Are fuel cell cars worth 40%-plus subsidies?

Hans Greimel is Asia editor for Automotive News

TOKYO -- From time to time, all governments strong-arm taxpayers into underwriting incentives for automotive programs. But Japan's latest scheme goes to extremes.

Here, citizens are being asked to subsidize incentives up to about $30,000 per hydrogen fuel cell vehicle. The immediate beneficiary will be Toyota Motor Corp. The Japan Inc. flag bearer unveiled its $69,000 fuel cell vehicle in June, after dangling hints that the vehicle would need incentives of about $20,000 to make it a realistic option for individual buyers.

In a matter of weeks, Japan's national government answered the call with -- you guessed it -- plans for consumer rebates of about $20,000 for the futuristic zero-emission cars.

Meanwhile, Aichi prefecture -- home to Toyota City and its namesake employer, the world's biggest automaker -- plans to chip in about $10,000 more for local buyers.

The combined incentives amount to more than 40 percent of Toyota's proposed sticker, slashing the roughly ¥7 million price tag ($68,556) to ¥4 million ($39,175).

Yet even that deep discount may be a stretch for customers who have to contend with an almost nonexistent refueling infrastructure once they buy into Toyota's experiment. The government aims to have just 100 stations up and running by next March.

Indeed, Toyota's fuel cell car, dubbed the FCV, seems designed primarily to satisfy California's zero-emission mandates. And the pressure exerted by one of Japan's biggest employers to wheedle unprecedented sums of government largesse foreshadows a showdown over how incentives will be handled when the car hits the U.S. market next summer.

To be sure, Toyota won't be the only beneficiary for long. Honda Motor Co. will join the hydrogen parade with its own entry next year, but details on that launch are still fuzzy.

Japanese Prime Minister Shinzo Abe ostensibly aims to make his country's auto industry the global leader in this next-generation fuel. The effort hinges mainly on incentives and plans to extend the infrastructure to bring down the price of hydrogen fuel.

But, surprisingly, some voices here say even massive $30,000 incentives lack oomph.

Japan's Nihon Keizai business daily outlined some of the other programs under consideration by a government panel. Among them: offering free fuel cell cars, providing free fill-ups for hydrogen cars and exempting their drivers from highway tolls.

"The government's plan for accelerating the arrival of a hydrogen era has failed to generate much excitement among the public," the newspaper opined. "To catalyze a revolutionary socioeconomic change, their vision must contain more radical ideas."

But the main question should be: If a technology is still so pricey it needs the government to cover more than 40 percent of the cost plus extras, is it really ready for prime time?

Or are the Japanese government and Toyota forcing the issue prematurely?

For taxpayers in Japan, where the government is already mired in one of the world's biggest public debts, carefree handouts to corporations ought to draw a second glance.

You can reach Hans Greimel at hgreimel@crain.com -- Follow Hans on Twitter: @hansgreimel



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