September 2021
Cities are electrifying public transport to tackle air pollution in densely populated urban areas and meet net-zero commitments. Around 10,500 global cities have adopted targets to reduce their greenhouse gas (GHG) emissions and 800 have committed to net-zero emissions.

States across the US are using their shares of Volkswagen's US$2.9bn mitigation trust fund to deploy electric school buses. VW was ordered to pay up after it equipped around 590k diesel cars with devices to cheat federal emissions tests in 2016-17.

Furthermore, the pandemic-induced boom in online shopping, and the huge rise in delivery vehicles it brings, has made the transition to electric increasingly imperative for cities and companies looking to slash emissions.



Cities are responsible for around 75% of CO2 emissions from global final energy use—and much of these come from transport. Fossil fuel powered vehicles emit roughly 24lbs of GHG emissions for every gallon of gas burned. In an effort to cut down on pollution, around 249 cities have enacted low-emission zones which deny polluting vehicles entry—either completely, or unless they pay a hefty fee. Going a step further, the Netherlands is claiming to be the first country in the world to give its cities the freedom to implement zero-emission zones. 

Looking at public transport, global electric bus sales rose 9% last year to 86k. Global stock totals 600k—98% of them in China. Indeed, Shenzhen is the world's first city to fully electrify its transport with 16k e-buses and 22k e-taxis. China has converted nearly 60% of its bus fleet to electric, compared to just 4.3% in Europe and 2% in the US. But momentum on both sides of the Atlantic, driven by tightening regulation to meet the Paris agreement, is building.

Norway is considering requiring most new vehicle purchases by public authorities—including cars, vans and city buses—to be electric from as early as next year. In the US, the Biden administration is seeking half of all new vehicles sold to be electric by 2030.

As the shift from brick-and-mortar to online shipping continues and board rooms have no choice but to get ESG savvy, the rapid shift to electric delivery vehicles is almost a given. Retail ecommerce sales are forecast to reach US$5.4bn in 2022, versus US$4.3bn last year, according to eMarketer.

Germany-based DHL Group, the world's largest logistics company, has earmarked EUR7bn (US$8.6bn) to deploy 80k EVs by 2030. This would boost its share of EVs to 60% of its 'last mile' delivery fleet, up from 18% in 2020. The group's emissions totalled 33Mt last year, but it plans to keep them below 29Mt by 2030.  Without electrification, emissions would spike to 46Mt by decade-end, the company forecasts.



Amazon has contracted Michigan-based EV maker Rivian to produce 100k electric delivery vans by 2030, with the first 10k hitting the road by the end of 2022. Partly propelled by surging demand during the pandemic, people spent more than US$610bn on Amazon over the 12 months ending in June, according to estimates compiled by FactSet. Meanwhile, Ingka Group, IKEA's biggest franchisee, plans to offer 100% zero-emissions home deliveries by 2025. Netherlands-based Ingka currently operates 378 IKEA stores in 32 countries. It has partnered with Denver-based rental company Fluid Truck to access EVs for its US deliveries.

The World Economic Forum estimates that e-commerce will increase the number of delivery vehicles on the roads of the world’s 100 largest cities by 36% by 2030. If all those vehicles burn fossil fuels, emissions will increase by 32%. But switching to electric delivery vehicles would cut emissions by 30% from current levels as well as reducing costs by 25%.

The global stock of electric light-commercial vehicle (LCV) is around 435k units. About a third of these are in Europe, where sales rose 40% last year to more than 37k, driven by stimulus packages and tightening C02 standards that limit emissions per kilometre driven.

Electric LCV sales in China, meanwhile, slipped 9.3% in 2020 to 39k, falling to slightly less than half of the peak in 2018 (84k). Sales in the rest of the world totalled about 19k units, mostly in Korea and Canada. However, current standards for LCVs are not tough enough to warrant large-scale electrification, as they do for passenger cars.

Meanwhile, global electric heavy-duty truck (HDT) sales rose 10% last year to 7,400, with stock at 31k. China continues to dominate the sector, with 6,700 new sales in 2020, up 10% on-year. Electric HDT sales in Europe jumped 23% to about 450 and rose in the US to 240 vehicles. Truck makers such as Daimler, MAN, Renault, Scania and Volvo have indicated they see an all-electric future. Meanwhile, start-ups like Chanje, Arrival, Nikola, and Rivian are also getting on board. Volvo, Daimler Truck and the Traton Group announced in July plans to invest EUR500m (US$587m) to develop a European charging network for HDTs.



