The commute on the number 43 bus past the Bank of England between London Bridge and Friern Barnet highlights the critical challenge facing the UK bus industry.
The sleek double-decker is one of the capital’s 450 electric buses, but no more than a third of the seats are full during midweek rush hour as the industry struggles with the collapse in passenger numbers.
For the producers of electric and hydrogen vehicles, the coronavirus crisis came just at the wrong time as they prepared to overhaul Britain’s fleet of 38,200 buses and take advantage of diesel falling out of favour.
The ambition to transform the market to green powertrains remains — but now the primary concern is how it can stagger back to health after passenger numbers dived more than 80 per cent at one point during the crisis last year.
“We’re running towards a cliff edge, if we don’t start getting orders,” said Andy Palmer, chair of Leeds-based bus maker Switch Mobility and former Aston Martin chief executive. “The key point is speed. The industry needs to get back on its feet and manufacture at scale.”
To get those orders, manufacturers need government help, which ministers recognised with a promise of £5bn for buses and other transport in early 2020.
This was narrowed down in England’s national bus strategy — the biggest transformation since the sector was deregulated in 1986 — to £3bn in March, specifically for buses and the reaffirming of support for building 4,000 low-emission vehicles.
As part of this strategy, the government launched the tender for the first tranche to support 500 buses at the end of March.
Still, some operators worry government money may be as slow in arriving as some of the country’s buses, undermining their desire to pump money into the electric sector.
“It’s only through making profits that we can invest,” said David Brown, chief executive of Newcastle-based Go-Ahead. He points out that electric buses cost twice as much upfront as diesel.
It means the big operators, which include National Express, Stagecoach and FirstGroup as well as Go-Ahead, need the subsidies soon if they are going to invest in orders for battery-powered vehicles.
Paul Davies, president of the UK’s largest bus and coach manufacturer Alexander Dennis Limited, ADL, said orders were about 1,000 units lower than expected in 2020, almost half of pre-pandemic expectations.
Other groups needed intervention to survive. Northern Ireland-based Wrightbus was on the verge of collapse before being rescued by businessman Jo Bamford, the heir to JCB, Britain’s construction equipment manufacturer, known for its yellow diggers.
Bamford, however, is upbeat, saying orders for electric buses will come, helped by moves towards low-emission street regulations in cities and operators such as National Express committing to a zero-emission bus fleet by 2030.
But, even on optimistic forecasts, the UK’s three main electric bus manufacturers — ADL, Switch and Wrightbus — face big challenges from overseas rivals.
China’s Yutong Bus, the world’s largest producer, is way ahead of them, having sold 15,300 low-emission buses globally last year.
Its sights are also firmly set on exporting globally, selling 130 buses in the UK in the past 12 months and receiving an order in March for 55 more from Scotland’s McGill’s Buses.
ADL is attempting to meet this challenge by joining forces with Chinese battery maker BYD, while Bamford has turned to hydrogen as a way to get an edge. He owns Ryse, a hydrogen fuelling company.
“When someone has 73 per cent market share [of the global automotive electric battery market], it’s difficult to knock them off their perch,” he said, explaining his bet on hydrogen.
That bet was given a boost in March with a £11.2m government subsidy to create a hydrogen technology centre in Northern Ireland, where Bamford’s Wrightbus is based.
Even with government backing, the challenges for UK producers remain great, with groups such as Yutong on its third-generation of fuel cell buses in China, according to its UK boss Ian Downie.
In contrast, Britain’s biggest producer ADL is still on its second-generation and, like Wrightbus, which says it is constantly updating its technology, is reliant on fuel cells from Canada’s Ballard.
The UK government could also run into trouble with the World Trade Organization if it explicitly advocates supporting local procurement, said a person familiar with Department for Transport discussions on the policy.
On top of this, the British groups face a challenge from Arrival, which listed in the US in March through a special purpose acquisition company and is backed by South Korea’s Hyundai. It aims to start producing buses from its “microfactory” by the end of the year.
In the view of Palmer at Switch, the UK groups will need to develop overseas markets to achieve the economies of scale to make profits.
“Can you survive on the basis of the UK alone? Our conclusion is you can’t,” said the chair of Switch, which is owned by Indian auto group Ashok Leyland. He pointed to India’s ambition to order 7,000 low-emissions buses by the end of its 2022 fiscal year that could benefit Switch.
However, before looking to expand overseas, the UK’s manufacturers need to get through the pandemic, which still hangs ominously over the sector, clouding its outlook.
The government must help UK groups “get us over this valley of death” to ensure their survival, said Nigel Base, commercial vehicle manager at lobby group the Society of Motor Manufacturers and Traders.