Toyota moving away from EVs in favor of hydrogen fuel cells

May 20, 2014 01:00 AM

Lentz on Toyota and Tesla: "We learned a lot about being a smaller entrepreneurial company in the auto business and being faster to market. They learned about our quality control."

Editor’s note: An earlier version of this story incorrectly identified the recipient of a $7 million loan from Toyota Motor Corp. to help establish a network of hydrogen refueling stations.

LOS ANGELES -- Toyota Motor Corp. is walking away from building longer-range battery-electric vehicles in favor of its effort in hydrogen fuel cell vehicles, its top North American executive said.

At a time when EV maker Tesla Motors is the darling of Wall Street, Jim Lentz, CEO of Toyota’s North American region, said Toyota sees battery-electric vehicles as viable only in “a select way, in short-range vehicles that take you that extra mile, from the office to the train, or home to the train, as well as being used on large [corporate] campuses.

“But for long-range travel primary vehicles, we feel there are better alternatives, such as hybrids and plug-in hybrids, and tomorrow with fuel cells,” Lentz said in an interview after Fortune magazine’s Brainstorm Green conference.

Because hydrogen fuel cells are cheaper on a cost-per-vehicle basis and are more efficient on a well-to-wheel basis, Toyota has turned away from a 20-year effort to create a viable battery-electric vehicle.

Lentz’s comments come on the heels of Toyota’s decision to end its r&d deal with Tesla to supply the RAV4 EV. Lentz said the deal, through which Toyota agreed to buy Tesla components for 2,600 RAV4 EVs over three years, “was never about open-ended volume. It was time to either continue or stop. My personal feeling was that I would rather invest my dollars in fuel cell development than in another 2,500 EVs.

Lessons learned

“We learned a lot about being a smaller entrepreneurial company in the auto business and being faster to market,” Lentz said. “They learned about our quality control. It was more about two types of companies working together than about batteries. We’re not anti-battery. We are a big battery company. We have 6 million hybrids running on batteries.”

Not that Toyota has done poorly investing in Tesla. When Toyota President Akio Toyoda joined forces with Tesla CEO Elon Musk in 2010 with a $50 million capital infusion, there was no way Toyota would know the investment would be worth 10 times as much today on Wall Street.

“It’s done OK,” Lentz said, with a hint of sarcasm. “It’s an investment and we have to treat it like an investment. If it were my money in my pocket, I would take a little off the table. But it’s a [Toyota Motor Corp.] investment, so I don’t control it.”

Toyota’s commitment to fuel cell infrastructure in California -- timed to coincide with the launch of its hydrogen fuel cell vehicle as well as those of Honda and Hyundai -- includes a $7 million arms-length loan to FirstElement Fuel Inc. to help build refueling stations.

FirstElement, led by former General Motors marketing chief Joel Ewanick, is planning a network of hydrogen refueling stations across California by Fall 2015.

A Toyota study has calculated that it will take 68 refueling stations to meet the needs of 10,000 California fuel cell customers to not worry about being stranded. By the end of 2016, California should have 50 stations in operation, “which is a good step,” Lentz said.

He said most of the hydrogen fuel will have to be trucked in, initially, before self-generating hydrogen stations can become affordable.

“My hope is that other automakers will see our investment and will invest as well, so hopefully we can accelerate to 70 [stations] before 2018,” Lentz said. “Unlike hybrids when we were on our own, all the major players will be out there with us in fuel cells.”