By Balazs Kiss
Electric buses are becoming increasingly common in the public transport systems of every city. Chinese manufacturers such as BYD or Yutong are strikingly strong market players, and deliver a massive number of vehicles to many places across the globe.
Chinese e-bus manufacturers have a first-mover advantage
The main reason behind the competitive edge of Chinese e-bus manufacturers is their homeland’s first-mover advantage and continuously strong national demand. Chinese authorities were right to identify diesel-powered transport vehicles as significant contributors to the country’s pollution problem. On average, electric buses emit 67.02 kg of CO2 per 100 km per year, compared with 129.91 kg of diesel vehicles, which is an almost 50% difference. A reduction in fuel consumption is another important factor, especially for a country like China, with a heavy dependence on oil imports.
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In this spirit, China had about 99% of the 385,000 electric buses worldwide in 2017, and it added roughly 9,500 new zero-emission buses every five weeks. At that time, this amounted to London’s whole working fleet. This feat was achieved by a number of pilot programs. Let’s take into account Shenzhen, a city notorious for its bad air quality that was chosen to be part of a zero-emission program in 2009. Two years later, BYD (a major manufacturer of automobiles in China, most notably for electric and hybrid vehicles) produced its first electric buses. In 2018, Shenzhen became the first in the world to have an all-electric public bus fleet.
The main driver was the government’s generous subsidy policy.
This rapid advance in fleet electrification was made possible by heavy subsidies. In Shenzhen, a local public bus operator was granted around 500,000 yuan (USD 72,150) worth of subsidies for every vehicle it runs every year. Additionally, for buses that run more than 60,000 km, another 500,000 yuan was paid by the local government. Typically, subsidies covered around half of total CAPEX per unit. The city has also built more than 500 charging stations and is able to charge about half the fleet at once.
Many of these subsidies applicable on the Chinese market were set to expire in 2022. However, in an attempt to stimulate the market, Beijing is now considering not to roll out its generous scheme. Still, as domestic subsidies might soon run out, Chinese manufacturers are right to leverage their home-grown advantage and strengthen their presence in other markets.
It’s not just about the price: technology, localisation strategies and geographical proximity matter.
The Asia Pacific region was by far the biggest market for electric buses in 2022 (105,021 units), and is projected to retain its dominance until at least 2027. Due to its geographic proximity, Chinese manufacturers could easily enter these adjacent markets. Even in larger countries such as South-Korea, about half of the market has been taken up by Chinese e- buses, a major reason being their price competitiveness. BYD, now the largest EV manufacturer globally, has produced about 70% of electric buses in Japan as of 2022. BYD has an advantage in both technology and operating costs. It is also using “customisation” techniques, for instance, its J6 model is a pure electric bus designed specifically for Japan with a smaller than usual body (to better suit narrow roads) and lower floor (to help the social needs of an aging society).
For a long time, BYD has been in a good overall market position since its models boast some of the longest ranges (up to 350 km) and since the company was the first to introduce an 18-meter articulated electric bus model. The manufacturer opened assembly plants on a global scale. Besides Asia, it has factories in both Europe (Hungary) and North-America (Canada, US). By opening a bus and battery plant in California, BYD has qualified for US federal funding from the ‘Buy America Act’;. As an important roadblock however, in late 2021, a ban on federal transit funding for China-linked manufacturers went into effect. This restriction took aim at BYD too, federal funding being mostly necessary for investment into e-buses. (The new rule has benefited US-based competitors, mainly Proterra.) Still, BYD’s approach can still work elsewhere: by localising the production and employing local people, it can garner political support in home countries.
Another important tool is setting up local cooperative agreements
BYD is strong in setting up joint ventures in foreign countries. In India, it has partnered with the country’s biggest e-bus manufacturer, Olectra Greentech, and provided crucial technological support for its buses. The cooperation is now expected to deliver 2000 buses by early 2023. In the UK, it has set up an agreement with Alexander Dennis Ltd (ADL) and provides chassis, batteries and core powertrain technology for buses. With this cooperation, in Europe, it holds a 11% market share for newly registered buses (2021), only behind leading European manufacturer CAF (Solaris) with 12%.
With the threat looming over deliveries in the US, it is wise to place even more emphasis on Europe. Just as in India, BYD aims to embed itself into the local market by bringing the production home. Presently, with its ‘Made in Europe for Europe’ principle, it is now expanding its e-bus factory located in Hungary. This would result in its production capacity increasing fivefold to 1,000 electric buses per year.
As its first-mover advantage fades, localisation strategies will be increasingly important for China. This will not only be the case for BYD, but for all other Chinese manufacturers on the EV and e-bus market. In addition to localisation strategies, preserving access to local subsidies will be vital for China’s continued competitiveness and growth in the electric bus industry.