Bus purchases represent one of the largest investments for most transit agencies in the United States. According to the American Public Transportation Association, in 2020 about 11 percent of all transit capital expenditures went toward passenger bus vehicles (known as “rolling stock”.)  The standard 40-foot bus is the workhorse of public transit in the United States, responsible for over 58 percent of all transit trips. Today, however, there is concern that the over-customization of new buses could be leading to higher costs for transit agencies and reducing the competitiveness of U.S. vehicle manufacturers. 

Agencies customize buses for a host of reasons. For example, they provide unique branding for their vehicles with exterior wraps and matching color schemes, which helps transit agencies to be visible in their communities. Agencies may also customize to meet certain HVAC and engine needs specific to the geographic settings or climate patterns of their communities.  

But recent analysis of bus procurements suggests customization could be driving up costs in a detrimental or counterproductive way. When designing a bus for a new transit agency partner, an original equipment manufacturer (OEM) must go through a rigorous configuration review and may need to do additional engineering work to meet an agency’s requirements. Manufacturers struggle to pass these costs on to the purchaser, making it difficult for them to stay in business. This is not just a problem for those companies, but fewer manufacturers reduces competition and hinders national public policy goals, such as Buy America

On August 8, Proterra Inc, an electric bus manufacturer, filed for bankruptcy. While Proterra’s path to bankruptcy was the result of multiple converging factors, the company’s Chapter 11 filing notes that “transit agencies demand highly customized buses that align with the other buses in their respective fleets. Therefore, the manufacturing process requires customization, which makes scaling the business difficult and requires an extensive amount of working capital.” Another manufacturer, Nova Bus, cited profitability challenges as the motivator for their withdrawal from the U.S. market by 2025. Our recent analysis suggests that excess customization was a contributing factor. 

Drawing a clear connection between excess customization and costs is admittedly difficult. For one, “excess” is a subjective term and equipment that may have been considered optional in the past (e.g., security, farebox, and GPS technology) are now considered industry standards by most transit purchasers. Another issue that makes this analysis challenging is that bus manufacturers do not make their prices for standard base buses (which do not include the aforementioned options for security, farebox, and GPS equipment) publicly available.  

However, an analysis of data from California’s Hybrid and Zero-Emission Truck and Bus Voucher Incentive Program (HVIP) offers a window into cost variance with transit bus procurements. The program  was established in 2009 by the California Air Resource Board (CARB) to provide incentives for the purchase of zero-emission buses (ZEBs) to transition away more quickly from more heavily polluting vehicles. Data from this program from 2016-2022 spanning 255 purchased orders makes clear the vast range of purchase price for the same model of bus. For one model, even after removing the most egregious outlier, per-unit bus prices ranged from $800,000 to almost $1,300,000. The table below presents the price range for the six most popular ZEB models sold to FTA-grant eligible buyers within the California HVIP.   

Source: California HVIP purchase order data, 2016-2022. 

Expanding the analysis further to all transit buses purchased with HVIP in California illustrates that this is a problem specific to transit agency procurements. An analysis of 297 purchase orders for 35’ and 40’ ZEBs (14 percent of which were to buyers not eligible for FTA discretionary funding) indicates that ZEBs bought by FTA eligible buyers are consistently more expensive than other buyers since 2017. This gap has only worsened since supply chain bottlenecks and inflationary pressure in recent years have driven up industry costs.  

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