The Fuse

Don Romano, CEO of Hyundai Canada, on the Future of Hydrogen Vehicles

by Leslie Hayward | June 26, 2015

To start off—tell us a little about Hyundai’s hydrogen vehicle program, and the company’s interest in the technology.

Hyundai has been involved in the hydrogen vehicle space for over a decade—we have an independent fuel-cell research and development group in Korea dedicated to the technology. Over the past decade the advancements have been incredible. We’ve seen it come from being a concept to the point where we are now able to sell cars to customers in Canada and the United States, and we are the only OEM that sells these vehicles in both countries. We think it’s the future, although we are of the belief that every technology out there that helps lower emissions and improves the environment is important. It’s just that we see fuel cells as the more adaptive technology.

Tell us more about that—why do you think hydrogen is the more viable alternative fuel?

The problem with current EV technology is that the cars require people to alter how they live their lives to accommodate battery charging. In today’s society, time is the most critical commodity—for people who can charge overnight and have a short commute, it works. But if you want to go between Los Angeles and San Francisco, New York and Boston, or Toronto and Montreal, and you don’t have extra time, you’re out of luck.

In today’s society, time is the most critical commodity.

Fuel cells don’t have a lag in charge time because they charge the battery as you drive. It takes five minutes to fill up at the hydrogen station, and off you go. As you drive, the hydrogen combines with oxygen to create a charge for the battery that runs the engine of the hydrogen vehicle. The user experience is much closer to what motorists are accustomed to—when you drive a fuel cell vehicle, there’s no charge cord or any complications.

Another challenge with EVs is that the faster you charge the battery, the faster it degrades. Slower charging gives the battery a longer life, while shoving massive amounts of electricity through a fast charger in order make it more convenient is bad for the battery lifecycle, and those batteries are expensive to replace. There’s no good solution yet, but industry is just moving forward with rapid chargers, pushing the problem of battery degradation to a later stage. With hydrogen, this problem doesn’t exist because the battery is being continuously charged, and even if you do need to replace the battery, it’s very small compared to an electric vehicle.

Another advantage with hydrogen is that it can be stored. With electricity, it needs to be powered on to charge that battery immediately, and you have peaks and valleys in demand. Hydrogen is much more transportable, and the fact that it can be stored is a real benefit.

There’s not a lot of hydrogen refueling stations around North America yet: Can you tell us about the company’s strategy for infrastructure deployment? Are you looking at public-private partnerships, building your own infrastructure, collaborating with other automakers, or seeking other solutions?

All of the above. I would say first and foremost that we’re working with governments so the road is paved for us to begin—whether it’s with adding hydrogen to an existing gas stations or in building a new hydrogen station.

We think it’s going to be critical that existing gas stations accommodate hydrogen fuel pumps, because in our view, developing an entirely new infrastructure from scratch seems impossible. Gas stations run efficiently, they are strategically located where consumers need them, some of them are merged with fast food chains—we think that if new fuelling stations are part of that established infrastructure, it is far more advantageous for everyone. I think we will see fuel stations where you can have electric, or hydrogen, or gasoline, or all three, but most importantly, people will still be able to get their twinkies, bottled water, their car wash… just add some hydrogen or put in a charging station and let people go about their day, and watch gasoline begin to drop off.

In Canada, we’re embarking on a new project developing a portable hydrogen station. It’s even more accommodating to people’s time.

In Canada, we’re embarking on a new project developing a portable hydrogen station. You use an app to order a vehicle to come to your work, fill your car while it’s parked, and that’s it. It’s even more accommodating to people’s time: They don’t even have to go to a fuel station.

That’s a fascinating interim solution. We live in the iTunes and Uber world, and people are impatient.

I think we’ve all looked at Uber’s success and given some thought to how we can replicate that business model. And what it comes down to is—if you can save people’s time, and if you can make things more convenient, you’re going to succeed. No matter how you look at it, the challenge with electric vehicles is that you’re always moving in the opposite direction of “faster and more convenient,” which is what consumers really want.

Does the portable fuelling station run on hydrogen or gasoline?

Right now it runs on gasoline. In the future it will be a hydrogen truck that fuels hydrogen vehicles—but we’re not quite there yet.

Do you see more centralized hydrogen production, which is then transported from production facilities to the fuelling stations, or do you see a distributed hydrogen production and refueling network?

It will depend on the grid. If you’re in Canada, where most electricity is generated in hydroelectric, carbon free plants, then you can use electricity at the gas station to electrostatically produce hydrogen from the water supply—and you maintain zero carbon.

In each case, the production of electricity has to be examined—and I think we will see countries with low-carbon grids exporting low carbon hydrogen fuel.

In places where they are still using coal, then no, I don’t think it makes sense to use the grid for distributed production because you are still creating carbon emissions. In each case, the production of electricity has to be examined—and I think we will see countries with low-carbon grids exporting low carbon hydrogen fuel. For countries with fossil fuel based grids, this creates an advantage for hydrogen vehicles over electric vehicles, because the hydrogen vehicles can be fuelled with lower carbon imported hydrogen. It’s going to vary based on country.

Right now, hydrogen is more expensive on a per-gallon basis than gasoline. What do you think about the competitiveness of hydrogen fuel when gasoline prices are low?

Anybody who thinks gasoline prices are going to stay low is not accurately forecasting the future. Although we have an abundance of oil right now, we’re still going to see the cost of gasoline go up, as we have in the past few months. In the long-term we don’t see hydrogen being more expensive than gasoline.

Outside of Southern California, where are your other areas for Phase One of the hydrogen vehicle rollout?

Right now we’re looking at Vancouver in British Columbia. But in truth we are all across the globe:
We will ship hydrogen vehicles to any area where there is a refueling system in place. We are also in Europe, Korea, China, Australia, so it’s growing pretty rapidly.

