Japan plans to roll out a government support plan for hydrogen vehicles to help speed up the uptake of the innovative technology developed by Japanese car makers.
According to the plan introduced by Japan’s Prime Minister Shinzo Abe, customers would be able to claim at least $20,000 (£12,000) per vehicle, making the price of, for example, Toyota's new fuel cell powered sedan about the same as that of a small luxury BMW 3Series, which sells at about $50,000.
Japan hopes the subsidies will help to get the innovative technology off the ground as more customers would be able to buy a fuel cell powered vehicle. The government hopes the subsidies could make Toyota’s vehicle a viable option for taxi operators and other companies with fleets of vehicles within driving range of the 100 hydrogen fuelling stations that Japan expects to have built by March 2015.
“It's still difficult to make these cars popular among ordinary consumers, but the subsidy has certain effects on companies interested in promoting themselves as green," said Tomohide Kazama, Senior Consultant at Nomura Research Institute. "It's a move to plant a seed for future growth."
According to the most ambitious projections, the fuel cell vehicle market could be worth up to $400 million in several years.
Fuel cell vehicles, which run on electricity made by cells that combine hydrogen and oxygen, have been in testing since the 1960s, when the technology was also being developed by Nasa.
Since the vehicles emit only water and heat, they have been seen as an environmentally friendly alternative to those powered by combustion engines.
For Japan, perfecting the technology could mean being finally able to wean itself off imported fossil fuels, which have become key for Japan's energy mix following the nuclear sector crisis after the Fukushima disaster.
While much of the hydrogen used in the country now is made from fossil fuel, the government hopes to implement carbon-free production by 2040.
The challenges to commercial use of fuel cell cars have been the lack of a hydrogen fuelling infrastructure and their high cost. Abe's government has taken aim at both barriers in the hope of protecting an area of emerging technology where automakers and suppliers believe they have a lead over rivals in the United States and Europe.
The $20,000 rebate per car means taxpayers may support subsidies of up to around $200 million a year.
To put 100 hydrogen fuel stations in urban areas by end-March 2015, the ruling party has suggested a subsidy of up to $2 million per station - which cost $4-5 million each to build - meaning another $200 million in taxpayer money.
The government plans to continue offering subsidies and tax breaks so that fuel cell cars can sell at around the same price as gas-electric hybrids in the 2020s.