Factors such as the increasing environmental concerns due to surging greenhouse gas (GHG) emissions and improving operational efficiency of batteries and plunging battery costs are expected to propel the electric bus market at a vigorous CAGR of 14.9% during the forecast period (2021â€“2026). According to P&S Intelligence, 82,604 units of electric buses were sold in 2020. The burgeoning demand for these buses can also be ascribed to the long-term cost benefits offered by them.
The electric bus demand is being driven by the declining costs and improving operational efficiency of batteries. This energy storage device accounts for approximately 40% of the production cost of such buses. Moreover, the increasing battery capacity, on account of continuous technological advancements, will also propel the demand for electric buses, as such batteries assist in meeting the rising need for a longer driving range. Currently, market players are working toward achieving higher energy density and reducing reliance on cobalt, which is an expensive raw material used in batteries, to boost the sales of electric buses.
Globally, Asia-Pacific (APAC) accounted for the largest share in the electric bus market in 2020, due to the presence of favorable government policies, such as tax rebates and discounts for replacing fossil fuel-driven buses with alternative fuel variants. For instance, the Government of China provides a subsidy of up to RMB 500,000 (around $72,500) for fuel cell electric buses. Furthermore, the National Development and Reform Commission (NDRC), Ministry of Transport (MoT), Ministry of Finance (MoF), Ministry of Housing and Urban-Rural Development (MoHURD), and Ministry of Industry and Information Technology (MIIT) promote the adoption of electric buses in China.
Whereas, the North American electric bus market is expected to demonstrate the fastest growth during the forecast period, owing to the presence of stringent emission norms in the region. In North America, the U.S. generates higher demand for electric buses, due to the enormous subsidies, tax credits, and financial incentives offered by the federal and state governments. Additionally, government initiatives such as exemption of such new energy buses from vehicle emission tests and toll charges also contribute to the market growth in the U.S.
Therefore, the lowering cost and improving efficiency of batteries and rising concerns being raised over GHG emissions are the prominent growth drivers of the market.