Growth in Natural Gas-Powered Vehicles Bypasses Japan

TOKYO – Despite bullish forecasts elsewhere, the outlook for natural-gas-powered vehicles inside Japan is not promising.

“Japanese automakers see no real cost merit for switching away from gasoline and diesel,” says Nobuo Iwai, senior research executive at the New Energy Development Technology Organization. “The business model isn’t there.”

There is skepticism because of Japan’s strength in hybrid and electric vehicles, coupled with the government’s withdrawal of subsidies for natural-gas vehicles in fiscal 2010 while instead offering incentives for EVs, plug-in hybrid-electric vehicles and clean diesels.

Only the Japan Gas Assn. is bullish on NGVs, projecting 10-fold growth by 2030 to 500,000 units. That represents an estimated 0.5% of the nation’s vehicle pool and would require yearly sales of 25,000 units. Not likely, according to analysts.

Globally, Navigant Research projects yearly NGV sales of 2.3 million through 2020, with Asia and the Pacific (excluding Japan) accounting for half of the expansion. Major growth markets include Thailand and India.

In 2013, an estimated 1,000 NGVs were sold in Japan for the third consecutive year, down from the previous 5-year average of 2,500, raising the total in operation to 43,500.

Included in that total are 0.7L mini-trucks and vans, standard cars (1.0L and above), light- and medium-duty trucks, garbage trucks, buses and forklifts.

Outside Japan, Honda Thailand launched a compressed-natural-gas version of the 1.5L City model in 2012. Compliant with Euro 4 emissions standards, the bi-fuel car runs on both gasoline and natural gas.

Also in Thailand, Toyota is selling bi-fuel variants of the Corolla and Hilux Vigo Champ while Nissan introduced CNG versions of the Navara pickup truck in July and Sylphy and NV350 Urvan models early this year. Mitsubishi Thailand sells a CNG version of its Triton pickup.

Thailand, U.S. Seen as Most Promising Markets

In the U.S., Honda sold 2,198 Civic GX models in 2013. The NGV is produced at the automaker’s Greensburg, IN, plant.

Mazda displayed an Axela CNG concept at the 2013 Tokyo auto show. Sold as the Mazda3 outside Japan, the Axela concept is powered by a 2.0L engine.

The model is basically road-ready, according to a Mazda engineer, although no launch date has been disclosed. Potential markets include Thailand, Indonesia and the U.S.

The engineer explains Thailand has a huge CNG infrastructure and thus would be a suitable place to sell the car. “We are also watching shale-gas trends in the U.S.," he says.

Mazda estimates CNG can cut carbon-dioxide emissions 25% compared to gasoline.

The engineer sees potential benefits for alternative fuels using the automaker's rotary engine, including, in addition to CNG, ethanol and other gas combinations. Mazda believes so-called multifuel solutions are critical.

"Everybody now understands the necessity to reduce CO2. Methane, ethane and CNG will all contribute to lowering CO2 emissions," he says.

Most taxis in Japan run on liquid petroleum gas, although the number is declining with inroads being made by hybrids, including the Toyota Prius. In March 2013, an estimated 248,000 LPG vehicles were on the road, down from 300,000 five years before. An estimated 80% were taxis.

Tom Stricker, vice president-technical and regulatory affairs, energy and environmental research for Toyota North America, is pessimistic about natural gas for light-duty personal transportation.

Speaking last July at the Washington auto show, Stricker explained “the operating cost per mile of a hybrid is on par with natural gas, even at very low natural-gas prices. The ‘cost-up’ is about the same. Meanwhile, you can refuel a hybrid anyplace. From a consumer viewpoint, outside of fleets natural gas is a tough sell.”

It is less of a tough sell to convert natural gas into hydrogen, according to Stricker. At least two of the first 100 hydrogen refueling stations scheduled to come onstream next year in Japan will be dual-function – CNG and hydrogen – both featuring onsite gas-to-hydrogen reforming.

Tokyo Gas, Japan’s largest natural-gas utility, will operate the stations in the Tokyo suburbs of Nerima and Urawa.

While the Japanese government ended subsidies for natural-gas fueling stations in fiscal 2010, concurrently with natural-gas vehicles, it continues to subsidize the construction of hydrogen stations.

In fiscal 2014, the Ministry of Economy, Trade & Industry is seeking authorization for ¥8.9 billion ($87.4 million) to pay for half of station-construction costs.