China and Japan are battling over the future of electrical cars

• Oct. 28, 2015, Four:51 AM
• 13,497

China’s Chen Jianxin (L) sprints to the finish line next to Japan’s Keisuke Nozawa during the guys’s 4x400m relay final at the 6th East Asian Games in Tianjin municipality October 9, 2013. REUTERS

TOKYO/DETROIT (Reuters) – Asia’s two autos powerhouses, Japan and China, are jostling for supremacy in how future electrified cars should generate their power – from batteries or hydrogen-powered fuel-cells.

In a potentially high-stakes clash reminiscent of Sony versus Panasonic in the Beta-VHS movie war in the 1980s, the winner could love years of supremacy if their technology is adopted as a global standard by other manufacturers.

This time, however, there should be a place in the autos market for both electrified battery and hydrogen fuel-cell cars. The key question is which will power more mainstream cars – the market predominated today by the likes of Toyota, General Motors and Volkswagen .

“We’re reaching a crossroads,” says James Chao, Shanghai-based Asia-Pacific managing director for industry consultant IHS Automotive. “It’s difficult to exaggerate the significance of the choice inbetween batteries and hydrogen.

“Billions of dollars will be invested in one or the other and may determine which companies will lead the industry through the end of this century.”

RIVAL VISIONS

China, a major oil importer and blighted by air pollution, is pushing for all-electric (EV) cars, suggesting incentives to buyers, forcing global automakers to share their technology, and opening its market to tech firms and others to produce electrical vehicles.

For a decade, Beijing has shoved for the EV to become a mass-market car, hoping a low entry barrier will permit its relative late comers to close a competitive gap with global rivals who have a century’s head-start in traditional combustion engines.

“(China President) Xi Jinping explained it very well, telling that developing fresh energy vehicles is the Chinese auto industry’s only road to grow from being big to being strong,” Xu Heyi, chairman of Beijing Automotive Group and a high-ranking Communist Party official, told reporters recently.

A man charges the batteries of BAIC Motors electrical cars, which will be serve as official vehicles for the APEC Summit, at a fresh charging station at the Beijing Capital International Airport in Beijing, October 30, 2014. REUTERS

Japan, tho’, sees the future differently and is investing strongly in fuel-cell technology and infrastructure as part of a national policy to foster what it calls a ‘hydrogen society’, where the zero-emission fuel would power homes and vehicles.

Toyota Motor especially is keen to maintain the alternative propulsion lead it established a decade and a half ago with the utter hybrid electrical Prius.

“It’s not that we’re not doing anything about the EV. Technically speaking, EV is a relatively lighter technology,” said Koei Saga, Toyota’s senior managing officer in charge of vehicle powertrain technology. “But it needs to evolve. If you’re looking for the ultimate solution, the EV most likely isn’t it.”

To be sure, China and Japan are not alone. GM has joint research with Honda on hydrogen cars, while BMW is Toyota’s fuel-cell playmate. Daimler in Europe and Hyundai Motor in South Korea are also carrying out their own research and development on a hydrogen car.

MORE AFFORDABLE

Honda Motor unveiled a ‘mass market’ hydrogen fuel-cell car at the Tokyo Motor Demonstrate on Wednesday that will go on sale in Japan in March, to be followed by launches in the United States and Europe, key potential markets for the technology.

Honda believes the car, dubbed the Clarity Fuel Cell, has reached the affordability range where a “fairly typical mainstream consumer could spread to buy one,” Toshihiro Mibe, a Honda operating officer, told Reuters. “We want this car to be the trigger for the ‘hydrogen society’.”

Honda Motor Co President and CEO Takahiro Hachigo speaks next to its FCV Clarity Fuel Cell car during a presentation at the 44th Tokyo Motor Display in Tokyo, Japan, October 28, 2015. REUTERS/Yuya Shino

The Clarity, which will retail for 7.66 million yen ($63,970) before government subsidies, goes after this year’s launch of Toyota’s hydrogen-powered Mirai – meaning ‘future’ in Japanese. Mirai buyers benefit from subsidies totaling around three million yen ($24,915) per vehicle.