Where will hydrogen deployment go next in North America?

I’m not sure about the U.S., but in Canada our next step is Montreal in Quebec—they are having real challenges with electric vehicles because of the cold weather. It’s a great market—we have strong market share, so we have been meeting with the government to establish some fuelling infrastructure. The electric vehicles aren’t selling in the area because of battery performance issues in the cold weather, and they aren’t working effectively for 4-5 months of the year.

And what about the consumer interest in hydrogen vehicles?

When we came out earlier this year and announced we were going to start selling hydrogen vehicles in British Columbia, we received 400 applications for the first 10 cars.

Wow. How do you pick the perfect early adopter?

Being chosen is almost like getting into college. We scoured the applications and we interviewed the individuals—we picked a family with young children, an individual who is director of the golf program at the University of British Columbia whose whole life revolves around golfing, and we have a skier who likes to drive to Whistler. The diversity shows that this technology is not limited to any one lifestyle.

What are your goals for manufacturing, how many vehicles do you see yourselves producing by 2020?

We have established a system in which a conventional Tucson can be converted to a hydrogen vehicle on the same line.

What we are doing in Korea—and I think it’s brilliant—has been to establish a system in which a conventional Tucson can be converted to a hydrogen vehicle on the same line. There’s a branch off the main production line, so you can divert it and add a hydrogen drivetrain, but if you don’t divert and it goes straight down the line you get a normal gasoline vehicle. Through this system, we have mass production capabilities for hydrogen vehicles, and I think we’re the only company with this ability.

This means we can produce as many vehicles as we need to meet demand, since demand will be predicated on the availability of fuel pumps. The entire production line could be hydrogen if we wanted to create hundreds of thousands of them—at which point our costs will drop tremendously because of the economies of scale, making it very affordable for consumers.

The flexibility built into that system is very impressive.

Yes, and it lets us to use our existing cars, which is great because consumers are already familiar with the vehicle. All the thought and effort that already went into ergonomics, comfort, and convenience is still there—all we’re doing is changing the drivetrain, which has almost no bearing on the feel and comfort. We know that people are going to have a good experience, and so far customers love driving these vehicles.

What’s the production cost of the fuel cell versus a conventional drivetrain, and how much of that cost will you pass on to consumers?

Right now we lease them for $495 per month over three years, all fuel included. The fuel is very volatile right now, there isn’t enough hydrogen for the price to be as stable as gasoline yet, and we don’t want it to deter buyers.

The cost is of this program is significant and we are subsidizing all of it—because when you only make 10, 50, 100, even 2,000 cars, we as a company are paying so much more per vehicle than if we were producing 8 million. Hyundai makes 8 million gasoline cars per year. Right now we’re talking about thousands of hydrogen, so even though it goes down a production line, the components that create the fuel cell are still very expensive

Look at the public records of companies like Tesla and they aren’t making money on their electric cars, they’re losing money.

The same is true of EVs—look at the public records of companies like Tesla and they aren’t making money on their electric cars, they’re losing money. They’re making money on the carbon credits. That’s not to say they won’t make money down the road as their production increases.

So at this point, you haven’t put a pin on where you expect the purchase price to be following this lease and deployment phase?

No, because it will depend on how rapidly the fuelling stations are built. Right now, alternative fuel vehicles and infrastructure are all being subsidized for the long-term investment, which we think will pay dividends. It might not be for ten years, but it will come, because slowly but surely we are realizing that burning gasoline is not the way of the future. Eventually electric vehicles, hybrids, and hydrogen vehicles will begin to dominate the landscape.

Determining which one will be most successful is the big question—we think it will be hydrogen, but we’re at the point where we’d like to see both of types of vehicles in the marketplace. But as long as the industry is moving in that direction, we all have the capability to produce both, so let’s just move forward.

What can public policy do to make it better for industry to produce alternative fuel vehicles?

One word: Infrastructure. I don’t think it’s about fuel economy, it’s about infrastructure—if you build it they will come. If you had a hydrogen station at every gas station and you could buy the car for the same price as a gas car and you could drive it anywhere in the world, wouldn’t you?

We need to make lives simpler, cleaner, and better, and the government can play a key role in doing that.

I applaud some of my competitors for trying to move us forward on both electric and hydrogen infrastructure. We need to make lives simpler, cleaner, and better, and the government can play a key role in doing that. In California they have taken the lead and are installing hydrogen fuelling stations across the state to get more people interested in the technology, and they are partnering with Shell. That doesn’t mean we agree with everything they are doing or that everything being done in California is enough—but they’re taking a lot of the right steps.

Car companies don’t make good gas station companies. It’s not our core competency, which is why I want to emphasize that we need to leverage the current existing infrastructure, and use partnerships.

Any closing thoughts?

Quite often, there are debates over which of these technologies is best. The best technology is the technology that just moves us forward. It’s not a competition between one or the other—there’s been so much hoopla in the media about one technology being worse, or terrible, or a joke, or silly compared to the other. They’re all good, they’re all moving us in the right direction, and it doesn’t matter which wins or loses.

The only thing that is certain is that eventually, gas is going to run out.

The only thing that is certain is that eventually, gas is going to run out. It’s a limited resource—there’s only so much oil in the ground even after the fracking and the exploitation of every resource that’s out there. There’s also the issue of how much carbon our environment can handle. If you’re in a garage and you shut the door and the car is running, you’re going to die. We are in the garage of the earth, and we know that if we put enough of this stuff in the air and we breathe enough of it, it’s not going to be good. These are problems that we have to deal with. The important thing is that we move together as one to solve these problems and create a sustainable and better future for our kids. I think everyone is working towards it, so let’s spend less time debating and more time collaborating.