Have you filled up your combustion-engine car with record-priced unleaded octane lately? We don't use this kind of jargon in describing our automobiles because, until recently, our options were limited. The US is lagging behind other markets in adapting alternative energy, but change is coming. Investors may very well benefit from taking a position in fuel cell-related stocks now ahead of the 2015 roll-out of many major auto industry automobiles using this technology.
In 1997, Toyota Motors (TM) introduced the first commercially available hybrid gasoline-electric car, the Prius. Toyota has gone a long way with this efficient, favorite among hybrid electric owners. What once was an eye-catching oddity, the Prius has become more of an economically attractive staple of the auto landscape. Toyota's 2012 projections include selling 220,000 Prius vehicles on US soil. Its sales of hybrid vehicles worldwide topped the 3 million mark in February 2011. Toyota pioneered the field in the US, but other companies have cashed in on the route it paved. Other top selling US hybrid companies include models from Hyundai (HYMTF.PK), Lexus, Honda (HMC), and Ford (F).
In 2010, Nissan (NSANY.PK) introduced the Leaf, the first commercially available battery-electric car. Since its launch in December, Nissan has sold over 20,000 Leafs. Most major automobile companies have entered this market. Competition is heating up to continue to develop this technology and answer critics of its mainstream capability in the market. Many electric vehicles are being paired with gas or diesel to extend range without the constraints of using batteries. For example, the Chevy Volt from General Motors (GM) can extend a 40 mile rage to 500 with a single gas fill up. While companies like Tesla Motor's (TSLA), have stuck to batteries alone and have improved technology such that some models can get up to a 300 mile range per charge.
It appears that first to market has been important in leadership with new automotive innovation. Toyota is currently number one in the hybrid market. Nissan is the leader within the pure electric category. Today most major automotive players are now in pursuit of bringing the fuel cell auto to market by 2015.
So how does the hydrogen fuel cell automotive fit in the mix? First of all, a fuel cell car is for all intents and purposes an electric car. What's good for an electric car is also good for fuel cell hybrids. Current innovations in drive train technology in electric vehicles will be passed on to this type of car as well. Cost has been an issue in adoption of new electric/electric-hybrid automotive technology. Long driving batteries weigh a lot, are expensive and hybrid gas vehicles need a separate generator or dual motors. As fuel cells get smaller and cheaper, hydrogen has the potential to overtake the solo electric vehicle.
Fuel cell vehicles have the ability to extend range without the need for as much weight in batteries. Without the need for combustion, a hydrogen fuel cell is a more efficient, cleaner choice when it comes to fuel. Some claim the hydrogen fuel cell has the ability to reduce fuel consumption by 50%. Interest in this technology is widespread. Even Apple (AAPL) has realized the value of hydrogen fuel cell efficiency and has filed patents which can be used in the future to circumvent the size constraints that batteries alone provide and run a computer for weeks without more hydrogen.
Investors have their eyes on 2015 as the big year for fuel cell actualization. This will be the year the technology will enter the mainstream auto industry both domestically and abroad. Daimler (DDAIF.PK), Ford, Nissan, Toyota, and others are committed to roll out cars using fuel cell technology that year in markets with the hydrogen infrastructure, which includes many states from California to Michigan.
Honda may be looking to become the long-term leader in the market. The company has pushed its date of release of its fuel cell vehicle to 2018 as it attempts to approach the market in a different way. The company is pairing a home energy station that domestically produces hydrogen with their FCX clarity automobile to circumvent a hydrogen infrastructure problem. The home fueling station was developed and miniaturized with the collaboration of Plug Power (PLUG). Honda claims that using its hydrogen fueling station can reduce domestic carbon dioxide emissions by 30% versus a home that uses gasoline power cars and commercial electricity.
Other ways to benefit from fuel cell auto adoption
You might say, if you build it, the infrastructure will come. The cars are on the way, the infrastructure is coming and more is likely to follow. Companies like Air Liquide (AIQUY.PK) and Hydrogenics (HYGS) are likely to see acceleration in contracts for fueling stations as 2015 and beyond approaches. Announcements from major auto players and successful infrastructure abroad will generate more interest in development.
All electric and hybrid-electric including fuel cell cars need efficient batteries. Any battery maker that survives between now when this technology becomes more wide spread will have one additional use for their batteries. A123 Systems (AONE) could benefit from the fuel cell vehicle adoption. Hydrogen fuel cell companies like United Technologies (UTX), Ballard Power (BLDP) and Plug Power will benefit from cheaper mass produced hydrogen for use with their bus, forklift, and other stationary fuel cells.
As we gear up for summer and rumors of $5-per-gallon gasoline abound, technologies like fuel cells don't perhaps seem as much an expensive science experiment as it does a viable option for change. Diversifying a portfolio to include hydrogen based technologies now may power gains for the investor in the future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.