Toyota & BMW to Solidify Partnership to Expedite FCV Development

Toyota Motor Corporation TM and BMW AG BMWYY are set to deepen their collaboration on fuel cell vehicles (FCV) to boost the competitiveness of their hydrogen-powered cars.

Per Nikkei Asia, under this expanded partnership, which is expected to be officially announced on Sept. 5, 2024, Toyota will supply essential components like hydrogen tanks and fuel cell systems to BMW, which will then manufacture and sell mass-produced FCVs over the next few years.

Toyota and BMW originally teamed up on FCV development in 2012 to create greener vehicles amid stricter environmental regulations. Hydrogen fuel-cell vehicles produce only water as emissions and don't face the range anxiety associated with battery electric vehicles (BEVs). They also refuel as quickly as traditional internal-combustion-engine vehicles. However, FCVs are currently expensive to produce, resulting in low profit margins, and require hydrogen storage at extremely low temperatures. The expanded partnership aims to standardize components and reduce the cost of FCVs, which have struggled to gain popularity due to affordability issues.

Toyota, a leader in FCV technology, launched the world's first mass-produced FCV, the Mirai, in 2014. However, due to the high price of the model of more than 7 million yen compared with the average car price in Japan of 2.64 million yen in 2023, TM sold only about 26,000 units since then, making a small fraction of the company's total annual sales of more than 10 million vehicles.

Per WardsAuto, BMW has developed a concept FCV, the iX5 Hydrogen, which features two hydrogen tanks and offers a range of more than 310 miles, with a refueling time of just 3-4 minutes. Incorporating Toyota's fuel cell system could help BMW accelerate the iX5 Hydrogen's production timeline. Despite the potential of FCVs, they have not yet achieved widespread success, mainly due to the scarcity of hydrogen refueling stations. The expanded alliance is also expected to focus on the development of hydrogen infrastructure in Europe. Per the European Automobile Manufacturers' Association, there are currently only 270 hydrogen filling stations, much less than 632,000 public BEV charging stations in the European Union as of the end of 2023.

Zacks Rank & Key Picks

TM & BMWYY currently carry a Zacks Rank #3 (Hold) each.

Some better-ranked stocks in the auto space are Dorman Products, Inc. DORM and Douglas Dynamics, Inc. PLOW, each sporting a Zacks Rank #1 (Strong Buy) at present.

The consensus estimate for DORM's 2024 sales and earnings suggests year-over-year growth of 3.71% and 35.46%, respectively. EPS estimates for 2024 and 2025 have improved 51 cents and 37 cents, respectively, in the past 30 days.

The Zacks Consensus Estimate for PLOW's 2024 earnings suggests year-over-year growth of 60.4%. EPS estimates for 2024 have improved 15 cents in the past 30 days.

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