Hydrogen Fuel Fallout
Honda-GM fuel cell venture ends as EV priorities reshape
After less than three years of production, Honda and General Motors will shut their joint fuel cell facility in Michigan before year's end, signalling a fundamental shift in how manufacturers balance alternative powertrains against market realities.
When the final fuel cell system rolls off the line at Fuel Cell System Manufacturing LLC's Brownstown, Michigan facility later this year, it will mark more than the closure of an $85 million joint venture. It will represent a rare admission from two automotive giants that even technological excellence cannot overcome weak demand.
Honda and General Motors established FCSM in January 2017 as the automotive industry's first dedicated fuel cell production partnership. The facility began manufacturing operations in January 2024, supplying Honda's CR-V e:FCEV and underpinning both partners' hydrogen strategies. Production will cease before the end of 2026.
[We aim to focus capital and R&D on] "batteries, charging technology and EVs, which have clear market traction, rather than on hydrogen, which has yet to fulfil its potential."
The decision comes after what Honda described as "extensive discussions" between the partners about the venture's continuation. Honda will pivot to an independently developed next-generation fuel cell system, whilst General Motors' withdrawal from the collaboration follows the American manufacturer's October 2025 announcement that it would shutter its entire hydrogen fuel cell development programme to concentrate resources on battery-electric vehicle technology.
The broader context is striking. General Motors stated at the time it aimed to focus capital as well as R&D on "batteries, charging technology and EVs, which have clear market traction, rather than on hydrogen, which has yet to fulfil its potential." That assessment reflects what manufacturers across the industry are discovering through hard experience rather than theoretical projections.
A recalibration presented as strategy
The joint venture delivered meaningful technical gains. According to Honda, the collaboration produced fuel cell systems with improved durability, enhanced cold-weather performance, better production efficiency and reduced costs through shared supplier relationships. The CR-V e:FCEV, powered by FCSM's technology, entered limited production in 2024 as one of the few fuel cell passenger vehicles available in the United States market.
Yet technical achievement proved insufficient. Honda has struggled with weak fuel cell vehicle sales across markets. The company postponed commercial operations at its planned fuel cell manufacturing facility in Tochigi, Japan, and reduced projected output capacity. Honda attributed these setbacks to slower-than-expected development of global hydrogen markets and delays in hydrogen supply infrastructure projects across Japan, the United States and Europe.
The pattern extends beyond Honda's direct operations. General Motors invested $85 million in the Michigan joint venture, whilst Honda's overall hydrogen programme has included decades of research dating back to the original FCX. The company has positioned hydrogen alongside electricity as a core energy carrier in its drive towards carbon neutrality by 2050. Despite this commitment, market absorption has not materialised at the pace required to justify the manufacturing capacity being built.
Manufacturing implications extend beyond two companies
The closure carries consequences that stretch well beyond Honda and General Motors' balance sheets. FCSM represented a model for risk-sharing in emerging technologies. By pooling expertise in fuel cell stack design, manufacturing processes and procurement, the partners aimed to achieve economies of scale that neither could justify independently. That model is now proven inadequate when demand fails to develop.
The automotive manufacturing sector finds itself navigating an exceptionally complex transition. Battery-electric vehicles face their own challenges. General Motors recently recorded a $6 billion charge as it scaled back EV production, idled battery plants and settled supplier contracts amid weakening demand and policy shifts. The OEM halted operations at its two Ultium Cells facilities in Warren, Ohio and Spring Hill, Tennessee for a six-month period beginning in January 2026, placing 1,550 workers on temporary layoff.
Ford Motor disclosed approximately $19.5 billion in special charges related to restructuring and pullbacks in its all-electric vehicle investments. These figures reflect fundamental mismatches between installed manufacturing capacity and actual market absorption across battery-electric platforms.
Yet manufacturers cannot simply abandon electrification. Regulatory frameworks in Europe, California and elsewhere mandate reductions in fleet emissions. The retreat from fuel cells and the scaling back of battery-electric production represent not strategic choices so much as forced recalibrations in response to consumer behaviour that has defied industry forecasts.
Honda's pivot to independent fuel cell development suggests the Japanese manufacturer retains conviction in hydrogen's long-term viability, even as it adjusts near-term manufacturing commitments. The company stated it will "continue to leverage next-generation fuel cell system technologies developed independently by Honda and strive to further expand business opportunities in order to grow its hydrogen business as one of the new core businesses of Honda."
