As electric and hybrid-electric buses gradually become a reality worldwide, achieving a better understanding of the mechanisms supporting investments in these new technologies as well as their assets is more important than ever. The global electric bus fleet grew about 32 percent in 2018, and it represents the fastest-growing part of the electric vehicle market. Nevertheless, capital costs for fully electric buses may be double or triple that of conventional internal combustion engine (ICE) buses, and batteries may need to be replaced after six to eight years, highlighting the importance of finding sustainable financial plans and business models.

This paper seeks to build on guidance provided by existing literature and dive deeper into some of the financial issues cities face, such as decisions about the different technologies, plans, operations, procurement strategies, regulations, and financing opportunities. The questions have been selected by the authors based on literature reviews, extensive desktop research into specific case studies, and interviews with stakeholders and global experts in the field. Thus, the responses are not meant to be prescriptive but instead represent the findings of the research.

Key Findings

  • Electric and hybrid-electric buses offer cities environmental and health benefits, such as helping to lower emissions that contribute to poor air quality and global climate change, as well as economic benefits, such as potential cost savings.
  • Although capital costs are often higher than conventional diesel buses, electric buses often have a competitive and sometimes lower total cost of ownership (TCO) due to savings from reduced energy costs per mile and maintenance.
  • Cities are adapting to how buses and bus services are procured, allowing third parties to assume an important share of the risk. More flexible procurement enables bus manufacturers to offer operators the option to lease both buses and batteries, reducing technological and financial risks.
  • Stakeholders not traditionally involved in transport, such as utility companies, have also recently been entering the market to purchase vehicles or batteries and lease them to the operators of the public fleets.
  • Some governments are helping cities to afford both direct and indirect costs of bus electrification. A variety of grants are helping cover direct costs, including for both capital and operational expenditures on buses and research and development. Tax incentives, such as value-added, import, and corporate profit tax breaks, are used to reduce the cost burden on operators and manufacturers.
  • Operators can reduce the financing costs by accessing available credit guarantees or concessional debt, for example, by public sector financial institutions.

Executive Summary

Full executive summary available in the paper.