Business 10th Edition by Ferrell,Geoffrey Hirt,Linda Ferrell

Exercise 17

Automakers Look toward Hydrogen Fuel Vehicles
In order to meet the California government's clean air requirements, automakers have been investing millions of dollars into research and development for clean vehicle technology. Electric vehicles are becoming more popular, but a lack of infrastructure, the range of charge, and high prices are impacting widespread adoption. Automakers are investigating other forms of cleaner energy, including hydrogen fuel.
Investments into hydrogen fuel-cell technology have proved promising as the costs have significantly fallen and vehicles can travel 250 miles on a single tank. However, there is still the service problem due to lack of infrastructure. Extracting hydrogen can be a difficult and time-consuming process. Additionally, hydrogen vehicles will require cities to build hydrogen fueling stations. Hydrogen fuel cars require high capital costs, which have led many automakers to conclude that wide-scale manufacturing of these cars will not be feasible until about 2020.
On the other hand, Toyota is not allowing these challenges to hinder its production. Toyota plans to release its first hydrogen fuel car in 2015. Honda has already begun selling hydrogen-fuel electric cars in California. Additionally, California announced plans to install 68 hydrogen fueling stations by the end of 2015. Whether automakers plan to introduce hydrogen fuel-cell vehicles in a few years or in another decade, it seems clear that auto companies are very interested in this alternative fuel technology. 27
Why do you think Toyota is willing to expend resources in developing hydrogen vehicles despite the high costs of capital involved?