China continues to dominate the electric bus market, driven by local policies to curb air pollution. Sales rose 9% in 2020 to 78k vehicles to reach a sales share of 27%. China last year announced it plans to peak carbon emissions before 2030 and achieve carbon neutrality by 2060.

Shenzhen Bus Group, the city's biggest bus company, estimates that an e-bus costs around US$98k annually, compared to US$112k for its diesel counterpart. This is because they are cheaper to fuel, and, with their streamlined engines, easier to maintain.

Looking at the private sector, Chinese e-commerce giant plans to replace its entire vehicle fleet of more than 10k with new energy vehicles by 2022. JD says it had reduced C02 emissions by more than 120ktpa since the replacement strategy began in 2017. Shenzhen-based logistics company SF Express deployed 17,053 new-energy vehicles in 185 cities as of end-2020, jumping 50% from 2019. It plans to bring into service an additional 8k NEVs this year.

Home appliance retail giant Suning said in 2018 that it plans to deploy 5k NEVs for its delivery network. The Nanjing-based firm inked a long-term strategic partnership with Chinese EV maker NIO last year.



United States

Transport accounts for about 29% of US emissions, more than any other sector, which means any plan to cut GHG emissions needs to centre around it. The Biden administration has targeted bus electrification as one of the main ways to help halve GHG emissions by 2030, compared to 2005 levels. Currently, of the country's roughly 70k diesel buses, only around 2% are zero emission, according to the Center for Transportation and Environment.

The Senate-passed US$1tn infrastructure plan, which is set for a House vote at the end of September, would devote US$2.5bn to replace aging school buses with 11k electric alternatives. There has also been another US$2.5bn allocated for "low-emission" ones. But this would only fund the shift for a tiny slice of school buses, given that there are currently 480k of them across the country, 95% of which run on diesel.

The bipartisan deal would also provide US$7.5bn for charging infrastructure along major highways and corridors. The sums are substantially less than the US$174bn Biden initially proposed last March to boost the overall EV market. That plan aimed to electrify 96k school buses, or about 20% of the US fleet, and roll out 500k public chargers.

The US e-bus market is currently led by California-based Proterra Inc and BYD North America, a unit of China-based BYD. Both companies have sold around 1k e-buses in the country over the past ten years. Colorado-based Lightning eMotors, which builds EVs for commercial fleets, struck a deal worth up to US$850m in August to provide electric powertrains for shuttle buses made by Forest River, a Berkshire Hathaway company.

Illinois will spend US$88.6m from its Volkswagen settlement to electrify transport. This includes US$39.9m on e-buses, US$33.6m for e-school buses, US$13.3m on charging infrastructure. Meanwhile, Florida will spend US$57m from its US$166m Volkswagen fund to replace diesel-fuelled buses with electric ones. Another US$25m from the fund will be spend on EV charging stations.

Virginia has pledged US$10.5m from its US$93.6m Volkswagen settlement to replace 75 diesel buses with electric versions. The rollout will be in partnership with Dominion Energy, which has deployed 50 e-buses in a pilot program as part of a vehicle-to-grid plan. The NYSE-listed electric utility plans to expand the program to another 1k by 2025, which could provide enough energy to power more than 10k homes. Dominion then plans to electrify all school buses in the state by 2030.

California announced last year that all commercial trucks and vans must be zero-emission by 2045. The state mandated in 2018 that all buses must be electric from 2029. Fifteen others states and Washington, DC have since announced similar targets.



UPS inked a deal with UK electric van start-up Arrival last year to buy 10k of its electric delivery vans through 2024. The Seattle-based shipping giant said there was potential to purchase another 10k after that. Globally, UPS operates around 120k vehicles and around 13k of them are alternatively powered, including battery electric. UPS has less than a 1% stake in Arrival. BlackRock and the South Korean automakers Hyundai and Kia have also invested in Arrival.

Looking at e-trucks, the Tesla semi has received 130 orders from Walmart, 100 from Pepsi ordered 100, 40 from Anheuser-Busch, 20 from FedEx, 50 from Sysco. CEO Elon Musk said he expects to sell 100k or more of the Semi in 2022. Deliveries will begin next year.


European Union

A stronger push for e-mobility across the bloc is already underway as it looks to cut carbon emissions by 55% below 1990 levels by 2030, on the way to net-zero by mid-century. Brussels has proposed strict carbon standards on road transport, a 2035 end to new fossil fuel vehicle sales and the introduction of carbon-related import tariffs.



