These should be boom times for transit bus manufacturers, especially those producing electric buses.
More than $3.3 billion has gone to fund transit buses and related infrastructure under the 2021 infrastructure law as of June. At the end of last year, almost 5,500 full-size zero-emission buses were on order, funded or on the road in the U.S., equivalent to nearly 10% of the total transit bus fleet.
But on Aug. 7, California-based Proterra, a leading electric transit bus manufacturer, filed for Chapter 11 bankruptcy protection.
NFI Group, the Canadian maker of New Flyer buses, underwent a $444 million refinancing plan this year after struggling with “inflation, supplier pricing adjustments, employee wage increases, and production inefficiencies,” according to the company’s first quarter 2023 financial report.
Nova Bus announced in June its intention to pull out of the U.S. market and close its Plattsburgh, New York, manufacturing facility by 2025, a result of ongoing financial losses.
“Not everyone has had the ability to make a successful ‘electric bus’ and it shows,” said Chris Murray, managing director for equity research at ATB Capital Markets, in an email.
“It's a challenging market at the best of times, given the high level of customization needed for each order, as well as the requirements around qualification and certification,” Murray explained. He pointed out that about 6,000 buses are produced in a typical year and that the flow of federal funds “doesn't move that 6,000 number much, especially with the supply chain issues.”
The loss of Nova Bus, which is part of the Volvo Group, could constrict transit bus availability at a time when orders are surging. The company commanded about 20% of the market prior to 2020, Murray said.
NFI Group President and CEO Paul Soubry told investors on the company’s Aug. 16 earnings call, “Year-over-year, our North American public bid universe is up 120%, and active bids are up 33%.” That represented a “new record for the highest number of bids submitted by NFI within one quarter,” he said.
“As we move into 2024 and 2025, we will be investing in working capital as we increase production rates and increase the amount of zero-emission buses built,” Soubry added.
Dramatic growth can create financial challenges. “In high growth environments like we are in, your cash consumption is a nonlinear item,” Proterra CEO Gareth Joyce said on a May 9 earnings call. “We noted in our prepared remarks that we expect Q2 to be an increase in cash burn again.”
Bus makers aren’t alone in their struggle to navigate the shifting market, Murray said: “It has been a learning process for regulators, transit authorities, local municipalities, the power guys and the manufacturers.”
Supply disruptions are improving, according to both Murray and Soubry. NFI Group “saw significant improvement in supply chain performance and associated production efficiencies,” Soubry said, but warned, “There's no question it will take time for our operations production efficiency to get back to pre-pandemic levels.”