Is Bmw Building A Hydrogen Bombshell?

Its internal-combustion engine could beat fuel-cell versions

At a BMW workshop in Munich, engineer Wolfgang Strobl takes off his glasses and holds them a few inches from the exhaust pipe of a seven-series sedan. The engine's running, but all that's coming out is warm, odorless steam. "See, I can even clean my lenses," Strobl says, wiping them with a felt cloth. The car, one of BMW's 15-strong fleet of hydrogen-powered 750hL sedans, emits water vapor and nothing else. BMW believes its system, developed over more than two decades at a cost of nearly $1 billion, is the answer to car pollution. "Hydrogen's the right way to go," says Burkhard Goschel, BMW's director of vehicle development. "You're solving the problem once and for all."

BMW's hydrogen hopes will be a big topic of discussion in Munich come mid-September at a huge hydrogen technology conference that will draw scientists and auto engineers from around the world. But they won't be there to proclaim BMW's hydrogen engine as the universal blueprint for the 21st century car. Instead, while other auto makers are also looking to hydrogen as the fuel of the future, BMW is emerging as a loner. From DaimlerChrysler to General Motors Corp., most are working on fuel cells that use hydrogen to produce electricity to run electric motors. But BMW's entry burns hydrogen in an only slightly modified version of the internal combustion engine that has powered cars for more than a century. BMW expects to put a model on the market in 2003.

So why go against the flow? Fuel-cell backers say their system offers quiet electric motors, superior acceleration at lower speeds, lower maintenance costs, and twice the energy efficiency of a combustion engine. Sounds good, but BMW figures its customers won't accept the performance of an electric car, with its sluggish acceleration at high speeds. Nor will they want a fuel-cell car that, in the words of one BMW official, sometimes "sounds like a vacuum cleaner." Indeed, the sleek BMW 750hL, expected to cost upward of $100,000, looks and feels like a high-performance luxury car. It has a top speed of 140 mph, 50 mph more than DaimlerChrysler's latest fuel-cell demonstrator, the NECAR 4. "History will decide, but my opinion is that customers will like combustion engines more than fuel cells," says BMW Chairman Joachim Milberg.

Of course, history also shows that what customers like doesn't always prevail. Fans of old Beta videotapes or Apple Computer Inc. software know this all too well. If most carmakers go for fuel-cell technology, that'll become the industry standard. BMW risks missing out on technological breakthroughs generated by the mainstream players and their suppliers. In fuel-cell research, GM has teamed up with Toyota, for example, and Ford with DaimlerChrysler.

One problem everyone faces is that hydrogen is not widely available. Right now, there's just one public hydrogen filling station in Europe, tucked in the cargo area of the Munich airport. And Don Huberts, chief executive of Shell Hydrogen, estimates it'll take 5 to 10 years to work out a safe way to store and distribute hydrogen on a large scale. Most fuel experts don't expect hydrogen cars to sell in big numbers before 2015.

QUICK SWITCH. BMW has no qualms about being ahead of the curve. "We're coming out with the cars first to show it's not a vision, but something real which can be done today," says Goschel. BMW's hydrogen car will contain both hydrogen and gasoline tanks. So if the hydrogen runs low, the driver can switch to gas by pressing a button. Christopher Will, a car analyst at Lehman Brothers Inc., believes BMW's bet looks shrewd. The company's sticking to what it knows best, high-performance engines. It's not signing onto huge investments in new engine production, and it's safeguarding its brand identity. "Performance is central to the BMW brand," Will says. "I wouldn't be surprised if they set an industry standard. In terms of current engine technology, they already do."

For BMW, the 750hL is just the start. Goschel's already thinking about bringing the technology to the Rolls-Royce nameplate, which BMW will acquire in 2003. "A Rolls would be an ideal hydrogen car," he muses. "You have the comfort, the power, you have everything--with zero emissions." The dream car, no doubt. The tough part will be making everybody believe in it.