Sometimes being first in the auto industry with new technology isn't best. Being first and making a profit is far better. But that is very hard to do. A good example: fuel cell vehicles.
Toyota, Honda and Hyundai have developed on their own hydrogen-powered fuel cell vehicles that are available in California. While they are excellent vehicles with admirable reliability records, all are being leased, probably at huge losses to each company. Toyota, for example, has leased 860 Mirais this year through August. Honda has put fewer than 500 Clarity fuel cell vehicles on the road in the same period.
Not only is each company's fuel cell technology proprietary, but it is on the cutting edge of what is possible for an automobile powertrain. And because volume is extremely low, none of the companies can offset engineering and manufacturing costs through higher production.
While some General Motors executives might have smarted at being beaten to market by three competitors, GM's long-term view may have been the better one. GM has been building its design, engineering and manufacturing expertise in electrified vehicles with the Chevrolet Volt plug-in hybrid -- now in its second generation -- and the battery-powered Chevrolet Bolt.
Because many of the same components in the Volt and Bolt can be used in a fuel cell vehicle -- remember, the fuel cell creates electricity for the vehicle's electric motor, effectively replacing the battery -- GM has a head start producing these expensive components. GM today is producing in volume parts such as electric motors and inverters in the Volt and Bolt, which have posted U.S. sales of more than 25,500 vehicles this year through August. Toyota is, too.
But GM has another advantage: its fuel cell partnership with Honda.
GM and Honda have assigned engineers to work as one team to design a compact, powerful -- and, most importantly, affordable -- fuel cell stack to be used in vehicles made by both automakers. Honda plans to keep the hand-assembled fuel cell stack in the Clarity until the GM-Honda unit arrives. GM has said little about which vehicles will get its fuel cell powertrain. But production of the GM-Honda fuel cell system is scheduled to start in 2020, and GM said Monday it plans to have fuel cell vehicles on the road by 2023.
This year, GM hinted at how it envisions its first commercially available fuel cells to be used. GM product development chief Mark Reuss said the first customers for the fuel cell stack could be the military or aerospace companies. That would be a smart move. A couple of years of production and real-world use would give GM (and Honda) a chance to iron out any kinks in engineering and production, which will be highly automated, an industry first.
And there's another advantage of being a late arrival to the fuel cell party: Today there are few places outside of California where gaseous hydrogen for fuel cell vehicles is commercially available. California has only about 30 hydrogen filling stations statewide. By 2023, there should be more stations in other states selling the fuel.
The old, pre-bankruptcy GM would have not worried about the cost and pulled the trigger on a fuel cell vehicle to claim bragging rights for being first, enhance the company's engineering prestige and flaunt its dominance over weaker rivals.
But these days generating mountains of profit to please impatient investors and mollify Wall Street stock analysts is more important than being first. GM's partnership with Honda, combined with the components it already has in production for its electrified vehicles, just may help the company be the first to sell a fuel cell vehicle and make money.