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Biden Gives Electric School Buses A Boost

Commercial Vehicles

November 2021

Jamie Fox

Principal Analyst

Jamie has 18 years experience in market intelligence. He covers commercial vehicles including battery electric vehicles and hydrogen. Jamie has worked on on-road (truck and bus), off-highway and components. He holds a BSc in Physics and Astronomy and an MSc in Nanoscale Science and Technology. Jamie is based in Chile.

US President Joe Biden is expected to sign an infrastructure bill (also known as BIF) today which has already passed both houses of Congress. One small part of this large bill concerns electric buses. My take on this bill is that it will make a big difference to the US school bus market but have a less dramatic impact on city transit buses.

To understand why I think this, and to understand this bill correctly, I think it’s first necessary to clearly understand exactly what is planned and exactly what certain figures refer to.

Firstly, the funding for transit/city buses and school buses are allocated quite separately in different areas of the bill.

Funding For Electric City Buses

The funding for transit buses (or city or urban buses) has been increased from a previous $90.5 million per fiscal year to $206 million per fiscal year, with each state getting $4 million per year and the remainder to territories.

This funding is for “low or no emissions vehicles” so it will include hybrid vehicles as well as hydrogen and battery electric vehicles. However, many OEMs are not focusing on hybrid buses and there are few stakeholders that are pushing the market in that direction. Hydrogen buses will play a role but due to high cost, lack of infrastructure and available supply, may, at least in the short term, not take up the majority of that funding either.

Battery electric buses may lead overall here then, after considering all factors including clean air, climate change, total cost of ownership and availability of supply. A reasonable initial estimate might be that perhaps around 60%, or $126 million per year of that $206 million per year may go to battery electric . However, Interact Analysis will interview industry stakeholders and fine tune this estimate ahead of the production of our upcoming hybrid and electric truck and bus report.

In order to determine the number of buses that will be sold, we need to know the average subsidy that will be allocated to each bus. One possibility might be $150,000 per bus. That would assume that in many cases just enough subsidy is given to make up the electric vehicle cost competitive and that in some cases the whole cost of the bus might be paid. Again, we will fine tune this estimate in upcoming interviews with bus OEMs and other industry stakeholders.

Forecasting Electric City Buses

$126 million per year divided by $150,000 per bus would mean 840 BEV buses per year paid for partly or fully by subsidies – as well as a smaller number of hybrids and hydrogen buses. This number is already broadly consistent with our previous forecast of 968 in 2022 steadily rising to 2120 in 2026 (the total number of all US city buses registered including conventional combustion engines is about 5,000 per year). Note that our previous forecast includes all city buses, including ones that are purchased without subsidies.

This bill may give a boost to 2022 numbers, but our forecast for 2023-2026 won’t likely change much as a result of this incentive, because market dynamics and local government decisions would in any case have led to similar numbers. Indeed, the available funding might even have a negative impact on some cities and counties. It’s not difficult to imagine some decision makers deciding not to purchase electric buses after losing out to others on funding competition, even though they might have gone ahead with a purchase decision if no funding was available nationwide.

Funding For Electric School Buses

The case for school buses is different, however. Due to the limited daily mileage, the annual savings on fuel relative to diesel buses are not as substantial so the total cost of ownership calculation does not work out as well for school buses. Therefore this funding changes things quite a lot.

During his campaign in 2020, President Biden launched a plan to convert all 500,000 US school buses to zero emission vehicles. The passing of this bill means he will fall short even if we allow him the possibility of a second term as President to accomplish it (which presumably was the intention, although this was never explicitly stated). However, few ever expected that particular target to be met.

Some media reports have cited a figure of $2.5 billion for electric school buses in this bill, but $2.5 billion has been allocated for zero emission (so electric) vehicles specifically, while another, additional $2.5 billion has been allocated for “clean school buses and zero-emission school buses”. “Clean school buses” in the bill refer to “a school bus that the Administrator certifies reduces emissions and is operated entirely or in part using an alternative fuel” where alternative fuel can include natural gas, propane and biofuels as well as battery electric and hydrogen.

This means that the amount for electric buses will be higher than $2.5 billion but lower than $5.0 billion. This is to be spent over five years, so each of fiscal years 2022 to 2026 inclusive will get between $0.5 billion and $1.0 billion for electric school buses. Fiscal year 2022 refers to October 2021 to September 2022.

Forecasting Electric School Buses

Just as an example scenario, we might see annual funding of $0.7 billion per year go to battery electric school buses, and $0.3 billion go to hydrogen, hybrids, propane, gas and biofuels combined. However, we will need to do further research before we can forecast this.

$0.7 billion per year for battery electric buses, at a subsidy of $150,000 per bus would give us 4,667 BEV school buses per year for 2022-2026. This is higher than our current forecast, as we had to factor in the possibility that this bill would not pass or that the electric bus funding might have been reduced or removed. However, it does still mean that the majority of the 40,000-50,000 new buses registered annually in the US will remain diesel for the foreseeable future.

Winners From This Announcement

Manufacturers such as Proterra and New Flyer should benefit from this news. The news highlights a particular opportunity for manufacturers focused on school buses such as Navistar, Blue Bird, Thomas Built and Lion Electric. Some of these manufacturers saw a stock price increase on November 5th following the vote. Given the size of the opportunity, and the potential for short term supply constraints at some companies as the market reacts, Chinese bus companies such as BYD – which have bigger global economies of scale of bus production – may also be able to benefit.


US electric buses now look set to catch up to European levels in the coming years, albeit lagging far behind both what China has done already. Unlike the transit bus market, these subsidies look set to be the decisive factor in this market. For electric school bus manufacturers, these are exciting times: it likely brings forward 2026’s market opportunity to 2022.

To continue the conversation about the electric vehicle market, get in touch with Jamie Fox, direct: