New European government deadlines are putting pressure on bus fleet operators to electrify their fleets sooner rather than later. In less than 10 years, it will no longer be possible to buy new ICE buses and the cost of running existing ones will escalate through rising emission charges and the removal of diesel fuel subsidies.
Even given government willingness to provide financial incentives, for companies with sizeable bus fleets the task seems daunting. Knowing where to start, what to buy, how to ensure batteries will last the routes and understanding the impact on operational practices are just some of the questions.
The current downturn in passenger numbers as people try to avoid infection and many increasingly work from home adds uncertainty. How can you commit to such a sizeable investment when revenues have shrunk? Or is this the perfect time to transition given the difficulty of making substantial changes when the industry is at its busiest?
The path to an electrified bus fleet can appear risky and complex. Many companies start with a small pilot to learn the lessons; however, working towards full electrification in small steps misses the opportunities and is often more costly than implementing a holistic, strategic plan.
New e-bus models appear regularly, with new features that lead to improved benefits. Similarly, battery technology is continually improving, and new, as-yet unproven, Vehicle to Grid (V2G) technology aims to reduce charging costs and create new revenue streams. How can you ensure that you can adapt to take advantage of new technologies at the right time?
Overnight charging at the depot is the best way to optimise electricity costs and ensure buses can complete their routes, but many fleets struggle to fit charging points into an already crammed depot.
Investment costs are substantial. Electric buses are still significantly more expensive to buy than equivalent ICE models and, although they are cheaper to run, it takes many years to generate a return. Charging infrastructure and batteries prices are coming down but still represent significant up-front cost. Depots may need to be reconfigured to free up space to charge vehicles and the grid network may need to be reinforced to enable sufficient electrical supply to charge so many buses.
When the migration to electric vehicles is underway, the fleet manager has the difficult task of managing a hybrid fleet – a mix of older ICE and new electric buses. Having already optimised the ICE fleet, you now have the task of minimising the cost of the new buses to bring forward the return on investment. This requires the analysis of an entirely new set of data aligned to the new vehicles; a substantially richer set of data than is available for ICE models. How best to utilise that data and integrate it with an existing company system to gain a holistic view of the business is another challenge to overcome.
Ultimately, bus companies would rather focus on their core business priorities of increasing passenger numbers, optimising routes and improving utilisation. However, pressures to decarbonise the fleet are increasing, so finding an organisation with the right experience and capabilities to support the planning and executing of the migration is vital.
There are plenty of point solution providers in the market. You can buy an extensive range of electric buses from a variety of suppliers but how do you know which vehicles would be best for your routes and passengers? The wrong choice is a costly one for your business. There are a similarly bewildering variety of batteries and charging infrastructure options, but which will transition your business most cost effectively and which technologies are here to stay? Some suppliers offer leasing, but is it better to save on capex or to own your own assets and the gains from any future upside?
Hitachi has over 100 years’ knowledge of the automotive industry, 25 years of fleet management experience, over 50 years in IT solution development and systems integration, and is an industry leader in grid to plug infrastructure, V2G and smart charging technologies. We have combined this knowledge and experience to create an offer called Intelligent Fleet Decarbonisation.
This service is designed to de-risk the entire fleet electrification process by working with you to create a Total Cost of Ownership (TCO) model for your business and for the entire electrification project. This extensible TCO model drives the transition strategy for your business, building the business case to prioritise what and when to buy, optimising operational costs and calculating when a return on investment can be realised. This TCO approach is a key enabler for gaining senior management buy-in to your electrification plans.
Hitachi will design, deliver and finance the entire bus fleet electrification transition project, including sourcing and procuring vehicles, supplying and installing charging infrastructure, managing and optimising battery charging, monitoring driver behaviour to minimise charge depletion, delivering the IT management system with a dashboard for your entire fleet of ICE and EVs, constant horizon scanning to keep abreast of new technologies as they emerge and financing of the entire project so that the need for up-front capital expenditure is avoided altogether.
Hitachi will look to recoup that investment over the term of the agreement. Per-mile charging leaves the risk of lower post-pandemic passenger numbers with the supplier. Per-month charging leaves that risk with the bus fleet operator. A balance of these charges provides some assurance to the supplier that a reasonable proportion of the initial investment will be recovered, while sharing the risk of business downturn along with the benefits of any upside. This allows Hitachi and the fleet operator to form a true business partnership for the long term where our future fortunes are inextricably aligned.
The residual value in batteries can be recouped to mutual benefit, which is not an option if the battery is owned by the supplier. Surplus energy generated can be sold back to the grid, allowing bus depots to be generating revenue to the mutual benefit of supplier and customer. There is a retail opportunity of charging local businesses for use of the charging infrastructure while buses are out on their routes.
The road to full bus fleet electrification is not straightforward and requires new skills and understanding. It also threatens to deflect bus fleet companies from their usual focus on passenger numbers, fleet utilisation and route optimisation. Finding a suitable long-term partner with the appropriate broad experience and financial strength to support you through the transition process from strategic planning to realisable saving is vital.
With its unparalleled experience of vehicle fleet management, charging infrastructure, IT business solutions, capital financing and long term, risk sharing partnerships, Hitachi is the partner of choice for fleet managers to navigate the obstacles on the route to net zero emissions.
How do you want to solve local and global challenges? Our team wants to hear your thinking—whether it’s the grain of an idea or an industry-changing one. Submit your information now.
Hitachi SIB can take you from possibility to reality. We’ll review specifics of your resources, products, and markets and see how the power of co-creation can build opportunity for everyone.