Kim Sae Hoon, general manager at Hyundai's fuel cell engineering design team, said fuel cell cars represent a bigger opportunity than electric cars because competition is less fierce. Hydrogen-powered cars also give more flexibility to designers, he said. They can be scaled to big vehicles such as buses as well as small cars.
They can also be refueled as quickly as gasoline cars while traveling more miles than electric vehicles. The Tucson's European version, called the ix35 Fuel Cell, can travel up to 594 kilometers (369 miles) while its US model travels up to 265 miles (426 kilometers) on one charge on the various government efficiency tests. It emits water vapor and no greenhouse gases.
High prices and the dearth of fueling stations are barriers to sales of fuel cell vehicles. Hyundai said it will be another 10 years before hydrogen cars start gaining wider acceptance. In the meantime, sales of eco-friendly cars are dominated by hybrid models such as Toyota's Prius and electric vehicles such as the Nissan Leaf, which are more affordable than fuel cell cars.
Hyundai also produces hybrid cars and electric vehicles. It plans to invest 11.3 trillion won ($10 billion) in eco-friendly technology including hybrid cars, electric battery vehicles and hydrogen fuel cells in the four years from 2015.
To boost sales, Hyundai slashed the Tucson fuel cell's price in South Korea in February to 85 million won ($76,000) from 150 million won ($134,000).
South Korean customers are local government offices as there is no government subsidy for consumers. South Korea's government plans to establish 10 charging stations for fuel cell cars and expects 1,000 hydrogen-powered vehicles will be on the streets in South Korea by 2020.
Japan started production of hydrogen-powered cars later than South Korea but such vehicles are experiencing faster growth in Japan with support from Prime Minister Shinzo Abe's government.
Toyota started sales of its Mirai fuel cell sedan in December and has decided to increase production to 3,000 vehicles in 2017, which is quadruple production this year. The company said it received 1,500 orders in the first month of sales in Japan.
The AP contributed to this report.