This language warrants scrutiny. Honda has invested more than three decades in hydrogen research. The decision to develop next-generation systems independently rather than through continued partnership with General Motors implies either that Honda believes it can achieve cost reductions General Motors considered unattainable, or that the Japanese manufacturer calculates that hydrogen applications in commercial vehicles, stationary power and industrial equipment will develop faster than passenger vehicle markets.
The broader electrification reckoning
The automotive manufacturing landscape in 2026 presents a stark divergence between policy ambitions and market realities. Governments have mandated electrification timelines. Manufacturers have committed tens of billions of dollars to battery and fuel cell production capacity. Yet consumer adoption has not followed projected trajectories.
The reasons are well documented. Battery-electric vehicles remain more expensive than internal combustion equivalents in most segments. Charging infrastructure, whilst expanding, has not achieved the ubiquity required to eliminate range anxiety for mass-market buyers. Fuel cell vehicles face even steeper hurdles. Hydrogen refuelling infrastructure is sparse outside California and a handful of other markets. Vehicle choices are extremely limited. The technology carries a cost premium that even emissions-conscious buyers find difficult to justify.
What distinguishes the current moment is manufacturers' willingness to acknowledge these constraints publicly. General Motors' Mary Barra stated it is "too early to tell" what true demand for EVs will be following the end of federal incentives. She suggested the industry will likely find its natural demand level over the next six months. Ford's Jim Farley told analysts the company evaluated the market and made the call to follow customers to where the market is, "not where people thought it was going to be."
This represents a significant shift in tone from the euphoric pronouncements about electrification that characterised industry communications in the early 2020s. Multiple executives have now acknowledged that policies, not consumer preferences, were driving the charge for EVs. The rollback of incentive programmes and regulatory delays have exposed this dynamic.
Manufacturing strategy in an age of uncertainty
The closure of Honda and General Motors' fuel cell venture crystallises the challenge facing automotive manufacturers. They must invest in technologies before market demand is proven, because regulatory requirements and competitive dynamics leave no alternative. Yet the capital intensity of modern powertrain development means that misallocated investments carry severe consequences.
Honda's decision to continue fuel cell development independently whilst General Motors exits entirely illustrates how different manufacturers are drawing different conclusions from the same market data. This divergence will shape competitive dynamics for the remainder of the decade.
Some manufacturers are hedging through hybrid technologies. Hyundai allocated production at its new $7.6 billion plant in Georgia for both Hyundai and Kia vehicles, with heavy emphasis on hybrid powertrains alongside battery-electric models. This approach provides flexibility as market preferences evolve.
Others are doubling down on specific technologies. Tesla continues to focus exclusively on battery-electric vehicles, betting that cost reductions and improved charging infrastructure will eventually overcome adoption barriers. Chinese manufacturers are expanding range-extended electric vehicle (EREV) platforms that combine battery power with small internal combustion engines, particularly in SUV and commercial vehicle segments.
The lack of consensus among manufacturers about which powertrain technologies will dominate in the 2030s means production planning has become extraordinarily difficult. Plants designed for internal combustion engines cannot easily be retooled for battery-electric production. Fuel cell manufacturing requires entirely different processes and supplier relationships. Each choice commits billions of dollars to a particular technology trajectory at a time when the destination remains unclear.
What Honda and General Motors' announcement makes plain is that first-mover advantages in emerging technologies provide little protection when the market fails to develop as anticipated. The companies combined deep expertise in fuel cell development and manufacturing. They achieved the technical objectives they set. They created a production facility capable of delivering fuel cell systems at scale. None of this prevented the venture's closure when consumer demand did not materialise.
The path forward for automotive manufacturing strategy involves fewer grand pronouncements about revolutionary transformations and more attention to the messy realities of consumer behaviour, infrastructure development and the true costs of transitioning to new powertrains. Honda's continued investment in fuel cell technology alongside its battery-electric programmes represents a bet that hydrogen will find viable applications, even if passenger vehicles are not the primary market. General Motors' focus on batteries and charging infrastructure reflects a different calculation about where capital should be deployed.
Both approaches carry substantial risks. What is becoming clear is that manufacturers who maintain flexibility across multiple powertrain options whilst carefully managing capital commitments are best positioned to navigate the transition, however it unfolds. The closure of a state-of-the-art fuel cell production facility after less than three years of operation provides a sobering reminder that technological capability alone guarantees nothing when market demand remains elusive.
