Light Duty Vehicles, Transit Buses, and Scooters: Global Market Analysis and Forecasts

RESEARCH REPORT Executive Summary: Fuel Cell Vehicles Light Duty Vehicles, Transit Buses, and Scooters: Global Market Analysis and Forecasts NOTE: This document is a free excerpt of a larger report. If you are interested in purchasing the full report, please contact Navigant Research at research-sales@navigant.com. Published 2Q 2013 Lisa Jerram Senior Research Analyst Kerry-Ann Adamson, PhD Research Director

Section 1 EXECUTIVE SUMMARY 1.1 Introduction Passenger vehicles represent one of the most challenging applications for fuel cells, but also the application where fuel cells could offer the most benefit in terms of fuel savings and emissions. The applications are challenging because the technology must compete against an entrenched technology the internal combustion engine (ICE) that is available at low cost and has widespread infrastructure in place. Moreover, the benefits of fuel cells for passenger vehicles are within the realm of the public good: zero tailpipe emissions, energy diversification, low noise operation, and reduced greenhouse gas (GHG) emissions. While these public goods do not carry a clear value to the customer, they do offer the promise of addressing significant societal concerns. This report examines the three fuel cell passenger vehicle applications that have made the most progress toward commercialization: light duty vehicles, buses, and scooters. The report covers recent developments in these three applications; competing technologies; major governmental and public-private programs designed to support fuel cell vehicle and infrastructure deployment; the top technology concern for fuel cell vehicles; and the key players in these markets. The report also forecasts global uptake of these three applications out to 2030. 1.2 Fuel Cell Light Duty Vehicles The fuel cell light duty vehicle (LDV) market continues to be in a long lead up to commercialization. At present, fuel cell vehicles (FCVs) have demonstrated the performance characteristics needed for commercial sales, although original equipment manufacturers (OEMs) will continue to improve and optimize the technology. Fundamentally, FCV technology can provide sufficient range well over 200 miles on a tank and can be integrated into larger vehicle models than plug-in electric vehicle (PEV) technology. The focus for the industry now is squarely on cost reductions and infrastructure to prepare FCVs for commercial introduction. It is the need for cost reduction that reportedly led to the unwelcome announcement in 2013 that Daimler would push out its commercial FCV introduction from 2015 to 2017. As Navigant Research has noted before, for better or for worse, the automotive fuel cell development pathway has closely followed Daimler s fuel cell development trajectory. This most recent delay is going to lead to further questions about the viability of the FCV market. The positive news has been that Hyundai has now stepped in as the clear leader in pushing FCV commercialization. Navigant Research noted in its previous FCV report that Hyundai was emerging as a major force in the fuel cell vehicle market, and the culmination of this is that Hyundai began small series production of its fuel cell ix35 (Tucson) sport utility vehicle (SUV) in early 2013. 1

Another shift in the past 2 years has been the emergence of Western Europe as the hub of FCV development activity. The United States had previously taken the lead, but has fallen back since the U.S. Department of Energy (DOE) shifted its interest from fuel cells to battery vehicles. Although there have been signs of a thaw at DOE, the U.S. has much ground to cover to return to leadership status on fuel cell vehicle development. This is compounded by the challenge of deploying infrastructure in such a large geographical area. By contrast, Germany, the United Kingdom, and the Nordic countries have less geography to cover and are forging ahead on plans to deploy hydrogen fueling stations. Germany has continued with its H2Mobility initiative to deploy public refueling stations by 2015; it has made a commitment to build 50 stations, although it should be noted that it has not yet reached 20 stations and it will be a challenge to reach 50 in just 2 years. In 2012, the U.K. government, automakers, and hydrogen companies signed a memorandum of understanding (MOU) committing to work together to support the rollout of FCVs from 2015 to 2030. The initial research indicated that the United Kingdom would require 65 stations by 2015, and the initiative is now working toward this goal. In the Asia Pacific region, Japan and South Korea also have plans in place to expand infrastructure for 2015. Fundamentally, the fuel cell vehicle market is hostage to the development of infrastructure. These infrastructure plans will determine the timing and volume of automaker FCV rollouts. This is a challenge for the industry that could forestall commercial deployment. Given the length of time it takes to build a station 18 months to 3 years it seems likely that that there will be low levels of fueling station coverage in the early days of FCV commercialization from 2015 to 2017, which will lead automakers to take a slow approach to their commercial vehicle rollouts. One way forward is for the automakers to take on the task of establishing and operating fueling stations. This idea may sound far-fetched, but it is not too far off what is already happening in South Korea and, to a lesser degree, Japan and Germany. In South Korea, Hyundai operates four of the stations currently available for fueling, while in Germany, Daimler is partnering with Linde to deploy 20 stations. 2

