NEW YORK (TheStreet) -- One of the last automakers to commit to hydrogen fuel cell cars, Volkswagen (VLKAY) could unveil its first production version at the Los Angeles Auto Show next month, according to a source at the company.
Driven in California, Germany and Japan, hydrogen fuel cell cars are a new-energy alternative to battery electric cars from most automakers already on the market. Volkswagen is second behind Toyota (TM - Get Report) and ahead of General Motors (GM - Get Report) in terms of the number of vehicles sold worldwide each year.
Right now, Volkswagen is the only car maker with two separate mainstream electric passenger cars -- the eGolf and eUp -- in production. Still, the production volumes are small, at about 100 cars per day. Volkswagen has already committed to making a plug-in hybrid variant of almost every car it sells by 2018.
Production of the Golf GTE has just started, and the Passat GTE starts next year. Many other models will follow in 2016, 2017 and 2018. In California, hyrogen fuel stations are in the early stages of a massive infrastructure buildout.
A few months ago, there were just nine filling stations. By 2020, the plan is to have built 100. Many difficult questions remain as to how these hydrogen fuel cars will be commercially viable. Why would consumers want to buy them?
The fuel looks to be more expensive on a per-miles-traveled basis compared with regular petrol. Unless the car is correspondingly cheaper to buy, it is hard to see why a consumer would purchase one.
Yet, fuel cell cars have some advantages over battery electric cars. Batteries are extremely expensive to manufacture, the recharging times are long, and many people have nowhere to charge batteries overnight or at work during the day.
What is skewing the marketplace in terms of the automakers spending billions of dollars on these new technologies, are massive subsidies and other incentives. The government is basically penalizing regular gasoline and diesel cars in favor of battery and hydrogen fuel cell technologies.
Specifically in California, Hyundai (HYMTF) is already in the hydrogen fuel cell car market, and Honda (HMC - Get Report) and Toyota have committed to rollout plans beginning next year. Other automakers have test fleets in operation and are widely believed to be launching commercially at various points between 2016 and 2025.
Volkswagen, together with Nissan (NSANY) , had been two of the most vocal skeptics against hydrogen fuel cell cars, in terms of market readiness in the short term. Both have questioned the prospects for building out hydrogen fueling stations in a timely manner.
In the meantime, Volkswagen committed to wide availablity of plug-in hybrids, and multiple pure electric cars. Nissan took pure electric-vehicle volume leadership with the LEAF, and will also be making at least one plug-in hybrid starting in about a year.
It isn't clear when Volkswagen's hydrogen fuel-cell car will be commercially available and if so where. Presumably it will be offered in Germany first, and then in California. One might surmise that German availability could start as early as late next year and that California availability isn't likely until late 2016 at the earliest. But that is just educated speculation.
Furthermore, it isn't clear in which car Volkswagen will offer its hydrogen fuel cell drivetrain. Volkswagen is keen on flexible and modular platforms, where one car -- Golf, say -- can be offered with any kind of drivetrain, such as gasoline, diesel, hybrid, electric, etc.
Hydrogen fuel cell cars require a lot of space for the hydrogen tanks. However, they are less weight sensitive than battery-electric cars because they can be refueled so much faster. Therefore, one might surmise that placing the hydrogen tanks in a SUV would be a good solution, which is what Hyundai did.
Volkswagen is widely expected to unveil in next year its U.S.-centric three-row SUV, which is scheduled to enter production in Tennessee in 2016. It would obviously fit all kinds of drivetrains: gasoline, diesel, hybrid, electric and hydrogen fuel cell.
Given that production is more than a full year away, however, it would seem premature to show it next month.
It might make more sense in Germany and Japan where gasoline and diesel prices are much higher -- upwards of $8 per gallon -- but in the United States it is hard to see how the consumer will be persuaded to buy hydrogen fuel cell cars without massive government subsidies. It seems like a giant waste of money, and where a future U.S. president or Congress could pull the plug on those subsidies overnight.
Hydrogen fuel cells look increasingly aren't economically viable in the context of increased U.S. production of oil and natural gas. With enough new refineries and pipelines, one could see a future where gasoline and diesel would once again cost less than $2 per gallon.
We see this in 2014 car sales in the United States. Relatively speaking, SUVs and pickup trucks are doing the best. Witness Jeep being up 45% and Subaru up 20%. Plug-in electric cars are also up this year, but non-plug-in hybrids are down. Hybrids struggle to break 3% of the car market, and plug-in electrics remain below 1%.
If the United States were running out of oil and gasoline/diesel started hitting $8 per gallon, it would be easier to see the beginning of viability for hydrogen fuel cells. As it stands, however, California's lurch into hydrogen fuel cell cars is exclusively a political force-feeding issue, in which the costs of compliance are spread across 99%-plus of the car-buying public.
All automakers stand ready to produce more fuel-efficient cars by virtue of downsizing engine power, if there is consumer demand for it. Numerous cars are already available for sale in the market with MPG ratings between 40 MPG and 50 MPG.
Plug-in hybrids are also available, and they can often yield blended MPG of 100 to 250, as most owners will be happy to show you.
The problem is that prospective buyers don't think these more fuel-efficient cars are worth it. There is an increasing abundance of oil, produced right here in the United Sates, and every brand new car sold in this country passes the government's stringent emissions standards.
It is in this context that Volkswagen, will likely join most other automakers and introduce a hydrogen fuel cell car next month. It will be a costly affair.
Volkwagon paid for a recent trip for the author to tour the company's Wolfsburg, Germany plant. At the time of publication, the author was short shares of Tesla.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.