Honda’s main advance on Toyota’s technology is to have shrunk the fuel-cell stack – the ensemble of fuel-cell, motor and transmission – by a third from a two thousand eight model it leased to a few private buyers in California in a subsidized trial deal.

That permits Honda to store the entire stack under the rubber hood, and package the car as “roomy enough to cosily sit five adults,” said Kiyoshi Shimizu, chief engineer for the fresh car, however it still sacrifices trunk space to accommodate a bulky hydrogen fuel tank. The battery pack sits under the front seat.

“With this, we now hope to make a hydrogen powertrain an option across our product line,” Shimizu added.

ON TESLA’S TAIL

China, meantime, is running utter tilt at electrical vehicles, and has opened its automotive industry to deep-pocketed technology firms to invest.

The budge has bred more than half a dozen Chinese-funded EV start-ups, backed by the likes of Baidu, Alibaba, Xiaomi and Tencent, as well as LeTV, a streaming movie and web-connected television provider.

Some, such as LeTV-funded Atieva and Faraday Future, have set up operations in California, in part to skim off talent and expertise that Tesla and others have developed there. Both aim specifically to create plush electrical cars to challenge with Tesla’s Model S in the next 2-3 years.

While this looks ambitious, one industry official said it should be taken gravely given the start-ups’ funding clout.

In a carrot-and-stick policy, Beijing provides subsidies for private buyers of more than $25,000 on an all-electric battery car and more than half that on a intensely electrified, so-called plug-in hybrid. It has also toughened fuel economy rules in a bid to force automakers to introduce more electrified cars, and encourages global automakers operating in China to share electrical car technology with their local playmates.

At the center of the fresh wave of China’s EV producers is Jia Yueting, the 42-year-old billionaire founder of LeTV, who has funded Atieva, Faraday and his own EV efforts.

LeTV founder Yueting Jia Screenshot Via YouTube

Jia wants to build a high-performance electrical car, a potential ‘Tesla killer’ he has christened Le Supercar. He has also ploughed hundreds of millions of dollars into Atieva and Faraday, while LeTV has partnerships with state-owned Beijing Auto and with British sports car maker Aston Martin, which could accelerate his efforts to put high-performance electrical cars on the road in 2017-18.

Other Chinese-funded EV start-ups also have Tesla in their glances. NextEV is backed by three Chinese Internet entrepreneurs and Tencent, while Pateo began out as a digital marketing agency before developing clever, Internet-connected car technology. It now aims to create its own clever electrified car.

Packing UP

Japanese Prime Minister Shinzo Abe’s growth strategy includes calls for subsidies and tax cracks for buyers of fuel cell vehicles, relaxed curbs on hydrogen fuel stations and other steps on a roadmap to promote hydrogen energy.

The ruling party wants to bring down the cost of a fuel-cell car to about $20,000 by 2025, and the government aims to create one hundred hydrogen fuel stations by March in urban areas where the vehicles will primarily be launched.

“For the hydrogen car to take off, we need a fairly well developed infrastructure to make liquid hydrogen available everywhere. On that front, Japan is among the world’s most aggressive and advanced,” said Honda’s Mibe.

Neither technology, however, comes without sizeable challenges – from regulation and subsidies to infrastructure.

Japan’s Prime Minister Shinzo Abe (L) wiggles forearms with China’s President Xi Jinping during a welcoming ceremony of Asia Pacific Economic Cooperation (APEC) forum, inwards the International Convention Center at Yanqi Lake, in Beijing, November 11, 2014. REUTERS/Kim Kyung-Hoon

Both need to significantly expand the number of refueling and recharging stations and, while EVs still need to persuade long-distance drivers, hydrogen’s appeal to the masses may be blunted by its cost. “There’s a lot more room for the fuel-cell vehicle to improve and evolve,” says Mibe.

(Reporting by Norihiko Shirouzu, with extra reporting by Maki Shiraki; Editing by Ian Geoghegan)

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