Global Electric Bus Market Growing Rapidly at 20.2% CAGR

Cities around the world are increasingly adopting electric buses as a key component of transport electrification, with some setting deadlines to phase out fossil fuel buses. Nearly 25% of registered buses in 2021 were zero-emission, a significant marker of the zero-emission bus adoption trend, according to new data from Transport & Environment. Countries like Denmark, New Zealand, and the Netherlands are aiming for 100% zero-emission bus procurements by 2025, and Costa Rica targets 100%  bus fleet electrification by 2050.

Electric Bus Market Size

The global electric bus market is projected to reach USD 19.2 billion in 2022, as estimated by Apollo Research Reports. With an annual growth rate of 13.3%, the market size is expected to hit USD 66.5 billion by 2032. 

Other than government initiatives to decarbonize public transportation, the falling price of batteries has accelerated the adoption rate of electric buses by cities and countries. Batteries, which make up 40% of the cost of electric buses, are expected to decrease in cost, thereby reducing the high initial cost of developing an electrified transport fleet and encouraging growth in the electric bus market.

China Dominates the Global Electric Bus Market 

APAC is touted as the leading region in the global electric bus market by both Apollo Research Reports and The Insight Partners. Based on data provided by The Insight Partners, APAC gained USD 26 billion in market value during the year 2021, and this number will grow to USD 96 billion by 2028, registering an 18.9% CAGR.  

China alone contributed USD 24 million to the region's overall market value in 2021. In terms of market share, China is dominating the market both regionally and globally, controlling over 80% of the global market share, which will be maintained by the country throughout the forecast period.  

This dominance is reflected in the sales figures: in 2022, around 66,000 electric buses were sold worldwide, about 4.5% of all bus sales. Of these global sales, 54,000 new electric buses were sold in China alone. This accounts for approximately 80% of electric bus sales and 85% of electric truck sales worldwide. China's substantial contribution to the electric vehicle market underscores its pivotal role in shaping the global shift towards electrification in public transportation.

Source: Statzon/ IEA

The success story of electric buses in China is largely due to the proactive approach of its electric bus manufacturers and the Chinese government's early recognition of the need for a cleaner alternative to diesel-powered vehicles, which were major contributors to air pollution. Addressing this issue head-on, China prioritized electric buses as a means to reduce its reliance on imported oil and fuel consumption.

Since 2010, China has been aggressively expanding its electric bus network, supported by substantial government backing. By the end of 2022, the Chinese Ministry of Transport reported that 77% (or 542,600) of all urban buses were classified as "new energy vehicles," encompassing pure electric, plug-in hybrids, and fuel cell vehicles. Moreover, a remarkable 84% of these new energy buses were fully electric. The pace of this transformation is noteworthy; in 2015, diesel or gas-powered buses made up 78% of China's urban bus fleet. This rapid and widespread adoption has cemented China's position as the world's largest market for electric buses and a model for other nations pursuing sustainable urban transportation solutions.

Electric Bus Market in Europe

Although Europe leads in research and development for electric buses, focusing extensively on advancing vehicle technology, the adoption rate of e-buses in the region still trails behind the Asia-Pacific (APAC) area. APAC also boasts some of the largest producers of buses and batteries. 

Nevertheless, Europe's electric bus market is expanding rapidly, with a compound annual growth rate (CAGR) of 21.6%—the highest among all regions. According to The Insight Partners, the European market value is projected to grow from USD 1.5 billion in 2021 to USD 5.8 billion by 2028.

Sales data from the International Energy Agency (IEA) reflects a 21% increase in electric bus sales volume from 2022 to 2023, with sales climbing to 4,770 units from 3,940 units. Another 2,567 battery-electric buses were already registered in the first half of 2023. Although these figures are way behind China's numbers, a significant milestone was reached in Q1 2023 when, for the first time in over a century, the sale of diesel-only vehicles in Europe fell below the majority. This shift allowed battery-electric buses to emerge as the dominant technology in the European road transport sector, marking a historic moment in the transition away from the internal combustion engine.

The EU Clean Vehicle Directive plays a critical role in this transition, mandating minimum quotas for the procurement of new zero-emission public buses by member states. The quotas vary by country, but generally, in Western European countries, at least 22.5% of the total bus fleet is expected to be zero-emission by 2025, increasing to 32.5% by 2030. This initiative is part of a broader movement towards sustainable transportation, as detailed in ING's 2021 report “All Aboard Europe’s Electric Bus Revolution”.

In 2022, Finland led Europe in electric bus sales, with two-thirds of all bus sales being electric. Norway and the Netherlands followed closely, with nearly half of their bus sales being electric, and Denmark with nearly one-third. Hybrid vehicles also play a significant role in the transition, particularly in Europe's larger countries. However, there is still considerable investment in natural gas engines in France, Spain, and Italy, indicating that while the shift towards electrification is well underway, it is not yet uniform across the continent.

