogen-powered vehicles a prominent force in the automotive industry.
Though success is not guaranteed, the potential payoff is huge. If Toyota can leverage its technological expertise and strategic partnerships effectively, it may succeed in turning a once-niche technology into a mainstream solution, driving the company, and potentially the world, toward a more sustainable future.
Zacks Rank & Key Picks
Tesla currently carries a Zacks Rank #3 (Hold). A few better-ranked players in the auto space include Ford (F - Free Report) , PACCAR (PCAR - Free Report) and Group 1 Automotive (GPI - Free Report) . While F sports a Zacks Rank #1 (Strong Buy), PCAR and GPI carry a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for F’s 2023 sales estimates implies year-over-year growth of 6.6%. The current-year EPS estimate has been revised upward by 4 cents in the past seven days. Ford has gained around 31% year to date.
The Zacks Consensus Estimate for PCAR’s 2023 sales and EPS suggests year-over-year growth of 15.6% and 36.5%, respectively. The current-year EPS estimate has been revised upward by 1 cent in the past 30 days. PACCAR has gained around 31% year to date.
The Zacks Consensus Estimate for GPI’s 2023 sales estimates implies year-over-year growth of 3%. The current-year EPS estimate has been revised upward by 5 cents in the past 30 days. GPI has gained around 48% year to date.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.