What the Proterra bankruptcy means for the electric bus industry

The article notes that the bankruptcy filing from electric bus manufacturer Proterra in early August is a significant stumble on the road to electrifying heavy-duty transportation, according to experts and analysts. The California bus maker announced it had filed for Chapter 11 bankruptcy protection in an effort to maintain operations and restructure to better address what it called “macroeconomic headwinds.” Proterra, which has a market cap of $15.24 million, ranks among the most competitive electric bus makers globally and is the largest in North America.

Matt said: “This will be a challenge for the industry, but it’s not a death knell or anything catastrophic.” But it could shake the confidence of fleet managers and municipalities, who are some of the biggest buyers of electric buses, or e-buses.

Paradoxically, Proterra’s struggles arrive at a moment when the market for e-buses in the U.S. has grown by 66 percent in 2022. Not to mention, the Biden administration’s 2021 infrastructure law has doled out $5.5 billion to transit agencies to fund the purchase of electric buses.

So what went wrong, and why has Proterra resorted to bankruptcy? Many analysts in the transportation industry did not see Proterra’s bankruptcy coming.

Will buyers lose trust?

Seeing a major electric bus manufacturer go under does not inspire confidence for the buyers of this technology, analysts said.

Matt said: “This unquestionably makes it harder for city transit agencies to trust in their suppliers. But it’s definitely not impossible to gain that trust back.” Proterra will have to honor its existing contracts and warranties, and not leave customers out in the cold, to earn the trust back.

Shakiness among Proterra’s clients could spill over to the clients of other bus makers, who could start doubting the overall outlook for bus electrification, Matt added. “That is going to cause some growing pains in electric bus adoption.” He is advising companies in the industry to double down on reliability and trustworthiness.

Filling the void

Proterra’s potentially temporary exit from the electric bus market could create an opening for its competitors.

A few key players dominate the U.S. electric bus market, including Blue Bird and New Flyer of North America as well as BYD Motors of China, widely seen as a market leader.

Matt is skeptical that competitors could pick up the slack in the short term. “A lot of bus manufacturers are cranking at pretty full capacity, and making them as fast as they can,” he said. “But in the medium term, definitely that demand is still there, and it’s going to get captured by one of the other big players.”

It could be challenging, still, for the cities and agencies that are purchasing buses. Existing Proterra customers will have to keep their fingers crossed that their orders are fulfilled. And in the future, less manufacturing capacity means even longer waits (and potentially higher prices) for electric buses.

A lesson for climate tech

The challenges that drove Proterra to bankruptcy can apply to any climate tech startup trying to scale a new product.

Matt said replicability and standardization are key for startups to prevent these situations. In Proterra’s example, contracts and bus designs differed from city to city, making it impossible to gain the efficiency of scale. Standardizing the product and replicating it across orders would ease both sales and manufacturing, he added. “That will be key.”

Matt adds that standardization should extend to financing models instead of offering many unique ways for agencies to buy or lease electric buses. “At the end of the day, you’re going to need to pick one or two models and not try to be everything to everyone,” he said.