BMW gears up for electric buses with Proterra investment
Electric bus upstart Proterra shifted into a higher gear Tuesday with another substantial funding round: a $55 million infusion led by Al Gore’s Generation Investment Management and the corporate venture arm of German automaker BMW.
The new backing is intended, at least in part, to fuel Proterra’s investments in additional manufacturing capacity at its plants in Los Angeles and Greenville, South Carolina, said Toby Kraus, vice president of finance and strategy for the 13-year-old company.
Proterra previously raked in about $290 million, including a $140 million round disclosed in January. So far, the company has delivered about 100 electric buses to nearly 40 public transit agencies in locations ranging from big cities such as Seattle to smaller communities in Florida, Tennessee and South Carolina. As of early June, it was sitting on orders for 300 more of them.
"Over the last 18 months, things have been moving at a good clip," Kraus said. "We have launched a long-range vehicle that can do anything that a diesel bus can do."
Proterra will benefit from BMW’s investments in lightweight carbon fiber technologies and its innovations in electric vehicles, he said. (General Motors is also a backer.) Meanwhile, the addition of Generation Investment Management should bring more notoriety to the U.S. company, which employs about 300 people.
"More than ever before, cities are looking for smart and sustainable transportation solutions that can reduce pollution efficiently and effectively," said former Vice President Al Gore, chairman of Generation Investment, in a statement about the funding. "Proterra is incredibly well-positioned to help accelerate the growth of sustainable cities and continue our transition to a clean energy economy."
Electric buses are far more established outside the United States, particularly in emerging economies in the Asia Pacific region. Lower battery costs for electric vehicles are helping drive down costs, a development to should drive sales from about 119,000 buses in 2016 to around 181,000 in 2026, according to projections from Navigant Research. Aside from China, which offers subsidies to encourage adoption of the technology, India is planning major investments in the technology — it has committed to buying at least 10,000 in the near term.
In Europe, the biggest markets for electric buses are the United Kingdom (there’s even a double-decker model on the road), France and Germany.
Traditionally, each market has been dominated by regional suppliers, but the lines have begun to blur — BYD entered the United States about three years ago and plans to sell its wares in India. Other key players include Daimler (Germany), Iveco (Italy), Scania and Volvo (Sweden); well-known companies such as Hyundai (South Korea) are circling the space.
Proterra is "laser-focused" on sales in its home market of North America and is winning over cities interested in improving urban air quality and reducing greenhouse gas emissions, Kraus said. The range argument is becoming less of an issue — Proterra’s latest model, the Catalyst E2, can travel up to 350 miles on one charge. Consider that the average urban transit route is about 130 miles on a daily basis. This is allowing cities to reconfigure routes as buses age out — the average bus stays in service about 12 years. "The No. 1 reason that customers buy our vehicles is actually economic," Kraus said.
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That is, if you consider the cost of fuel in the ownership equation: Historically speaking, an electric bus costs around $300,000 more than a diesel model, according to various analyses (PDF), but if you factor in the fuel savings over the average life of the vehicle ($365,000), the investment looks far more reasonable.
That said, federal funding is definitely a factor in Proterra’s sales uptick. When King County in Washington state announced its intention to pay around $55 million for 73 Proterra buses in January, it received a $3.3 million grant to help. Many buses that the county is buying initially have a relatively short range of just 25 miles, but they can be fully recharged in 10 minutes. King Country also intends to invest in some longer range — and longer — 60-foot buses, which will come several manufacturers.
"To better serve our customers, we want battery buses that travel longer distances and can carry more people," said the county’s transit agency general manager, Rob Gannon, in a statement. "We’re committed to expanding our bus fleet and new the industry to accelerate development of standardized battery bus charging systems that can work flexibly for any business route, and also build more 60-foot-long articulated buses — which serve as the transit workhorses in King County."