Hyundai urges rivals to buy its fuel cell tech to boost sector

Hyundai Motor says it needs its rivals to buy its hydrogen fuel cell system to spur global adoption of the technology and help it reach commercial scale as the South Korean company becomes the latest group to overhaul its business model to survive rapid changes in the auto sector.

The world’s fifth-biggest carmaker by sales intends to spend Won7.6tn ($6.7bn) over 10 years to develop the technology, which it hopes will prove more popular than electric in replacing petrol and diesel vehicles.

“If we do not actively work in the global market, we will be dependent on our own companies’ car sales. Today maybe it is competitive but in the future we cannot grow,” Sae Hoon Kim, head of Hyundai’s fuel cell division, told the Financial Times.

The move to supply technology to competitors comes as carmakers look to different business models to hurry the mass adoption of cleaner fuels and boost investment into new supply chains.

Battery charged electric vehicles and cars powered by hydrogen fuel cells are at present a fraction of the overall market. However, electric is expected by some car groups to dominate over the next two decades.

Volkswagen, the biggest carmaker by sales, is pumping billions into the electric model. It has agreed to license its electric vehicle technology as part of a bid to dominate the battery-powered market.

Some industry figures say people travelling shorter distances in cars might favour electric batteries while commercial transport might be better suited to the longer range and quicker refuelling of hydrogen.

Hyundai, which has for years been criticised for being slow to pursue new technologies, is also pouring billions of dollars into electric vehicles.

But the lack of infrastructure in the hydrogen fuel cell market has made the need for collaboration among traditional competitors acute, Mr Kim said.

Japan’s Toyota Motor is also sharing its technology in hybrid vehicles and fuel cell patents with Chinese companies in a move to drive growth.

However, Hyundai is going further, selling its whole fuel cell system — which converts stored hydrogen into electricity to power the vehicles’ motors — rather than licensing its technology.

“Licensing will be difficult as there are too many sub-components within the stack and the system, which should be controlled precisely during the production process,” Mr Kim said.

Lee Hang-koo, a researcher at the Korea Institute for Industrial Economics and Trade, warned the long-term transformation for South Korea’s second-biggest company “won’t be easy”.

“The strategy seems right but the key is how much interest global carmakers will show in the hydrogen technology and whether the related infrastructure will be built up in time,” he said.

Analysts are also wary about the broader industry’s plans to commercialise hydrogen technology.

Kim Pil-soo, a professor of auto engineering at Daelim University, said Hyundai, Toyota and Honda, as the early movers in hydrogen, were gaining a technological advantage, but it “will take a long time for them to make money”.

Critics also point to the high cost and weak early sales for the first commercial hydrogen models. Elon Musk, chief executive of electric car pioneer Tesla, has reportedly dubbed the rival technology “fool cells”.

An industry group estimated in 2017 that to develop the market by 2030 investments of $280bn would be needed, including $110bn on hydrogen production and $80bn across storage, transport and distribution.