While the European market is one of the leading regions for electric bus research and development (R&D) – including vehicle technology – the Asia-Pacific region is home to some of the biggest producers of both buses and batteries. However, in Europe, the market is accelerating slightly faster. Growing at a 21.6% CAGR, the highest among other regions, Europe's market value is expected to increase from USD 1.5 billion in 2021 to USD 5.8 billion by 2028, according to The Insight Partners.

IEA data shows there is a 21% increase in sales volume between 2021-2022 for electric buses. Sales up to 4,770 units from 3,940 units. Another 2,567 battery-electric buses were already registered in the first half of 2023. Though the number is still far behind China's, a new record was achieved in Q1 2023 when the share of diesel-only vehicles sold dipped below its majority stake, giving way to battery electric to take a leading role. This marks the first time that zero-emission technology has become dominant in the road transport sector in Europe after over one hundred years, the internal combustion engine has reigned supreme. 

Source: Statzon/ IEA

The EU Clean Vehicle Directive sets minimum quotas for purchasing new zero-emission public buses for its members, although the quotas are different from country to country. The Directive mandates that Member States acquire 24% to 45% of their buses as alternatively fueled vehicles (excluding diesel-only buses) at the end of 2025. At least half of these targets must be met with zero-emission powertrains. Starting in 2026, these targets will rise to 33%–65%.

Finland led Europe in electric bus sales, with two-thirds of all bus sales being electric in 2022. Following Finland, Norway and the Netherlands each saw electric buses comprising nearly half of their total bus sales, while Denmark reported electric buses accounting for almost one-third of its sales. Hybrid vehicles have also become increasingly prominent in some of Europe's larger countries. However, there are still concerns over substantial investments in natural gas powertrain, particularly in countries like France, Spain, and Italy.

North America Electric School Bus Expansion Plan

North America is lagging behind APAC and Europe in the transition to electric buses. The region contributed USD 756 million to the global market in revenue, seizing around 2.6% of the total market share. The US, in particular, remains a long way from a complete transition to an electric fleet. The long lifespan of diesel buses is part of the problem. Most diesel buses last approximately 12 years, meaning it will take some time before they are up for replacement. Federal regulation also caps the number of buses that a transit agency may have, making it more difficult for them to add electric buses to their current fleets.

The region is catching up, focusing first on the country’s iconic school buses. President Biden launched a plan to convert all 500,000 US school buses to zero-emission vehicles during his presidential campaign in 2020. Currently, school buses are run on diesel, but the limited daily mileage does not lead to significant savings, making a shift to electrification sensible.  

As of June 2022, US school districts have committed to 12,275 electric school buses in 38 states, according to a report from the Washington DC-based nonprofit, World Resources Institute (WRI), consisting of more than 11,000 buses in awarded phase (funding or a contract for the bus has been approved or granted), 300 in ordered phase, 313 in delivered phase, 285 in operating phase. The number is almost a 10-fold increase from August 2021 data when WRI began tracking school electric buses nationwide.  

By June 2023, the cumulative figure for electric school buses that have been ordered, delivered, or are operational stands at 2,277—an uptick of more than 1100 buses on the same phases since June 2022. Every state has now committed to transitioning their school bus fleets to electric models, and approximately one-third of U.S. school districts are under state or local mandates to initiate this switch. Nonetheless, there remains a substantial count of buses stalled in the 'awarded' phase, yet to proceed to ordering. In addition to that, the increment in buses that are operational is relatively modest when contrasted with the number of those delivered, suggesting a potential lag in the final stages of deployment.

Electric Bus Market Segmentation 

The electric bus market is segmented based on vehicle type: battery electric buses, hybrid electric buses, and plug-in hybrid electric buses. The battery electric bus segment is the market leader, with over 90% share in 2021. A higher acquisition cost of electric buses is justified because the overall cost is less expensive over the course of its lifetime. A fully electric bus also produces zero pipeline emissions compared to hybrids which sometimes run on fossil fuels.  The hybrid electric bus and plug-in hybrid electric bus each gained a market share of 4% and 2% in 2021.  

Segmentation by end-user is divided between the public and private sectors. The public segment held the largest revenue with 88% market share in 2021, while the private segment is anticipated to expand rapidly at a CAGR of 22.4% during the forecast period. Many private bus operators experienced setbacks during the Covid-19 pandemic. Now, as lockdowns are being lifted, the surge of migration and tourism activities will positively impact the private transportation industry. 

The electric bus market is segmented based on length into less than 9m, 9−14 m, and above 14m. Throughout the forecast period, the 9–14 m segment will dominate the market with around 50% market share. This segment makes up most of the electric bus fleet of China as it is ideal for city transit in terms of size, passenger capacity, and battery consumption.  

Sources: Statzon, Transport & Environment, ICCT, Sustainable Bus, Transition China, Global Times, CGTN, ING, Autonomy Paris, Electrek, Interact Analysis, Frotcom, BBC, IEA (1), IEA (2), ICCT, WRI, The Insight Partners' electric bus market report