Toyota Bets Against Tesla With New Hydrogen Car

Toyota says batteries are old news. Tesla says hydrogen is for fools. Who's right?

Jul 30, 2014 at 6:40PM

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Toyota's new hydrogen fuel cell vehicle is expected to be called the Mirai. It will go on sale around the world next year. Source: Toyota.

It's really happening: Toyota's (NYSE:TM) new hydrogen fuel cell car will start arriving at dealers sometime next year.

Bloomberg reported this week that the car is expected to be called the "Mirai," the Japanese word for "the future". It won't be cheap: Toyota says it'll be priced around 7 million yen, about $68,000, when it goes on sale in Japan next spring. Sales in Europe and the U.S. will follow.

Unless governments are willing to offer some hefty incentives to buyers, It doesn't seem likely that Toyota will sell too many Mirais at that price.

But the Mirai is a big deal, because of what it says about Toyota's view on electric cars and its view on a company it has invested in, California's Tesla Motors (NASDAQ:TSLA).

An electric car, minus the big battery pack
So what is this thing? First and foremost, the Toyota Mirai is an electric car, but it doesn't have the big, heavy battery packs used by cars such as Tesla's Model S and Nissan's (NASDAQOTH:NSANY) Leaf.

Instead, it has a fuel cell, a device that chemically converts the energy in hydrogen gas into electricity. It's a very clean process: the only "exhaust" from a hydrogen fuel cell is water vapor.

Hydrogen fuel cell cars like the Mirai have most of the advantages of battery-electric cars -- they're clean and quiet -- without the weight of the battery pack, which in a car like the Model S is very substantial. 

But unlike a battery-electric car, which simply needs to be recharged, the Mirai will need "gas" -- hydrogen gas -- in order to operate. Right now, there are only a handful of hydrogen refueling stations in the U.S., but if the cars start to catch on, more will spring up quickly.

But why is Toyota making such an aggressive move toward this technology and away from battery-electric cars?

A big bet that puts Toyota at odds with Tesla
Simply put, Toyota thinks that current battery technology isn't good enough, and there are no promising breakthroughs on the horizon.

Toyota global research and development chief Mitsuhisa Kato recently told trade publication Automotive News that he thinks the short range and long recharging time of current battery-electric cars are huge disadvantages for the technology. As Kato sees it, a "Nobel Prize-winning type battery" would be needed to change his mind.

Under Kato, Toyota's research team has moved aggressively toward fuel cells -- so aggressively, reports have suggested, that the automaker has delayed the next-generation Prius in order to focus on the Mirai's development. 

But Toyota's investment in the Mirai project seems like a big bet against a company like Tesla. And it's all the more striking because Toyota is one of Tesla's investors

Of course, Tesla thinks Toyota's view is nonsense. CEO Elon Musk believes current battery technology is sufficient to make a fine car -- and Tesla's award-winning Model S sedan is a powerful argument in his favor.

Tesla Model S Bridge

Can battery-electric technology lead to great cars? Tesla's Model S is certainly a good one. Source: Tesla Motors.

Musk has derided hydrogen fuel cells as "fool cells" and dismisses the technology as a dead end. Of course, you'd expect that from a CEO of a battery-electric-car maker, who has a big interest in seeing batteries adopted more widely, but it's still telling that Tesla doesn't believe fuel cells hold any real promise.

Who's right?
It's not as if Toyota doesn't know anything about using batteries to propel a car. Toyota is, after all, the world's leading maker of hybrids. In terms of technology, developing a pure battery-electric car wouldn't be a daunting task for Toyota, as its plug-in hybrid Prius shows.

But giant Toyota has chosen another path, despite the success (so far) of upstart Tesla Motors.

Will this turn out to be the right move? Or are hydrogen fuel cells a technological dead end? Scroll down to leave a comment and share your thoughts.

John Rosevear has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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