By Nick Carey

MUNICH (Reuters) – Battery power may be the frontrunner to become the car technology of the future, but don’t rule out the underdog hydrogen.

As part of their efforts to eliminate fossil fuels, major automotive companies, such as BMW and Audi are creating hydrogen-fuelled passenger cars prototypes.

They hedge their bets in the hope that the political winds might shift in favor of hydrogen in an industry shaped early by Tesla’s (NASDAQ:) decision to make clean-cars battery-powered.

Germany, the global hub for auto manufacturing is at forefront of attention. Already, it is betting billions of dollars on hydrogen fuel in industries like steel and chemicals to achieve climate targets. This month’s closely fought elections could see the Greens join the coalition government and push this technology further.

BMW, Germany’s largest proponent of hydrogen among carmakers in Germany is charting a course to mass-market models around 2030. This company is also focused on changing hydrogen policies in Europe as well as in China, which has the biggest car market in the world.

Munich’s premium brand has built a hydrogen prototype car using its X5 SUV. This project was partially funded by Germany.

Jürgen Guldner, the BMW vice president who heads up the hydrogen fuel-cell car programme, told Reuters the carmaker would build a test fleet of close to 100 cars in 2022.

His team has already begun work on the next-generation vehicles, and he stated that “whether this (technology is driven by demand or politics), we will have a product.”

We are close to getting there, and we believe we will make a significant breakthrough during the next decade.

The premium brand of VW, Audi, told Reuters that it had assembled a group of over 100 engineers and mechanics who had already built a handful of prototype cars.

HYDROGEN TOO COSTLY NOW

Hydrogen is viewed as a sure bet by the world’s biggest truckmakers, such as Daimler AG (DE:) unit Daimler (OTC:) Truck, Volvo Trucks and Hyundai, because batteries are too heavy for long-distance commercial vehicles.

However, fuel cell technology is too expensive to be used in mass-market consumer vehicles. This involves hydrogen passing through a catalyst and producing electricity. Complex cells require expensive materials and are more difficult to recharge than batteries.

Because hydrogen has fallen behind in getting to an affordable market, even champions of this technology like Germany’s Greens favour battery-powered passenger cars. They see them as the most efficient way to decarbonise transport.

Although the Greens back hydrogen fuel being used for aircraft and ships, they are keen to see “green” hydrogen made from only renewable sources.

Stefan Gelbhaar from the Bundestag, said that hydrogen will have a major role in transport.

However, politics can change quickly. Diesel’s Dieselgate scandal in 2015 saw it go from a good friend to a criminal. Carmakers see hydrogen technology as an insurance policy since the EU wants to end fossil-fuel car sales by 2035.

Daimler last year announced that production would be stopped on the Mercedes-Benz GLC-CELL hybrid fuel-cell SUV. But, someone familiar with the company’s plans indicated that they could revive the project if the European Commission and a German government with Green participation choose to support hydrogen cars.

“We’re focusing on (battery) electric first, but we’re in close cooperation with our truck guys,” said Jörg Burzer, Daimler’s head of production, when asked about that approach.

The technology is always accessible.

180 KPH IN HYDROGEN X5

For years Japanese carmakers Toyota, Nissan (OTC:) and Honda, and South Korea’s Hyundai, were alone in developing and pushing hydrogen fuel-cell cars, but now they have company.

China has been expanding its hydrogen fuelling infrastructure. Several carmakers are now developing fuel-cell vehicles, such as Great Wall Motor which is planning to create hydrogen-powered SUVs.

EU is looking to construct more hydrogen fuelling stations in commercial vehicles. Joshua Cobb, Fitch Solutions’ auto analyst said that the EU was unlikely to begin pushing hydrogen passenger cars within two-to three years. This is because it was still trying to figure out how to finance its push for battery-electric cars and obtain sufficient “green” hydrogen from sources other than renewable.

However, he said: “It is not unreasonable to believe that if (German) Greens are in power they will accelerate the push for regulations favoring hydrogen fuel cell cars.

Guldner, BMW’s chief executive officer, acknowledged that hydrogen technology is too costly to make fuel-cell cars affordable for consumers today. However, he said that costs will drop if trucking companies invest in it to help them bring more vehicles on the market.

Guldner demonstrated BMW’s hydrogen X5 prototype by taking Reuters out on a drive at 180 km per hour (1112 miles) along an autobahn in Munich. He then gave the hydrogen fuel pump at a Total petrol station enough fuel to get it running for 500 kilometers using just a few minutes.

Guldner stated that BMW views hydrogen fuel-cell vehicles as a “complementary”, to the future range of battery electric models. This provides an option for customers who can’t charge at home and want to travel long distances while refuelling quickly. BMW’s all electric iX motor is used in the new hydrogen X5.

He said, “When there is no emissions in the future, having two solutions is better than one.”

A LONG AND WINDING ROAD

Yet Fitch Solutions’ Cobb said that it would still take years before any European policy support for hydrogen-powered cars translated into significant sales.

LMC auto consultancy predicts that the use of hydrogen in various applications – including in aircraft, passenger cars and energy storage – will encourage its adoption over time.

Sam Adham, senior LMC powertrain analyst said that “we’re not going to get there anytime soon.” LMC projects that hydrogen fuel cell models in Europe will account for 0.1% of all sales by 2030. Sales will accelerate only after 2035, according to LMC.

There is still much to be debated about this technology within and outside the auto sector.

Although VW’s Audi unit is researching fuel cells for the future, Herbert Diess of Volkswagen has been harsh about hydrogen-powered cars.

He tweeted this year, “The hydrogen vehicle has not proven to be the solution for climate change.” Shameful debates waste time.

Stephan Herbst, the general manager at Toyota Europe, holds a contrary view.

Herbst spoke in his capacity as member of the Hydrogen Council’s business group. It forecasts that by 2050 hydrogen will be used to power over 400 million vehicles. Herbst stated that he believed that governments would continue pushing hydrogen along with battery-electric cars now that they have set high carbon reduction targets.

He said, “This isn’t a matter of either or.” We need both technology.”