An Analysis on China’s New Energy Bus Industry

A General Introduction of China’s New Energy Bus Industry

The onslaught of the international financial turmoil in late 2008 has sent the chill down to the spine of every bus & coach builders in China. In sharp contrast with the robust growth registered in the past few years, almost every China’s manufacturers of buses experienced the sharpest ever downturns in almost three decades.

The sales volume of China’s buses from 2005 to 2008

In a bid to help enterprises combat with the ongoing crisis, China rolled out its Temporary Regulations on Management of Financial Aids to Promote Application of Fuel-saving and New Energy Vehicles, which is warmly welcomed by all businesses across the nation. To many bus companies, new energy is actually not an unfamiliar word. Back in 2004, Ankai Bus became the first company in China which successfully applied for the National Notification from the government for its all-electric buses. Zhongtong Bus immediately followed suit and rolled out its first hybrid bus on Apr. 9, 2006. Apart from the two companies mentioned above, China’s top four players in bus & coach field, namely Zhengzhou Yutong, Xiamen Kinglong, Xiamen Golden Dragon, and Suzhou Higer have all been quite actively involved in R&D of new energy buses.

Featuring high fuel economy and eco-friendliness, new energy buses have been gaining increasingly favors from the government. According to the statistics about China’s bus & coach sales in Jan. 2009, trolleybuses were the only good performer that witnessed increases, rising from zero in the same period last year to 100 this year.

The sales volume of new energy buses from 2005 to 2008

In response to the government’s call for greener mobility, various cities across China has launched their procurement work of eco-friendly buses since the start of 2009. Beijing increased its purchasing volume to 1,000 units and signed a procurement contract of 800 Foton AUV hybrid buses in early this year. Hunan Provincial Government also pledged to put 500 units of hybrid buses on the road in the province’s three major cities. Wuhan, provincial capital of central China’s Hubei Province, recently declared that it would add another 1,000 new energy powered buses to its current hybrid bus fleet. 

According to an initial estimate, the total demand for the new energy buses will surpass 3,000 units in 2009. Given the current market condition, the importance of new energy buses can hardly be neglected.

An analysis of China’s new energy buses

The varieties of China’s new energy buses

A. CNG (Natural Gas) Bus

As a kind of gas fuel, CNG can be easily blended with air, thus can get burned more fully and reduce the emissions of such harmful exhausts as CO and hydrocarbons. Moreover, it is relatively easy to remodel a gasoline engine to a CNG one. Another plus of CNG bus is that it can improve fuel economy significantly compared with diesel or gasoline powered buses.

Thanks to its above mentioned features, CNG buses have now been widely used in some cities in Sichuan, where natural gas is in rich reserve. As the construction of west-east pipeline is gradually being completed, many cities in east China, such as Nanjing and Wuhu, have also added large fleet of CNG buses to deal with the rising diesel prices.

However, the main bottleneck for further popularity of CNG buses lies in the shortage of natural gas and the gas-refilling stations. In addition, the driveline system of the CNG bus is not without any problems. Given above, it is yet to see more CNG buses running across China.

B. LPG bus

The characters of LPG (liquefied petroleum gas) are basically the same as CNG. As an alternative fuel, LPG produces fewer pollutants. However, it has met less enthusiasm than that of CNG bus. A few years ago, Guangzhou was claiming to build the world largest LPG bus fleet. However, the prolonged losses suffered by Guangzhou public transport companies finally made the city drop the ambitious plan. The chief reason for the failure is that real practice has showed that the operating costs of a LPG bus each day is RMB 200 (about USD 29.2718) higher than that of a diesel powered bus due to huge construction fees needed for a LPG refilling station and overdependence on imports of LPG products. 

C. Hybrid bus

A hybrid bus mainly refers to a diesel-electric hybrid one. It can improve fuel economy by over 30% and comply with Euro 4 Emission Standard. However, its drawbacks, including the low capacity and short lifespan of batteries, have hindered its serial production so far.

As a project enjoying government’s special support in China’s 863 Hi-tech Plan, the research and development of hybrid buses have once become a very hot topic across the industry. To date, enterprises including FAW, Dongfeng, Wuzhoulong, Ankai, Yutong, Zhongtong, etc. have all rolled out their own hybrid buses. However, to realize the serial production of hybrid buses still need to take some time due to its high price and immature technologies. 

D. All-electric bus

As is shown from its name, the bus is solely powered by electricity. Capable of providing a quieter and more stable travel environment for its passengers, all-electric bus emits no pollutants whatsoever, which make it the fittest passenger transport means in urban area.

