Yahoo Finance If Apple wants to transform cars, it should build this instead of copying Tesla
The tech world is going gaga over the prospect that mighty Apple will enter the car business and teach those fumblebums at General Motors (GM), Toyota (TM), BMW and Tesla (TSLA) how to build a 21st-century vehicle.
There are plenty of reasons to be skeptical that Apple will ever manufacture cars for public sale. The car business is a low-margin heavy industry, for instance, whereas Apple (AAPL) is a high-margin consumer-product company. It does make sense for Apple to get more involved in cars as a supplier of information, software and control systems, but not as a manufacturer running its own assembly lines.
Still, it’s possible Apple might see an opening others don’t, and decide it can transform autos the way it transformed music with the iPod and iTunes, and communication with the iPhone. Bloomberg recently reported that Apple may be producing cars as early as 2020. Apple has been hiring automotive talent from Tesla (TSLA), Ford (F) and other car companies. The types of people Apple is hiring—including engineers with experience in electrification—suggest the tech giant is interested in building battery-powered cars that would somehow be better than those produced by Tesla, General Motors, BMW, Toyota and most other automakers.
It’s a fun storyline, but the real target for any company that wants to transform the automotive industry isn’t battery-powered electrics, but affordable hydrogen-powered cars.
“If I were thinking long term, I’d be looking at hydrogen fuel cells,” says analyst Dave Sullivan of research firm AutoPacific. “Fuel cells are far more efficient. You’re making power onboard the car instead of drawing it from the power grid.”
Hydrogen vs. plug-ins
If they ever became cost-effective, hydrogen fuel cells would revolutionize not just driving but the world’s energy markets. Dependence on oil produced in the Middle East and other volatile regions would plummet, and the whole carbon economy might fade. That’s why some analysts consider fuel cells to be the holy grail of the auto industry. Prototype vehicles already being developed by Toyota, Honda, GM, Hyundai and others can travel about 300 miles on a tank of fuel, and it only takes 3 to 5 minutes to refuel them—just like gas-powered cars. Electrics, by contrast, typically take several hours for a full charge, though they can be refueled in about an hour at specialized quick-charge stations.
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The limited range of plug-ins is another problem for many drivers. Tesla’s Model S can travel 200 to 270 miles on a full charge, but the huge set of batteries required to reach that range helps push the base cost of a Model S to $70,000. More affordable electrics, such as the Nissan Leaf, typically have a range of 100 miles or less. Range limitations are the reason General Motors built the Chevy Volt with a small gas-powered engine as a backup for when the battery runs down. And while many companies are working on battery technology, no breakthroughs likely to double or triple range while lowering costs seem imminent.
As a fuel, hydrogen is abundant and cheap. Using hydrogen to power a car produces no emissions other than water vapor. That ought to appeal to Apple CEO Tim Cook, who recently inked a deal for Apple to power most of its California buildings from a new solar farm. “The time for talk is past," Cook said of renewable energy. "The time for action is now."
Barriers to entry
So what’s the problem? Why don’t all cars run on hydrogen fuel cells? Two main reasons: First, the technology is relatively new, compared with batteries and internal-combustion engines, and the costs are still far too high. Tesla CEO Elon Musk, in fact, is one of the biggest critics of hydrogen fuel cells, calling them “fool cells.” Musk argues that converting hydrogen into fuel that can be used in a car is a cumbersome process that‘s too complicated and costly, compared with simply drawing power from an electrical grid that already exists.
Costs have been falling rapidly, however, and future breakthroughs could push costs closer to the range of gasoline-powered engines. That leads to the second problem with hydrogen-powered cars. Widespread adoption of technology usually pushes costs down, but there’s no refueling infrastructure in place for hydrogen. Few consumers want to buy a car that has to be refueled at some out-of-the-way facility, and with limited demand for such cars, automakers will never build them in quantities required to slash costs. This is where plug-ins such as Musk’s Model S have an advantage, since every home and business already has electricity that can be funneled into a car (as long as you can park it there for a while).
Government incentives could help speed the adoption of hydrogen-powered cars, just as they have for plug-ins. The federal government, for instance, offers a $7,500 tax credit to anybody who purchases a plug-in and could do something similar for fuel-cell cars. It could also provide incentives to help companies build hydrogen fueling stations. Of course, the need for such artificial spending raises the question of whether either type of technology could hold its own in the marketplace. Even with incentives, for instance, plug-ins will account for just 2% of all U.S. car sales in 2020, according to forecasts by AutoPacific.
Hydrogen-powered cars do have similarities with Tesla-style EVs -- each relies on an electric motor to turn the wheels. The major difference is the source of the electricity that powers the motor. In a fuel-cell vehicle, the electricity comes from a chemical reaction involving hydrogen stored on the vehicle. In a plug-in, the electricity comes from a power outlet and is stored in the battery. But both types of vehicles are, technically, electrics.
Since Apple is reportedly hiring dozens or hundreds of EV experts, it might very well plan to include hydrogen cars in its survey of automotive opportunities.
Japanese automakers probably have the lead on fuel cell development today, since Japan, unlike the U.S., is highly dependent on energy imports and has more to gain from developing new sources of fuel. So if the technology catches on there, it could migrate here, just as hybrids came to America from Japan. The big, stodgy automakers still have a chance to disrupt themselves before Apple makes them obsolete.
Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.
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