Toyota keeps hydrogen as a hedge

Last year, global hydrogen passenger car sales just barely surpassed 16,000 units, while those of electric vehicles exceeded 12mn. Despite the growing disparity in the numbers, Toyota has continued to offer hydrogen fuel-cell vehicles as part of its portfolio. While that looks increasingly difficult to justify, the carmaker may still be on to something.

That something is not car sales. While global sales of hydrogen-fuelled cars rose nearly a quarter over the year in the second half of 2025, according to SNE Research, the numbers are still paltry. Hyundai Motor leads with 6,861 units while Toyota sold 1,168 units across its Mirai and Crown models, a 39.1 per cent year-on-year decline. Honda also re-entered the segment last year. It is hard to escape the conclusion that hydrogen fuel-cell cars are not competitive in the mass market passenger vehicle segment, even more than a decade after their launch.

The biggest constraint is infrastructure. Last year, there were fewer than 1,400 hydrogen refuelling stations worldwide, compared with more than 5.7mn public EV charging points. Hydrogen cars are also significantly more expensive to produce than battery-powered ones, meaning higher sticker prices, especially as many regions have phased out their most aggressive hydrogen incentives.

Yet even if hydrogen never becomes viable for mass-market passenger vehicles, it may still have a role to play in commercial transport. The economics of hydrogen refuelling stations are easier to justify when supported by consistent demand along fixed routes. If a station serves 200 trucks a day, it would process over 8,000kg of fuel, which would be enough to begin justifying the higher capital cost of infrastructure.

Government backing would add a boost. The Japanese government is currently working with Toyota to implement hydrogen trucks at scale. These trucks could open up a new, albeit modest, source of revenue for Toyota.

For now, volumes remain low and the economics remain unfavourable. But Toyota’s edge in its hybrid business provides a reliable profit base and gives it the leeway to experiment across hybrids, battery EVs and hydrogen. Hybrids generate current returns while battery electric cars are a high-growth but capital-intensive bet. Hydrogen is a longer-term and more uncertain bet, but it does have potential in niches where batteries fall short.

Optionality has served Toyota well before. A decade ago, when critics argued hybrids would be displaced by battery EVs, Toyota stuck with the technology. Demand proved much more durable than expected. That does not guarantee a similar outcome for hydrogen. But in an uncertain transition, retaining flexibility may prove more valuable than going all in too early on a single bet.

[email protected]