Introduction
In recent years, with growing concern for environmental issues, hydrogen energy and fuel cell vehicles (FCVs) have attracted global attention. China, in particular, has continued its "manufacturing powerhouse" strategy, as demonstrated in solar panels and electric vehicles, into the hydrogen sector, which is significant news. However, what appears to be rapid progress now seems to be beginning to falter.
This article will explain in detail the reasons why China's hydrogen and FCV market has begun to stagnate, including the underlying economic factors. We will provide simple explanations of technical terms and share insights from a business perspective.
Why the adoption of FCVs in China is now suddenly declining.
For over a decade, China has been making massive government-led investments in the hydrogen energy industry. According to the National Energy Administration of China, hydrogen production is projected to exceed 36.5 million tons in 2024, making it the world's largest producer.Green HydrogenIts production capacity has also exceeded 120,000 tons per year, accounting for half of the world's total production.
However, this rapid progress is now showing signs of trouble. FCV bus sales in Guangdong Province fell by nearly 50% in the first nine months of this year compared to the same period last year. Nationwide FCV sales are also sluggish, projected to be only 2,208 units by the first nine months of 2025 (down 46.61 TP3T year-on-year).
This sharp decline is due to the economic downturn that began with the collapse of the real estate bubble. Tax revenues and land use rights revenues have decreased, exacerbating the financial shortage for local governments. Providing subsidies for expensive fuel cell vehicles (FCVs) is also becoming difficult, and the "government-driven demand" is showing signs of wear and tear.
In Wuhan, Hubei Province, the target amount for the hydrogen industry was revised down from the initially projected 60 billion yuan to 20 billion yen. Although it is the leading city in China for hydrogen adoption, the momentum has slowed compared to three years ago.
Three factors behind the sharp decline in sales
Point 1: The limits of government subsidies have been reached.
The central and local governments have provided subsidies of approximately 1 million yuan per vehicle for fuel cell vehicles (FCVs), "bridging the price gap with other commercial vehicles such as diesel vehicles." However, due to strained financial resources, it is becoming difficult to support demand.
Experts point out that "the high cost of purchasing the vehicle and the cost of refueling with hydrogen make it inferior to gasoline cars and EVs, and short-term widespread adoption will be limited to demonstration projects." Without subsidies, the widespread adoption of FCVs will be difficult.
Point 2: Economic downturn due to the collapse of the real estate bubble
The real estate sector, which has been a pillar of the Chinese economy, is in crisis, and the overall economy is sluggish. Consumer spending is also declining, and people are increasingly prioritizing maintaining their livelihoods over investing in expensive environmental technologies. This macroeconomic environment is particularly impacting the FCV industry, which is still in its early stages of development.
Point 3: The severity of local government finances
While they do rely on support from the central government, local governments are facing a serious shortage of financial resources. In addition to declining tax revenues, land sale incomes have also fallen, making it difficult to develop new infrastructure or provide subsidies. Model cities for FCV (Fuel Cell Vehicle) adoption in rural areas are also facing these financial constraints.
Comparison of the current situation and future prospects of hydrogen-powered vehicles in Japan
In Japan, Toyota Motor Corporation was the first in the world to achieve this in 2014.FCV mass production vehicle "Mirai"They launched the first model and introduced a new model in 2020. However, due to challenges such as infrastructure development, widespread adoption has not been achieved. Although there is a sense of slowdown, China still maintains its lead in FCV adoption.
However, China's goal is to possess more than 500,000 aircraft by 2030, but currently it has fewer than 30,000. While it is sticking to its "manufacturing powerhouse" strategy, the focus appears to be shifting towards semiconductors and artificial intelligence (AI). Interest in the FCV field may also gradually diminish.
Supplementary information: Status of hydrogen infrastructure development
In Foshan, Guangdong Province, China, practical hydrogen infrastructure has been under development. In May, a station equipped with large-capacity hydrogen tanks that can be filled at a pressure of 70 MPa became operational, and it has been reported that up to 600 hydrogen vehicles visit the station per day.
However, the fact that vehicle sales are declining despite having such well-developed infrastructure suggests that they are heavily influenced by buyers' decision-making and economic conditions.
Supplementary information: Response of Japanese companies
While hydrogen adoption in Japan is stagnating, Japanese companies (such as Toray and Tanaka Kikinzoku Kogyo) are supplying the necessary components for fuel cells and exhibiting in China with the aim of seizing business opportunities amidst the stagnation of hydrogen adoption in Japan. In this way, the restructuring of international supply chains is also underway.
Summary
In the business world, it's not uncommon for companies to appear successful while actually being in a critical situation. This is especially true for industries supported by the Chinese government; even if their figures appear strong, they often rely heavily on subsidies. The collapse of the real estate bubble, a significant shift in the macroeconomic environment, has exposed this vulnerability.
For technologies still in development, such as hydrogen energy and fuel cell vehicles (FCVs), it's important to understand that the market structure can change dramatically depending on whether or not there is government support. Furthermore, the impact of severe local finances on the speed of new technology adoption is deeply related not only to the national economic situation but also to the local economic conditions.
When considering investments in environmental technologies, it is crucial to balance a "long-term vision" with "short-term profits." Without subsidies and government support, the ability of companies to continue operations using their own funds becomes a matter of survival.
While China's hydrogen and fuel cell vehicle (FCV) market appeared to be making rapid progress, it was hampered by a vulnerability: a lack of funding. This lesson is crucial when considering business strategies. We must always be mindful of "sustainability" and "risk management," not just "superficial success."
This knowledge is especially crucial for businesses currently considering or interested in investing in environmental technologies. Businesses that rely heavily on subsidies should recognize their vulnerability to macroeconomic changes and will need to prepare diversified funding channels.
