Electric buses get billions in federal aid. A top maker just went bankrupt.
In court filings, California-based Proterra said it was struggling with how to make money while delivering the individually designed buses its customers demand.
“While our best-in-class EV and battery technologies have set an industry standard, we have faced various market and macroeconomic head winds, that have impacted our ability to efficiently scale all of our opportunities simultaneously,” company chief executive Gareth Joyce said in a news release announcing the bankruptcy.
Proterra says it plans to keep operating as it works through bankruptcy, while some transit agencies that ordered buses say they were assured they will receive them. But the company’s uncertain future is a new hurdle for the nation’s transition to electric power at a time when leaders in Washington and transit officials are aiming to move as quickly as possible to meet greenhouse gas emissions reduction goals.
Melinda J. Metzger, executive director of Pace, a bus network in suburban Chicago, said the industry can’t afford to lose a major manufacturer.
“If there’s less manufacturers, the backlog gets greater and we can’t get these buses on the street, which we need to do,” said Metzger, whose agency is waiting on the delivery of 22 Proterra buses.
The bipartisan infrastructure law provided $5.5 billion for low- and no-emission buses over five years, with billions more available through other federal grant programs boosted by the law. The Biden administration has touted its success in getting money into the hands of transit agencies, which need the aid to replace aging diesel buses with electric models that cost about $1 million each.
A year ago, the Federal Transit Administration announced grants that it said would double the number of zero-emission buses on the road. But it will take time for that money to translate into passenger-ready buses. According to figures compiled by industry publication Metro, deliveries of electric buses slumped 20 percent last year as transit agencies navigated fallout from the coronavirus pandemic. Nonetheless, federal officials say they expect that by 2025, half of new buses will be zero-emission.
Proterra was founded in 2004 and sold its first bus five years later. As a key player in a small industry, Proterra attracted attention from federal officials drawn to its climate-friendly work. Biden virtually toured the company’s South Carolina manufacturing plant in 2021 and appointed Joyce this year to an advisory committee on trade.
“You’re making me look good,” Biden said during the virtual tour, part of an effort to promote an economic plan that was the basis for the infrastructure law. “I mean it. I have overwhelming confidence in American enterprise.”
Proterra said in the bankruptcy filings that it has delivered 1,000 electric buses, including 199 last year as agencies ramped up to switch to battery power. Federal money has helped buoy the company, which received a $10 million loan under the pandemic-era Paycheck Protection Program, money that was subsequently forgiven. Proterra also expected to receive battery-production tax credits from the Inflation Reduction Act, the administration’s signature environmental legislation.
But even as its bus business grew and Proterra branched out into other parts of the electric vehicle business, the company was showing signs of distress. In January, it announced plans to close a factory in City of Industry, Calif., and consolidate operations in South Carolina, a move that cost 300 jobs.
Earlier this month, the company announced it would file for bankruptcy “in an effort to strengthen its financial position through a recapitalization or going-concern sale.”
Buying a bus is not like choosing a car off a dealership lot. Transit agencies undergo extensive procurement processes, often apply for federal grants and work with manufacturers to customize buses. It can take well over a year from when a contract is signed to when the manufacturer gets paid.
Joyce wrote in court papers supporting the bankruptcy that as inflation mounted, that lag left Proterra with contracts signed in 2021 for less than its manufacturing costs the following year. The problems were worsened by supply-chain disruptions that affected the automotive industry as whole.
“Given the highly customized nature of the buses, small delays and disruptions can cause significant production inefficiency,” Joyce wrote.
Steven Fox, an analyst at Fox Advisors who recently met with Joyce, said the bankruptcy came as a surprise because, in his view, the company has a path to profitability.
“I’m stunned by the decision,” Fox said. “It wasn’t growing at an ultrafast pace, but it was growing.”
Transit agencies looking to buy buses powered by batteries or hydrogen fuel cells have few choices. Gillig and New Flyer are the two biggest manufacturers, producing diesel and natural gas models alongside zero-emission buses. Proterra and Chinese-firm BYD offer an alternative, but lawmakers blocked BYD from receiving federal transit funds in 2021, citing security concerns.
Proterra’s bankruptcy follows a June announcement by Swedish manufacturer Volvo that its bus business, Nova Bus, would leave the U.S. market and close a plant in Plattsburgh, N.Y., by 2025. The company said it made the decision after repeated financial losses.
Executives at Canada-based New Flyer say they also have faced challenges in recent years, although not to the extent as Proterra.
Jennifer McNeill, the company’s vice president for public sector sales and marketing, said funding from the infrastructure law is driving the electric transition more quickly than expected. While McNeill said the company had struggled to obtain microchips and electrical components, she said those difficulties are easing.
“What we’re facing is trying to ramp back up to pre-pandemic production levels,” she said. “The market is there. The order book is there.”
Amanda Wanke, a New Flyer spokeswoman, said the company is also working with U.S. officials to explore a legislative change in how manufacturers can be paid with federal money, a shift that could make it easier for the company to take on complicated bus fleet-electrification projects.
The FTA said in a statement the agency and the Biden administration, “are committed to transforming our transit fleet as rapidly as possible, giving Americans safer, more reliable, cleaner rides.”
Christof Spieler, director of planning at consulting firm Huitt-Zollars, has urged transit agencies to be cautious as they make the transition, pointing to the complexities of building charging infrastructure and designing routes suitable for battery-powered buses.
He said the industry has been through turmoil in the past — with seemingly established players leaving the business — and he doesn’t see Proterra’s bankruptcy as significantly changing the picture.
“I would not look at this and say ‘if you’ve got Proterras on the road or you’re putting out a procurement, you should be worried,’” he said.
