What are Main Factors Responsible for Surge in China Electric Bus Market?

On account of its high level of industrialization and vast population, China is the largest greenhouse gas (GHG) emitter in the world. As per the International Energy Agency (IEA), “…the emissions growth in 2018 was largely driven by non-OECD countries, led by China and India.”, reflecting why the country is now trying to bring a major reduction in these emissions. As a result of the continued government efforts, China has also become one of the largest producers and consumers of renewable energy!

China Electric Bus Market Outlook

Consistent with its efforts to clean up the country’s air, the People’s government has been offering strong support to electric vehicles (EVs) for quite some time. This is why P&S Intelligence says that the Chinese electric bus market will see176.4 thousand unit sales in 2025 compared to 104.3 thousand units in 2017, with the number increasing at an 8.6% CAGR between 2018 and 2025 (forecast period). China is already the largest EV user in the world, with the IEA saying in the context of electric buses for 2019 that “About half a million electric buses are in circulation, most of which are in China.”

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Even though China has reduced EV subsidies, the Chinese electric bus market is unlikely to witness any major impact, as most of the buses are run by government agencies, for whom subsidies do not matter anyway. In addition, the sale of electric buses is expected to pick up faster than those of electric cars and two-wheelers, as, compared to millions of individual vehicle owners, merely hundreds of commercial vehicle fleet owners have to be convinced to switch to electric mobility.

Another key driving factor for the Chinese electric bus market is the constant decrease in the price of the battery. Between 2012 and 2016, the purchase price for large lithium-ion battery orders dropped from $540 per kilowatt-hour (kWh) to $140/kWh. Since the battery cost accounts for almost 40% of the entire bus’s, this decline will be vital for increasing the latter’s adoption in China. Additionally, as battery companies increase their production capacity and achieve economies of scale, they will be able to further reduce the price of such components.

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Thus, with the government efforts to control air pollution, electric bus sales will keep rising in China.