The Impact of the Top 3 Strategic Imperatives on the Passenger FCEV Industry

Transformative Megatrends

• Why: Electrification in passenger vehicles (PVs) is gaining momentum as a megatrend, with new mobility models expected to shape the industry’s future.Various sub-trends within electric vehicles (EVs), such as battery electric or fuel cell, are increasingly popular
• Frost Perspective: Adoption of zero-emission powertrains, such as those used in the electric PV industry, will largely depend on cost ownership, infrastructure, and government support.Industry transformation will occur between 2024 and 2030, with the emergence of new entrants and disruption among legacy players.

Competitive Intensity

• Why: While large automotive OEMs typically lead the PV industry, new-age startups are disruptors employing cutting-edge technologies and innovative business models that challenge established norms.
• Frost Perspective: Within this decade, new competition is expected to emerge from technology-centric mobility companies challenging established players.New business models and customer offerings will likely come into play during this period.

Industry Convergence

• Why: Anticipated partnerships among technology firms, Tier I suppliers, and OEMs will be integral to the adoption of zero-emission powertrains.These partnerships are forecast to yield prompt synergies, expediting the creation of inventive cost-cutting solutions and risk mitigation measures.
• Frost Perspective: Industry partnerships supporting infrastructure such as electric charging or hydrogen refueling, OEM manufacturers, and fleets will likely emerge. New business models will surface as technology becomes more prevalent in the PV industry

Scope of Analysis

Passenger Vehicle Segmentation by Powertrain

Powertrain Type

• xEV
  • Fuel Cell Electric Vehicle (FCEV)
  • Plug-In Hybrid Electric Vehicle (PHEV)
  • Mild Hybrid Electric Vehicle (MHEV)
  • Hybrid Electric Vehicle (HEV)
  • Battery Electric Vehicle (BEV)
• CNG
• Diesel
• Gasoline

Growth Drivers

Environment regulations: Globally, authorities are setting targets to reduce CO2 or NOx emissions and noise levels generated by ICE PVs, which is expected to drive demand for FCEVs in the PV segment.

Shorter refueling duration: FCEVs are commercially viable emission-free alternatives to ICE vehicles with a refueling duration of less than 10 minutes and a driving range of approximately 300 miles on a single refuel. Greater convenience and less downtime for refueling enhance the potential of FCEVs for fleet-based operations.

Cheaper raw materials: Raw materials needed to produce fuel cell systems are cheaper. Manufacturing BEVs requires critical raw materials, including nickel, cobalt, and lithium. Also, FCEVs do not need heavy batteries, reducing vehicle weight and payload issues.

Growth Restraints

High maintenance costs: Unique components in passenger FCEVs increase replacement costs for owners. Because of rapid innovations, the availability of newer, more sophisticated vehicle parts, and the shortage of older components, technology obsolescence is a major risk for vehicles bought a few years ago.

High production costs: Limited production volumes owing to low consumer demand could hinder OEMs from benefiting from economies of scale. Also, the short supply of components required for fuel cell vehicle production, including fuel cell stacks and hydrogen fuel tanks, adds to the manufacturing woes.

Inadequate refueling networks: One of the biggest challenges in owning a passenger FCEV is restricted access to hydrogen refueling stations. Furthermore, hydrogen fueling stations require substantial investment, which prevents many fuel station owners from investing in this.