Chart 1.1 Fuel Cell Light Duty Vehicle Sales by Region, World Markets: 2013-2030 (Vehicles) 2,500,000 2,000,000 1,500,000 1,000,000 North America Western Europe Eastern Europe Asia Pacific Latin America Middle East & Africa 500,000 - (Source: Navigant Research) As Chart 1.1 shows, the fuel cell light duty vehicle market will be in a long period of supply constraints until around 2020. The market will take off from this period if and only if the infrastructure is in place to meet customers fueling requirements. This will require a large investment from government and industry, and there will be a ramp up period where this infrastructure is planned and put in place. If the infrastructure is built out, automakers will increase their production levels, which will result in major cost reductions. This is a virtuous cycle that will then lead to a truly demand-driven market in the period after 2025. 1.3 Fuel Cell Buses Fuel cell buses are also in a pre-commercial phase, although there are buses being deployed in regular transit operations and transit fuel cells being offered with conventional warranties. Most fuel cell development in the transit sector has focused on the full-size 40-foot buses, with the fuel cell providing primary propulsion. This requires a high-power fuel cell typically around 125 kw to 150 kw. The cost of these buses is still quite high, and over the next several years manufacturers will be devoted to refining the technology while bringing down costs. The first markets for fuel cell buses will be the United States, where California s Zero Emission Bus regulation spurred development, although the mandate has been postponed, and Europe, where the European Union (EU) is funding fuel cell bus deployments. South Korea and Japan will also see development and deployment activity, but fuel cell bus deployment seems to be secondary to the fuel cell LDV roll-out. 3

There are three emerging markets for fuel cell buses covered in this report: China, India, and Brazil. China represents a huge market opportunity given the size of its bus market, but it is currently more focused on battery electric and hybrid buses that will utilize its lithium battery resources. Brazil also represents a large market opportunity, and has been pursuing development of fuel cell buses, but the need for the bus content to be locally produced will slow progress in this country. India faces a similar issue, with an interest in creating domestic fuel cell bus technology, but could become a viable market in 5 to 7 years. 1.4 Fuel Cell Scooters Scooters are a popular transportation option in many parts of the world, especially in Asia Pacific, Europe, and developing countries. Much of the current growth of scooters coincides with an increase in family incomes and the urbanization occurring across the world. This large global market has attracted the interest of several fuel cell integrators and OEMs. At present, this application is not yet commercial, but there are several fuel cell scooter models under development and demonstration. One advantage that scooters have over the bus and LDV applications is that they present a hydrogen distribution model that is very different from conventional refueling stations. Because the scooters use such a small amount of hydrogen, they can utilize hydrogen canisters rather than fueling dispensers. Canisters are attractive because they break the link between the fuel cell transportation applications and the need for large-scale hydrogen infrastructure. Moreover, scooter companies can develop the transportation solution and the canisters in tandem. Navigant Research sees this market developing slowly over the next 2 to 3 years, largely remaining in a demonstration phase or in very low-level series production. The market will pick up after 2015. The primary markets for this application are the Asia Pacific and Western Europe regions, where ICE scooters are popular; the North American market will not open up until after 2020. One of the biggest challenges to the fuel cell scooter market will be the increasing success of battery scooters. Battery electric scooters are beginning to capture significant market share and will act as a competitor to fuel cell scooters, especially in Asia Pacific where they are projected to see sales in the millions. 4

Section 9 TABLE OF CONTENTS Section 1... 1 Executive Summary... 1 1.1 Introduction... 1 1.2 Fuel Cell Light Duty Vehicles... 1 1.3 Fuel Cell Buses... 3 1.4 Fuel Cell Scooters... 4 Section 2... 5 Market Issues... 5 2.1 Light Duty Vehicles... 5 2.1.1 Heading to 2015: The State of OEM FCV Development... 5 2.1.2 Startups and Innovative Business Models... 6 2.1.3 Plug-In Electric Vehicles: Competing or Complementary?... 7 2.2 Buses... 9 2.2.1 Technology Developers versus OEMs... 10 2.2.2 Battery Electric Buses: Competing or Complementary?... 12 2.2.3 Emerging Bus Markets... 12 2.2.3.1 Brazil... 12 2.2.3.2 China... 13 2.2.3.3 India... 13 2.3 Scooters... 14 2.3.1 Infrastructure... 16 2.3.2 Competitors... 17 71