There are 692,207 buses in circulation on the EU’s roads today, but only 4.3% of them are alternatively powered, according to the European Automobile Manufacturers Association. But the outlook is improving. Diesel buses held an EU-wide market share of 72.9% in 2020, down from 82.4% in 2019. Sales of new electric (BEV & PHEV) buses in the EU rose 18.4% to 1,714 buses last year, capturing a market share of 6.1%. Netherlands was the leading market with 446 purchases, followed by Germany (388) and Poland (200). Sales of HEV buses totalled 2,662 units last year, up 36.0% on-year. Germany accounted for roughly half of total sales with 1,243 units.

There is potential upside from the non-binding European Clean Bus Deployment Initiative, started by the EC in 2017. The 50 signatories include Barcelona, Berlin, Brussels, Copenhagen, Madrid, London, Milano, Nice, Oslo, Sofia and Warsaw. Roughly 8% of the bus fleet is renewed every year following a typical 8-10 year cycle life for diesel buses.

There are currently more than 28m vans on the EU’s roads. Alternatively-powered vans have risen to 4.2% of all new van sales in the bloc, but only account for a measly 1.9% of all LCVs on the road today. In 2019, average new van emissions were 158.4g CO2/km in the EU.

Air pollution costs the EU economy between EUR427m (US$503.7m) and EUR790m (US$932m) every year, according to the European Commission. The auto industry generates more than 8% of the EU’s GDP, while the sector accounts for 6.7% of all EU jobs, employing 16.4m. 



The Canadian government announced in August that it would invest C$32m (US$25.4m) to install 853 EV charging points across the country. There are currently 6k public EV chargers in Canada, less than half of the country's gas stations. Montreal is investing US$885m in electrification—for EV charging stations, e-buses and e-bikes—over the next three years. Montreal aims to install 1k chargers by 2025, add 200 e-bikes, and at least 30 e-buses to its fleet. 



Moscow rolled out its 700th electric bus in August, up from zero three years ago. Another 200 e-buses are expected to be ready by the end of the year. In 2022, another 300 are expected to hit the road. The fleet will be increased to 2,200 by 2024.

Russia began replacing its diesel buses with electric ones in 2018, banning their purchase from this year. E-buses reduced Moscow's air pollution by 40kt in 2020, according to Moscow Transport. Moscow has a goal to install 500 fast charging stations by end of 2023, up from a current level of 129. Russian truck and auto manufacturer Kamaz opened its electric bus plant in Moscow in June. It has a capacity to produce 500 e-buses per year, with a second stage to boost output to 700 annually.


Latin America

Chile and Colombia are jumping on the e-bus bandwagon. In Santiago, 776 e-buses are in place, under private contracts. China's BYD has supplied 455 e-buses and 50 e-taxis so far in the country. A government program is covering up to CLP8m (US$11k) toward a new BYD e5 taxi, a little more than a third of the total cost, plus home charging equipment. Chile is aiming to achieve 100% electric public transport by 2040 and carbon neutrality by 2050.

Meanwhile, Bogotá announced in January it will update its fleet with 596 new BYD e-buses, taking the total to 1,485—the largest electric fleet outside China. The new e-buses are expected to be in operation by next year. The city expects to invest US$1.82bn to purchase the buses, and US$1.41bn to operate them over a 15-year timeline.


A Wave of Electrification

Globally, transport accounts for 24% of CO2 emissions, with road vehicles accounting for three-quarters of those emissions, according to the IEA. But passenger cars can only do so much to curb transportation emissions. The electrification of buses, vans and trucks is going to be essential.



They are fast-approaching life cycle cost parity with internal combustion engines, adding commercial viability to benefits such as better air quality and reduced noise pollution. Improved technology and scale of production will continue to drive costs down.

EVs make a lot of sense for buses and delivery fleets. They can be charged centrally at night, a daily route rarely exceeds one battery charge, and EVs are cheaper to maintain that their ICE counterparts.

The rise of EV adoption in public and commercial spheres will be supported by 'green' stimulus packages designed to drive economic growth and limit the costs of climate change. The private sector, meanwhile, is investing in e-mobility to avoid future penalties and appease ESG-conscious shareholders and customers.

Some commercial applications, however, may pose more difficulty for li-ion batteries. The heaviness of batteries, while not an issue for passenger cars, could limit the ability of semitrucks which need to travel long hauls with heavy freight. The use of 'green' hydrogen fuel cell trucks could solve that problem, which Hyundai is backing. Alternatively, lighter and smaller solid-state batteries could be a game changer, but they are years away from being viable even for passenger cars.