SEOUL, Jan. 21 (Korea Bizwire) — Hydrogen-powered vehicles have the potential for growth and can lead South Korea’s auto industry into the future, but a longer-term perspective is advisable due to some hurdles in the nascent sector, market watchers here said Monday.

The country’s hydrogen car market has gained traction on the back of strong state support. Last week, the government vowed to build a so-called hydrogen economy and announced an ambitious plan to produce 6.2 million fuel cell cars that run on the resource by 2040.

“Based on Hyundai Motor’s lead, local carmakers could enjoy advantages of economies of scale in this field and secure a competitive edge in the global arena,” Yoo Ji-woong, an expert at eBest Investment & Securities, said.

Hyundai Motor is a global leader in the development of hydrogen fuel cell electric vehicles (FCEV). After years of research and development in hydrogen, Hyundai last year released its dedicated FCEV sports utility vehicle, the Nexo.

Currently, electric vehicles (EVs) hold the dominant position in the next-generation vehicle sector. As of 2017, some 3,000 FCEVs were sold around the world, compared with some 74,000 pure electrics.

Fuel cell cars create electricity that powers a motor by using stored hydrogen mixed with oxygen from the air. EV have to be charged from electrical outlets with the stored energy in battery pack pushing cars forward.

“But hydrogen cars enjoy shorter charging times and can travel longer distances on a full change, which can bolster their future prospects as eco-friendly alternatives to conventional internal combustion engine vehicles,” Lee Han-joon, from KTB Investment & Securities, said.

Hydrogen cars, while very expensive at present, may witness a significant drop in price going forward once demand picks up and more are made by carmakers, Lee said.

He noted that the manufacturing cost is forecast to decrease by around 38 percent to about 28 million won (US$24,838) per unit when carmakers have the necessary facilities and can take advantage of economies of scale and churn out around 500,000 cars annually.

Reflecting that outlook, share prices of green car-related companies have soared on the Seoul bourse. This popularity has been helped by state support and generally positive assessments from analysts.

Since December 11, when Hyundai Motor announced its hydrogen car-related roadmap, its shares have jumped 17.49 percent. Unick Com, Hyundai’s affiliate and hydrogen car parts maker, saw its share price spike 271.9 percent on the tech-laden KOSDAQ market.

On the other hand, analysts remain guarded against hasty optimism, and have stressed the need to have a longer-term perspective in investing in FCEV relevant fields.

“Until around 2020, demand for electric cars will grow far faster, though hydrogen cars are forecast to outstrip competitors as a next-generation vehicle after this period,” Lim Eun-young at Samsung Securities, said.

Ryu Yeon-hwa, from Hanwha Investment & Securities, offered a more pessimistic take, saying that hydrogen cars lag far behind electric cars in terms of energy efficiency and in certain performance areas.

“Hyundai Motor’s dedication to hydrogen-fueled vehicles seems like a big adventure. Such a large investment in hydrogen cars will be a burden over the long term if the endeavor does not pan out as anticipated,” she stated. Ryu said that hydrogen could be a viable option for long-distance heavy commercial vehicles.

“It will take time before sales of hydrogen cars pick up in earnest, as we have a long way to go before achieving a satisfactory level of technological development and getting the relevant infrastructure fully in place,” Cho Soo-hong, an expert at NH Investment & Securities, said.

(Yonhap)