How To Invest In Electric Buses

With 91% of the world’s population living in places where air quality exceeds WHO guideline limits, the situation is becoming increasingly alarming. Harmful tailpipe emissions are among the biggest contributors to air pollution, and this has shifted focus towards electric vehicles (EVs) as a viable alternative. The consumption of barrels of fossil fuel and emission of harmful gases by buses worldwide strengthens the case for replacement of internal combustion vehicles by electric counterparts. The transition of public transport, such as buses, to electric is the need of the hour.

Here’s an overview of the electric bus segment

It is estimated that the total contribution of transport to particulate air pollution can vary widely, from 12-70% of the total pollution mix. The impact of air pollution on health is startling; it is reported that air pollution can lower the life expectancy of a person by 1.8 years and it is responsible for more than 8 million premature deaths each year globally. Studies suggest that over 25 tonnes of carbon dioxide emissions can be reduced by using an electric bus instead of a fossil-powered bus.

China is the world’s largest vehicle market across all segments, be it gasoline or electric. China’s automobile output is expected to reach 35 million by 2025. China took note of its rising environmental problem long back and to combat the same, its government took timely measures to push the EV segment. In 2009, the Chinese government launched a series of policy initiatives to promote EVs, with an aim to minimize exhaust emissions. Manufacturers have been given incentives in the form of subsidies and tax benefits. China has achieved great success in transforming its public transport to electric given that more than 90% of new urban buses sold in 2017 were electric. The country achieved another milestone as Shenzhen—one of its prominent cities—entered 2019 as the world’s first city with an all-electric public transport system.

Like China, India has included EVs in its policies to lower carbon emissions while providing convenient and cost-effective mobility. Early this year, the second phase of the 'Faster Adoption and Manufacturing of Electric Vehicles (FAME India Phase II)' for promotion of electric mobility was adopted. The scheme with total outlay of ₹10,000 crores over the period of three years (effective from April 2019). The Ministry of Road, Transport and Highways (MORTH) constituted a committee of joint secretaries to execute a plan to deploy 10,000 electric buses. At a recent conclave, the Union Minister in India for MORTH said that in the next two years, all buses will be converted into electric in India.

During 2018, China, the U.S. and India together accounted for more than two-thirds of the global increase in energy demand. India and China are combating twin issues—huge oil dependence and rising air pollution; the adoption of electric buses can help reduce burden from both.

The U.S. lags behind China and India when it comes to the number of electric buses on the road. Although the start has been slow, U.S. is looking to catch up. The Metropolitan Transit Authority (MTA) which operates a fleet of almost 6,000 buses plans to convert its fleet into a zero-emissions fleet by 2040. In the U.S., the Federal Transit Administration (FTA) is providing several grants for the purchase of e-buses. A sum of $84.95 million was granted during fiscal year 2019 under the low or no-emission (low-no) bus program projects. There are other programs aimed at encouraging the adoption of electric buses in the nation. More and more states are eliminating new demand for internal combustion transit in the coming years; California has decided to do so by 2028. It is estimated that by 2025, more than 50% of the U.S. transit purchases will be electric with an annual market size of $3.6 billion.

In the European Union, several significant policies have been approved to give effect to e-bus adoption. It has been decided that at least a quarter of new buses bought by local authorities and public companies will need to be clean vehicles by 2025. In Germany, Berlin’s public transport operator “BVG” plans to convert its fleet to electric buses. Back in 2016, Dutch government announced its plan to convert all new public transport buses into zero-emission vehicles by 2025. Just not vehicles, EU is working towards leveraging the increase in demand for batteries given the ongoing clean transition worldwide. In May 2018, the Strategic Action Plan for Batteries in Europe was adopted. Sources estimate that the European market potential could be worth up to €250 billion annually from 2025 onwards. 

The Market & Manufacturers

McKinsey estimates that, ‘Electric buses constitute the fastest-growing part of the EV market, with a compound annual growth rate of more than 100% since 2013, compared with 60% for fully electric passenger cars.’ A report projects the e-bus market to surpass $165 billion by 2026, expanding at a CAGR of more than 24% during 2018-2026. Further, the BNEF’s Electric Vehicle Outlook 2019 shows that electric buses are set to hold 81% of municipal bus sales by 2040.

The electric vehicle market for buses is dominated by Chinese manufacturers. China’s BYD (BYDDF) continues to be one of the most experienced players in this segment and the first electric bus manufacturer worldwide with over 45,000 e-buses delivered. BYD has recently secured an order to deliver 22 fully electric 12-meter e-buses in Germany.

In the U.S., Proterra is the most prominent electric bus manufacturer.

In India, Tata Motors (TTM) has delivered more than 100 e-buses to two different states in the last few months. Meanwhile, some the Indian automobile players are tying up with foreign companies, such as Ashok Leyland with Optare.

Volvo (VLVLY) has delivered e-buses in India and continues its supply in European countries; Volvo e-buses can be seen in Denmark, Britain, Luxemburg, the Netherlands, Norway and Poland and Sweden (next summer). Some of the other companies are Xiamen King Long United Automotive (China), Zhengzhou Yutong Group (China), Solaris Bus & Coach (Poland), Daimler (DMLRY) (Germany), Zhongtong Bus & Holding (China), Ebusco (Dutch), Alexander Dennis (UK), Dongfeng Automobile (China), FAW Group (China), and Skoda Auto (Czech Republic), among others.

While challenges remain, more and more governments around the world are committing themselves to bring a change to how their public transport system works. Electric is the way forward.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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