To date, all-electric buses have realized trial operation in Beijing and Shanghai. Initial results show that there are still some problems, including the low capacity and short lifespan of the batteries and the mode of recharging, which need to be addressed before the bus can be fully commercialized.

E. LNG bus

LNG (liquefied natural gas) is a more compressed natural gas. Once the fuel tank of a LNG bus gets fully refilled, it can sustain the bus to travel non-stop for 500 km to 1,000 km, which is quite fit for long-distance passenger transport. Currently, LNG buses have entered trial operation in Changsha, provincial capital of Central China’s Hunan Province. A research shows that the LNG bus has very strict requirements on gas refill stations as LNG is contained in super low temperature environment. Given this, the wide application of LNG bus is almost next to impossible.

F. Fuel-cell bus

Widely regarded as the most promising vehicle model, fuel-cell bus has pointed out the right path to solve woes of energy shortage faced by all humankind. China’s two most prestigious higher education institutes, Tongji University and Tsinghua University, having been playing the leading role in R&D of fuel-cell vehicles, have both made significant breakthroughs and rolled out their products.
One of the biggest drawbacks of fuel-cell buses is the exorbitantly high production costs. No bus operator can accept to buy a bus that costs RMB 4 million (about USD 585,437). Another two fatal weaknesses are the shortage of hydrogen-refilling stations and the short lifespan of fuel-cell. Given above, it is impossible to commercialize this type of vehicle in the foreseeable future.

G. Alcohol fuel powered bus

Alcohol fuel chiefly refers to methanol and ethanol. Currently, the alcohol fuel is mostly used by being blended with gasoline. In China’s Shanxi Province, which is rich in coal reserves, has become the demonstration base for methanol powered vehicles in China. In recent years, the engines specifically designed for alcohol fuel have become available in the market, which has laid a solid foundation for the popularization of this type of vehicle. 

However, according to the experiment conducted by some foreign countries, methanol tends to rust equipment on the bus. As a result, it is not quite feasible yet to popularize methanol-powered vehicle. As to the ethanol, which is derived from grains and has become increasingly popular in recent years, it is not practical to adopt ethanol-powered vehicles on a large scale, either. 

H. Other energy-powered buses 

Currently, China has also seen the operation of other energy-powered buses, including dimethylether (DME) buses, hydraulic hybrid buses and ultra-capacitor buses, etc. However, their business prospects are still not quite clear at present.

What measures governments and enterprises have been taking in new energy buses?

Early this year, Beijing decided to popularize energy-saving and low emission vehicles in thirteen cities across China. In the next four years, the government plans to popularize over 60,000 fuel-efficient new energy vehicles by subsidizing bus and taxi operators. City buses above ten meters in length will be given the highest subsidies. For example, if a bus operator plans to add a new above-ten-meter hybrid bus, the government will help pay a bill of RMB 420,000 (about USD 61,467.78) at the maximum. If the bus operator wants to buy an all-electric bus or fuel-cell one, it can receive a subsidy as much as RMB 500,000 (about USD 73,175.04) and RMB 600,000 (about USD 87,804.20) respectively.

In response to a series of favorable policies rolled out by the government, a number of bus & coach builders have been actively involved in developing new energy technologies. In late 2008, Foton Automotive inked a deal with Beijing Public Transport Group and would supply 800 hybrid city buses to the bus operator. The deal is so far the largest for new energy vehicles. In the meantime, Beijing New Energy Vehicle Design & Manufacturing Base finally made its home in Foton’s production base in Changping Dist. in northern Beijing. With a total investment of RMB 5 billion (about USD 731.677 million), the base currently boasts an annual production capacity of 5,000 units of new energy buses and 400,000 units of fuel efficient engines.

Apart from Foton, FAW recently also secured a cooperative tie with Dalian Municipal Government and will build a production base for new energy buses in the northern coastal city. According to the agreement reached by the two parties, the new base will be able to churn out 3,000 units of eco-friendly buses in 2013.

SAIC, Hengtong Bus, and CSR Zhuzhou Electric Locomotive Research Institute Co., Ltd. have all followed suit and made big moves in R&D of new energy buses.

According to the estimation of MA Jishan, a researcher with Huajing Zhongheng Information Center, China’s sales volume of new energy buses will reach 3,000 units in this year, and will grow to 4,500 units in 2010, 6,800 units in 2011 and 11,000 units in 2012. 

Predictions on new energy bus consumption from 2009 to 2012