Will Anyone Buy Honda's New Hydrogen Car?

By Markets Fool.com

The all-newHonda Clarity Fuel Cell is an electric sedan carpowered by a hydrogen fuel cell.Honda says it will arrive at a small number of U.S. dealers by the end of 2016. Image source: Honda.

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Did you know that Wednesday is "National Hydrogen and Fuel Cell Day?"

I didn't either. But Honda (NYSE: HMC) says it is, and the company chose Wendesday to remind us that its latest hydrogen fuel-cell model will arrive at (a few) U.S. dealers before the end of the year.

But here's the big question: Will it matter?

About Honda's new hydrogen car

The all-new Honda Clarity Fuel Cell (that's what they're calling it) was unveiled about a year ago. It's a five-passenger electric sedan powered by a fuel cell, a device that chemically converts the energy in hydrogen gas to electricity. Its styling might be described as "distinctive," and it has a somewhat futuristic dash, but a fairly conventional Honda interior.

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Despite the... interesting styling, it's still a Honda sedan, so it comes with the full suite of safety and convenience features you'd expect in (for instance) a loaded Accord. And it's bigger than its closest hydrogen-powered competitor, Toyota's (NYSE: TM) Mirai, so it may have more appeal for some customers.

The Clarity Fuel Cell is an electric car, but because it's powered by hydrogen its range is limited by the size of its tank. Honda anticipates that its official EPA range rating will be "significantly more than 300 miles." "Recharging" the Clarity Fuel Cell takes just a few minutes at a hydrogen refueling station.

The interior of a Japanese-market version of the Honda Clarity Fuel Cell. The U.S. version will have the steering wheel on the other side, but is otherwise expected to be similar. Image source: Honda.

Pricing hasn't been announced, though it'll probably be quite a bit more expensive than a loaded Accord. If it's expensiveenoughto get intoTesla Motors(NASDAQ: TSLA) territory, over $50,000, that could make it a hard sell. If you're not in California, you probably won't see one at your dealer anyway: Honda will offer the vehicle only through select dealers in the San Francisco, Sacramento, and Los Angeles metro areas. Like the Mirai, quantities will likely be very limited. (Through September, Toyota has sold 710 Mirais in the U.S. this year.)

It's so limited because right now California is where the hydrogen refueling stations are. That leads to the challenge faced by the Clarity Fuel Cell and other efforts to bring this technology to market.

The appeal -- and limitations -- of fuel cell vehicles

Advocates for fuel cells in electric vehicles say fuel cells have some advantages over batteries. The fact that they can be refueled much like a gasoline car (in about the same amount of time) is seen as a big advantage: Consumers who balk at long recharging times for battery-electric vehicles will find fuel cells to be a more familiar and workable technology, the thinking goes.

Even if batteries become the mainstream choice for passenger vehicles, fuel cells may have a role. Some observers think they're best-suited for larger vehicles, like trucks, where the number of battery cells required to give good range could prove unworkable because of weight or cost. And they may also play a role in vehicles that can't have extended downtime to recharge batteries (think first responders).

But fuel cells also have some big shortcomings, starting with this one: There aren't very many hydrogen refueling stations, and creating a hydrogen refueling infrastructure is more expensive and complicated than creating a network of charging stations that can just tie into the existing power grid.

There are also concerns about how green fuel cells really are. While water vapor is the only "exhaust" given off by a hydrogen fuel cell, existing processes for making hydrogen gas on a commercial scale rely on natural gas, and aren't especially clean.

So why is Honda bringing this car to market?

Honda has been working on fuel cells in a partnership with General Motors (NYSE: GM) for several years. While GM plans to hold off on bringing a fuel cell vehicle to market until 2020 or so, Honda is doing this now: Why?

In part it's an answer to Toyota's Mirai, a way to showcase Honda's technology. It's also a learning experience for the company. Honda has been offering fuel cell vehicles in very limited quantities (think dozens) since 2002, as a way to test its technology in the real world and gather data. While it has more ambitious plans for this new Clarity Fuel Cell sedan, they're still pretty limited.

What's next for Honda's green-car efforts

Honda is expected to follow the Clarity Fuel Cell with battery-electric and plug-in hybrid sedans. Both will come to market next year under the "Clarity" sub-brand. It has hinted that its battery-powered Clarity Electric will be a serious contender with good range at a competitive price, but it hasn't released much in the way of details yet.

In the meantime, a small number of green-car enthusiasts in California will have the chance to try living with the automaker's latest hydrogen fuel-cell effort. But whether the technology will ever find a broader audience is still very much an unanswered question.

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John Rosevear owns shares of General Motors. The Motley Fool owns shares of and recommends Tesla Motors. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.