Cost of Batteries, Increased Incentives Drive Electric Bus Market

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Falling costs of batteries and increasing government regulations and incentives will boost the electric bus market in coming years, according to a new report.

Batteries make up 40% of the cost of electric buses, according to the report by ReportLinker, and the average cost of lithium-ion battery packs for large orders has fallen from about $600 a kilowatt hour in 2015 to $150 a kilowatt hour in 2020. That has helped spur the sales of more than 82,000 electric buses last year, and the report says there will be a CAGR of 14.9% through 2026.

In addition to battery costs and growing financial incentives, the report says more major automotive companies are producing the vehicles, which is also boosting the market. The electric bus market exceeded $28 billion in 2020.

North America is expected to be the fastest growing electric bus market based on increasing emissions regulations. The United States leads the way in the region with tax credits and other incentives encouraging the move to electric buses.

Electric vehicles were a big part of a $2 trillion infrastructure plan, with $174 billion of that going toward the industry. Varying incentives have also driven the market in the country.

The EPA, for example, offered a $7 million electric school bus rebate through the American Rescue Plan Act of 2021. There have been more than 400 electric school bus orders placed through Blue Bird over the past three years, that company says.

As the market expands in the US, the New York Power Authority recently partnered with ABM Industries in a $39 million agreement to improve infrastructure for electric buses. The city plans to have an all-electric fleet by 2040.

This week the Central Florida Regional Transportation Authority (LYNX) also will be piloting an electric bus route in the Orlando area. LYNX began implementing electric buses in 2020 with plans to have an entirely electric fleet by 2022.

Economic incentives and efforts to reduce emissions are helping implement the vehicles across the world.

In India, the ReportLinker account says, the government has provided $486 million in incentives to support the deployment of more than 7,000 of the vehicles there.

Asia-Pacific currently has the largest share of electric buses, especially because of a large deployment of the buses in China. That has also been enhanced by financial incentives by the government to replace traditional fuels such as diesel, petrol and natural gas with greener variants, the report finds.