China is driving e-bus demand – will the US and EU get on board?

China currently accounts for 98% of the global electric bus stock, and adoption is steadily increasing. The Chinese market will more than double to surpass the 1 million e-bus mark by 2023. In the US and Europe, the market remains largely in pilot phase. But with significant clean transport targets to reach that could be about to change.

We spoke to contributing analyst Timotej Gavrilovic about the forecast for e-bus and infrastructure growth.

The rise of the e-bus

In recent years the electric vehicle (EV) market has captured attention from consumers, manufacturers and media. While some have questioned whether the EV revolution may be more hype than reality, electrifying transport is becoming a popular strategy for cities, states, and countries seeking to accelerate the energy transition.

The change will not be easy. Unseating established technologies will require more than overcoming the pricing advantages that come with legacy supply chains. Maintenance staff will need to be retrained, facilities will need to be upgraded and operational practices will need to change. Extensive planning is needed to site, supply and maintain new electrical infrastructure at depots and along routes. Capital costs are significant: depot chargers cost around US$50,000-100,000, while higher power on-route chargers are as much as US$400,000.

These are sizeable challenges for transit operators, local governments and bus companies. Thin margins coupled with dependence on federal subsidies and local taxes amplify the cost of failure. As a result, the market innovates slowly, relying on extensive pilots and knowledge sharing to validate the business case for investment.

However, change is being driven by global concern about diesel emissions. In the last decade, policymakers around the world have offered incentives in the form of direct and partial funding, credits and long-term mandates.

So far, these policies have made the greatest dent in China.

Policy is driving e-bus adoption rates

In 2015, the Chinese government started diverting funds previously used to subsidise public transport fuel to support e-bus adoption. This continues to reduce dependence on foreign oil, promote public transit to ease congestion and reduce pollution in urban centres. These e-bus subsidies are expected to continue beyond the 2020 phaseout of national EV subsidies.

Continued government support will see China’s e-bus stock reach 1 million by 2023 and climb to 1.3 million by 2025.

In the US and Europe there is token support for pilots. In the US, for example, a federal fund supports the deployment of e-buses in transit and school bus segments. The Low or No Emission Bus (or ‘Low-No Bus’) Program has allocated nearly US$300 million in funding since 2017.

The EU’s goal of a 35% clean bus stock by 2030 provides government guidance for the industry’s growth. The degree to which this goal is achieved will vary by country.

Falling battery costs and lower operating costs also promote EV adoption

Over time, declining battery costs will reduce the need for subsidies and make e-buses more economically viable.

E-buses cost around US$750,000, compared to $435,000 for a diesel bus, but prices are poised to decline. While battery raw materials could face a supply crunch by the mid-2020s, spot prices for lithium carbonate have fallen. Lithium ion battery pricing will continue to fall through 2025, with nearly a 50% drop from 2017 – resulting in lower bus production costs. As e-buses have lower fuel and maintenance costs than a diesel equivalent, this will further strengthen the economic case.

Will e-bus growth accelerate in the US and EU?

Clean transport targets will help to push the e-bus market out of its pilot phase in the US and EU. But when will that growth gather momentum? How will e-bus charging infrastructure develop? And what role will transit operators, EV network providers, utilities, and governments play in enabling and promoting adoption?

You can find out more about our e-bus and infrastructure investment forecast in our report: The growing global e-bus landscape in China and beyond.