Later this year, Toyota Motor Corp (ADR) (NYSE:TM) will release a very special car. The Toyota Mirai, humbly priced at about $45,000 after incentives, is Toyota’s first major venture into hydrogen fuel cell cars.
And believe it or not, the zero-emission Toyota Mirai could pose a very real threat to Elon Musk’s Tesla Motors Inc (NASDAQ:TSLA), and ultimately, the TSLA stock price.
Toyota only plans to make around 700 Mirais this year, and doesn’t expect to build into five figures until the 2020s. And the 153 HP Mirai isn’t quite in the same league as the Tesla Model S, which goes for between $70,000 and $120,000, depending on how fast you want your face melted off.
So where’s the threat?
Well, TSLA stock doesn’t trade at 25 times forward earnings because of the 33,000 Model S sales it’s expected to log in 2014, either. Tesla’s about the longer-term plan, too.
That’s where the Toyota Mirai — and other hydrogen fuel cell cars — could seriously impact the TSLA stock price.
Hydrogen Fuel Cell Cars Threaten Tesla’s Dream
Toyota is butting heads with TSLA in a few ways. For instance, Tesla isn’t just mindlessly churning out EVs; it’s building a nationwide Supercharger network to make its battery-run cars more feasible for travelers. Not to be outdone, Toyota is building out a network of its own. The carmaker is financing the construction of 19 fueling stations in California, and 12 in New York, New Jersey, Rhode Island, Massachusetts and Connecticut. The State of California has even pledged $200 million to build at least 100 fueling stations over the next 10 years.
What about the act of fueling up itself? Unlike electric vehicles, the Mirai, which has a range of 300 miles, can be refueled in about five minutes. For comparison’s sake, you can get 170 miles of range in a Tesla S after about a half-hour of charging.
While the Toyota Mirai is the highest-profile hydrogen fuel-cell car yet, TM isn’t the only player. Honda Motor Co Ltd (ADR) (NYSE:HMC) has a fuel-cell car dropping in 2016, and Hyundai Motor Co Ltd (OTCMKTS:HYMLF) also has one on the road. This emergence of low-emission competition doesn’t just threaten TSLA, but also Nissan Motor Co Ltd (ADR) (OTCMKTS:NSANY) and its $29,000 EV, the Leaf.
Sure, the Toyota Mirai comes out to $45,000 — about 10 grand more than the expected price of the Model 3 — but that price will fall over time as fuel cell technology gets cheaper and cheaper. The cost of fuel cells has already come down 90% in the last decade, according to the Wall Street Journal. As an added bonus, Toyota will foot the fuel bill for a full three years after your purchase.
Beware Elon Musk, The Dismissive
Tesla CEO Elon Musk, on the surface at least, is hardly impressed with the revolutionary technology behind hydrogen fuel-cell cars, whose only emissions are water and heat. In fact, at a speech in Germany in 2013, Musk called hydrogen fuel cell cars “bullsh*t.”
Tell us what you really think, Elon. But before you do, what does Toyota think about your verbal assaults?
“If I had all my eggs in one basket,” said a Toyota executive recently, “I might be making the same comments.”
But seriously, Musk. Are you really calling hydrogen cars “fool cells” because you think they’re silly, or because you see them as a threat to TSLA stock? With Musk, it’s not always clear whether what he advocates is for the betterment of mankind or the girth of his wallet.
A Fortune article detailing the ugly backroom politics of how the Gigafactory ended up in Nevada termed Musk “a shrewd and unsentimental player.” The report details how Musk “dazzled, seduced, squeezed, bluffed, manipulated, and prodded his way” to secure a juicy $1.4 billion incentive package from the state.
All that’s a long way of warning investors of Musk’s skepticism. Sure, only 700 Toyota Mirais will hit the streets this year, but don’t discount Toyota’s fuel cell entry because of that. I recall a little car that sold about 600 units a year between 2008 and 2012.
As of this writing John Divine held no positions in any of the stocks mentioned. You can follow him on Twitter at @divinebizkid.