That’s not a rhetorical question; of the 425,000 electric buses worldwide at the beginning of the year, 421,000 were in China.

So why do over 99% of electric buses reside with the Asian superpower? A lot is to do with government policy and generous subsidies handed out there. Take the city of Shenzhen for example, government subsidies were providing almost half of the cost of an electric bus in 2015, sparking a rapid transformation of its entire bus fleet. By the end of 2017, all 16,359 buses had been electrified.

Electric Bus Adoption in Shenzhen, China

Source: Shenzhen Urban Transport Planning & Design Institute Co, Ltd

Compare this to the US and Europe where subsidies are smaller and you see that governments are more willing to let market forces play out. This inevitably leads to slower adoption as the economics take longer to tip in favour of electrifying transport. Less than 1% of the US’ municipal bus fleet is currently electric. But this is forecast to change to 6% by 2025 and 80% by 2040. Have we finally reached the inflection point?

The economics are aligning
The initial cost of an e-bus can be up to $200,000 more than its diesel counterpart. But a number of studies have shown that even with this initial premium, e-buses are now cheaper when the total life cycle of the vehicle is taken into consideration. Lower fuel and maintenance costs significantly reduce the overall costs of running an e-bus over its full years of service:

Total Lifecycle Costs of Transit Buses

Unfortunately for many local governments, the higher initial outlay is still a stumbling block and realising the financial benefits 5+ years down the line takes a long-term mindset. But now companies like Proterra offer leasing agreements for the battery, making the initial cost the same. The price to buy the battery outright (the expensive bit) is also coming down.

Why should we care?
The effects of the EV industry on displacing oil demand is growing. It’s estimated that 256K barrels per day (equivalent use of a medium-sized country such as Portugal) were displaced by passenger EVs and e-buses in 2018. If the goal is to move to lower carbon economies, e-buses can make a sizeable difference to the transport sector. So far, the majority of this fossil fuel displacement has come from China’s fleet, replacing more than 4 times than that of passenger EVs:

Cumulative fuel demand displaced by product 

Source: BloombergNEF

Cities are coming under increasing pressure to reduce congestion and clean up the air we breathe. Many are signing up to initiatives such as the Fossil-fuel-free streets declaration that has participants pledge to; “Procuring, with our partners, only zero-emission buses from 2025; and ensuring a major area of our city is zero emission by 2030.” London, Paris, Los Angeles and Copenhagen are amongst the signatories.

Further positives include comparable ranges (it’s a bus that holds the world record for distance travelled by an electric vehicle; 1,100 miles), less noise and better driving performance.

With the economics aligning and the positive societal and environmental benefits from e-buses, it might be appropriate to finish on the old adage of ‘you wait forever for one to come and then three come at once’.


P.s we have an added extra this week from our Ethical fund range;

‘In response to client feedback, we are pleased to announce that the Kames ethical fund range is now fossil fuel free.

Kames recently celebrated the 30th anniversary of the Kames ethical equity fund. In the three decades of providing UK investors with ethical investment products, the Kames ethical funds have evolved in response to client feedback and changing societal concerns. The funds have previously made only selective investments in in the oil and gas sector.  Excluding the sector continues the funds evolution, ensures their continuing relevance and brings them into line with investor requirements.­­

The breadth of the client-led exclusions that the Kames ethical funds apply mean they remain some of the most stringent in the UK market. The changes we have now made will also mean they meet the demands of investors who are seeking fossil fuel free investment opportunities.’


About the author

Euan Ker is a Sustainable Investment Analyst. He is responsible for analysing and monitoring environmental, social and governance factors within the Global Sustainable Equity Strategy. Euan joined us in 2014 as an investment implementation analyst with responsibility for implementing macro investment decisions across a number of fund-of-fund mandates, totaling some £13 billion under management. Prior to moving to the ESG Research team in 2018 his responsibilities also included asset class, regional and currency hedging overlays through derivatives. Euan has a 1st Class Honours degree in Management with Economics from Robert Gordon University. He has the IMC professional qualification and has 5 years’ industry experience (as at 30 April 2019). 

Sign up to receive our fortnightly Soapbox email

Share This