Section 3... 18 Global Policies and Programs on Fuel Cell Vehicles... 18 3.1 Europe... 18 3.1.1 European Union Policy... 19 3.1.2 United Kingdom... 20 3.1.3 Germany... 21 3.1.4 Nordic Countries... 22 3.2 Asia Pacific... 23 3.2.1 Japan... 23 3.2.2 South Korea... 24 3.2.3 China... 25 3.2.4 India... 26 3.3 North America... 27 3.3.1 United States... 27 3.3.1.1 California... 28 3.3.2 Canada... 30 Section 4... 31 Technology Issues... 31 4.1 Light Duty Vehicles... 31 4.2 Bus Targets... 32 4.3 Scooter Targets... 33 Section 5... 34 Key Industry Players... 34 5.1 Introduction... 34 5.2 Fuel Cell Companies... 34 72

5.2.1 Automotive Fuel Cell Cooperation... 34 5.2.2 Ballard Power Systems... 35 5.2.3 ClearEdge Power... 36 5.2.4 Hydrogenics... 36 5.2.5 Intelligent Energy... 37 5.2.6 Oorja Protonics... 38 5.3 Infrastructure Providers... 38 5.3.1 Air Liquide... 38 5.3.2 Air Products... 39 5.3.3 Hydrogenics... 40 5.3.4 ITM Power... 40 5.3.5 Linde... 40 5.3.6 Proton OnSite... 41 5.4 Automotive OEMs... 42 5.4.1 BMW... 42 5.4.2 Daimler... 42 5.4.3 General Motors... 43 5.4.4 Honda... 44 5.4.5 Hyundai-Kia... 45 5.4.6 Toyota... 46 5.4.7 Volkswagen... 47 5.5 Others... 48 5.5.1 BAE Systems (Hybrid Systems Developer)... 48 5.5.2 Microcab... 48 5.5.3 Riversimple... 49 73

5.5.4 Tata... 50 Section 6... 51 Market Forecasts... 51 6.1 Overview of Forecasting Methodology... 51 6.1.1 Forecasting Variables... 51 6.1.2 Forecasting Pivot Points... 53 6.2 Fuel Cell Light Duty Vehicles... 54 6.3 Fuel Cell Buses... 57 6.4 Region of Manufacture: Sales, Capacity, and Revenue... 60 6.5 Fuel Cell Scooters... 63 6.6 Conclusions and Recommendations... 64 Section 7... 65 Company Directory... 65 Section 8... 68 Acronym and Abbreviation List... 68 Section 9... 71 Table of Contents... 71 Section 10... 75 Table of Charts and Figures... 75 Section 11... 77 Scope of Study... 77 Sources and Methodology... 78 Notes... 79 74

Section 10 TABLE OF CHARTS AND FIGURES Chart 1.1 Fuel Cell Light Duty Vehicle Sales by Region, World Markets: 2013-2030... 3 Chart 2.1 Cumulative Plug-In Electric Vehicle Sales by Region, Top Markets: 2013-2020... 9 Chart 2.2 Annual ICE Scooter Sales by Region, World Markets: 2010-2013... 15 Chart 6.1 Fuel Cell Light Duty Vehicle Sales by Region, World Markets: 2013-2020... 54 Chart 6.2 Fuel Cell Light Duty Vehicle Sales by Region, World Markets: 2020-2030... 55 Chart 6.3 Fuel Cell Light Duty Vehicle Sales by Key Country, World Markets: 2013-2020... 56 Chart 6.4 Fuel Cell Bus Sales by Region, World Markets: 2013-2020... 57 Chart 6.5 Fuel Cell Bus Sales by Region, World Markets: 2020-2030... 58 Chart 6.6 Fuel Cell Bus Sales by Key Country, World Markets: 2013-2020... 59 Chart 6.7 Chart 6.8 Fuel Cell Light Duty Vehicle Sales by Region of System Manufacture, World Markets: 2020-2030... 60 LDV and Bus Fuel Cell Capacity Shipped by Region of System Manufacture, World Markets: 2015-2030... 61 Chart 6.9 Fuel Cell Vehicle Revenue by Region of Vehicle Manufacture, World Markets: 2015-2030... 62 Chart 6.10 Fuel Cell Scooter Sales by Region, World Markets: 2013-2030... 63 Figure 2.1 GM Powertrain Matrix... 8 Figure 3.1 Matrix of Vehicle Options, Range, and CO2 Emissions, Germany: 2010-2050... 20 Figure 4.1 NREL Data Collection Results and DOE/DOT Bus Targets... 32 75

