Global Economics

The Fuel-Cell Car—for Kids


The H-racer toy car from China's Horizon Fuel Cell Technologies is just the thing for children who want to play "green"

The low-slung, aerodynamic toy car runs fast. Inside its silver and transparent body is a small blue balloon and a blue chip. What makes the toy called the H-racer special is that it isn't powered by your usual alkaline batteries, but by an emerging green technology: the fuel cell. While fuel-cell-powered vehicles may be years or even decades away on a mass scale, a mini-version is about to arrive at your kids' playground. And perhaps not surprisingly, given the mainland's massive toy industry, it hails from China.

While 1.5 million Thomas & Friends wooden train sets are being recalled because of dangerous lead paint and "Made in China" is becoming synonymous with peril and disaster, at least in the eyes of some Westerners, China is also at the forefront of bringing cutting-edge fuel-cell technology to mainstream toy markets.

The H-racer toy car is developed by Horizon Fuel Cell Technologies, a technology startup headquartered in Singapore but with its base of operations in Shanghai. Recently, Horizon teamed up with Wah Shing Toys, a leading toy manufacturer with five factories in southern China, to bring the H-racer and other fuel-cell-powered toys to children who want to play "green." "This is the first time that a fuel-cell-powered product is being brought into the mainstream market," says Taras Wankewycz, a Shanghai entrepreneur who co-founded Horizon with a handful of entrepreneurs from China and Germany in 2003 and serves as vice-president.

From Plastic Toys to Fuel Cells

Backed by European, U.S., and Asian investors, Horizon aims to bring fuel-cell technology out of the lab and into consumer-product markets. Wah Shing is a Hong Kong subsidiary of South China Industries Limited. Last year, its five factories in mainland China made 60 million toys, including robots, dolls, and electronic toys for companies such as Hasbro (HAS) and WowWee.

This is "a high-risk venture: We're looking at whether a former plastic-toy manufacturer can make the jump to hydrogen-based fuel technology," says Jing Ulrich, Hong Kong-based chairman of China equities at JPMorgan Securities. "However, they appear to have made some initial success."

Horizon introduced the H-racer in the U.S., Japan, and European countries including Germany, Italy, and Britain in June, 2006. Since then, tens of thousands of units have been sold in the U.S. alone. The alliance with Wah Shing aims to scale up the production of the H-racer, and apply the technology to a wider array of toys, including more sophisticated, remote-controlled toy cars. The companies are also in talks with major international toy companies, whose names they would not disclose, to apply the technology to branded toys. Ultimately, the companies hope to roll out millions of fuel-cell-powered toys to children worldwide at the beginning of next year.

"It may be two or three types of cars, robots, talking dolls, depending on the progress of our negotiations," says Richard Ellert, Hong Kong-based managing director of Wah Shing. "But it could affect every kid who wants to experience toys that are environmentally friendly."

Expanding Market for Fuel-Cell Tech

Compared with battery-powered toys, which can cost as little as $24, H-racer is not cheap, with a price tag of $110 to $120. But Horizon estimates the price will drop in one or two years as volumes increase.

Horizon also aims to bring to market fuel-cell batteries that can be used just like the usual dry-cell batteries for powering consumer electronics, which could have a big environmental payoff. Americans purchase nearly 3 billion dry-cell batteries every year to power radios, toys, cellular phones, watches, laptop computers, and portable power tools. On average, each American discards eight dry-cell batteries per year, according to the U.S. Environmental Protection Agency. "Toys are a small step away from consumer products, where we could see fuel-cell technology used in flashlights, mobile phones, laptops, just to name a few," says Wankewycz. And in the long term, Horizon is even interested in developing fuel-cell power systems for automobiles, he says.

In recent years, China has become a leader in utilizing sophisticated, high-tech renewable energy. In 2004, China set up one of the largest solar photovoltaic power stations in southern China's Shenzhen, and the country is the third-largest biofuel and third-largest ethanol producer, according to the National Renewable Energy Laboratory, a research laboratory under the U.S. Energy Dept. China also plans to invest $184 billion to boost renewable-energy consumption to 15% of total energy consumption by 2020, according to China Daily, the nation's leading English newspaper.

As renewable energy in China becomes big business, many technology companies smell opportunity. Horizon chose to base its business in Shanghai because it sees China as its largest market in the future. For the short term, China's status as the world's largest manufacturing base provides convenient access to everything from technology to supply chains. "If we were based in the U.S. or Europe, our market would usually be local," says Wankewycz. "But based in China, we can reach the global market."

Xiang is a reporter in BusinessWeek's Hong Kong bureau.

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