Table 3.1 European Union GHG Reduction Targets from 1990 Levels by Sector: 2005-2050... 19 Table 3.2 Government-Owned FCV Fleet Program, South Korea: 2006-2013... 24 Table 4.1 100 kw Low-Temperature PEM Fuel Cell Subsystem Cost: 2011... 31 Table 4.2 Comparison of Electric and Gas-Powered Motorcycle and Scooter Costs: 2012... 33 Table 6.1 Fuel Cell Vehicle Market Phases, World Markets: 2013-2030... 53 76

Section 11 SCOPE OF STUDY Navigant Research has prepared this report to provide participants at all levels of the fuel cell passenger vehicle (FCV) market, including vehicle OEMs, component suppliers, infrastructure providers, governments, and supporting associations, with a study of the market for FCVs. The report focuses on fuel cells in passenger vehicle applications only, covering cars, transit buses, scooters and trucks (excluding fuel cell APUs for trucks). In addition, Navigant Research analyzes the state of hydrogen infrastructure development. The major objective of the study is to determine the state of the fuel cell vehicle industry, the key demand drivers and barriers, and likely future growth of global FCV demand. Navigant Research provides an overview of the state of hydrogen fueling infrastructure as a critical pre-condition for the FCV market, as well as a review of key industry players within the FCV and infrastructure competitive landscape. The report s purpose is not to present an exhaustive technical assessment of the vehicles and technologies covered. Rather, it aims to provide a strategic examination from an overall tactical business perspective. Navigant Research strives to identify and examine new market segments to aid readers in the development of their business models. All major global regions are included, as well as key countries for FCV adoption, and the forecast period extends through 2030. 77

SOURCES AND METHODOLOGY Navigant Research s industry analysts utilize a variety of research sources in preparing Research Reports. The key component of Navigant Research s analysis is primary research gained from phone and in-person interviews with industry leaders including executives, engineers, and marketing professionals. Analysts are diligent in ensuring that they speak with representatives from every part of the value chain, including but not limited to technology companies, utilities and other service providers, industry associations, government agencies, and the investment community. Additional analysis includes secondary research conducted by Navigant Research s analysts and its staff of research assistants. Where applicable, all secondary research sources are appropriately cited within this report. These primary and secondary research sources, combined with the analyst s industry expertise, are synthesized into the qualitative and quantitative analysis presented in Navigant Research s reports. Great care is taken in making sure that all analysis is well-supported by facts, but where the facts are unknown and assumptions must be made, analysts document their assumptions and are prepared to explain their methodology, both within the body of a report and in direct conversations with clients. Navigant Research is a market research group whose goal is to present an objective, unbiased view of market opportunities within its coverage areas. Navigant Research is not beholden to any special interests and is thus able to offer clear, actionable advice to help clients succeed in the industry, unfettered by technology hype, political agendas, or emotional factors that are inherent in cleantech markets. 78

NOTES CAGR refers to compound average annual growth rate, using the formula: CAGR = (End Year Value Start Year Value) (1/steps) 1. CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years are given, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may be given as well. Figures are based on the best estimates available at the time of calculation. Annual revenues, shipments, and sales are based on end-of-year figures unless otherwise noted. All values are expressed in year 2013 U.S. dollars unless otherwise noted. Percentages may not add up to 100 due to rounding. 79

Published 2Q 2013 2013 Navigant Consulting, Inc. 1320 Pearl Street, Suite 300 Boulder, CO 80302 USA Tel: +1.303.997.7609 http://www.navigantresearch.com This publication is provided by Navigant Research, a part of Navigant Consulting, Inc. ( Navigant ), and has been provided for informational purposes only. This publication is intended for the sole and exclusive use of the original purchaser under terms and conditions agreed to by the parties. This publication may not otherwise be reproduced, recorded, photocopied, distributed, displayed, modified, extracted, accessed, or used without the express written permission of Navigant. Navigant makes no claim to any government data and other data obtained from public sources found in this publication (whether or not the owners of such data are noted in this publication), and makes no express or implied warranty, guaranty, or representation concerning the information contained in this publication, its merchantability, or its fitness for a particular purpose or function. Any reference to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise, does not necessarily constitute or imply an endorsement, recommendation, or favoring by Navigant. Navigant does not assume, and hereby disclaims, any liability that may result from any reliance on or use of any information contained in this publication, or for any loss or damage caused by errors or omissions in this publication. If you do not have permission from Navigant covering this publication, please refrain from accessing or using this publication. Please contact Navigant at research-info@navigant.com to obtain permission to use this publication. 2013 Navigant Consulting, Inc. Notice: No material in this publication may be reproduced, stored in a retrieval system, or transmitted by any means, in whole or in part, without the express written permission of Navigant Consulting, Inc. 80