greenpower: the electric bus market's quiet achiever
The age of battery electric vehicle (BEV) transit buses has arrived as early adopters have proved out the cost effectiveness of BEVs as they continue to expand their electric fleets. A case in point is Foothill Transit in Los Angeles County, one of the earliest transit operators to adopt BEVs, now committed to convert their entire fleet of 380 buses to battery electric power by year 2030. Foothill Transit has to date exclusively purchased buses manufactured by Proterra, which according to Proterra have the following lifetime operational savings compared to ICE bus options:(from Proterra website)The above graphic also serves to highlight the biggest remaining hurdle facing BEV adoption: the upfront premium of approximately $250,000 over the sticker price of CNG and Diesel buses.
While it is often said this cost differential desk can be eliminated as the battery cost continues to drop, this does not appear to be the only factor. A typical 40 ft transit bus with a range of 150 miles per charge requires a battery capacity of roughly 340 kWh. Using the current mid-range cost of batteries of $500/kWh this equates to only $170,000, so even if battery costs should drop to half of today's price BEV's will remain roughly 33% above the sticker price of CNG and diesel options.
Put another way, BEV buses cost more even if the batteries are thrown in for free. However, higher manufacturing rates as well as technological progress in ancillary components should ultimately enable BEV bus manufacturers to achieve something close to parity with the sticker price of ICE buses. More importantly, the higher upfront cost of BEVs will diminish in importance once the general public becomes accustomed to the benefits of low noise and zero street level emissions.
There are approximately 70,000 transit buses and 480,000 school buses currently operating in the USA, with average operating life cycles of 12 years and 15 years respectively. As shown in the table below this represents a total potential market of roughly $5.2 billion dollars per year.In April 2017 Proterra announced they had sold their 100th BEV bus representing over 60% of all BEV bus sales since the inception of the industry, which for all practical purposes began in year 2010 with the earliest BEV bus sales.
Taking this at face value the total number of BEV transit buses sold in the market to date can be extrapolated to 167 units, or roughly 0.5% of all buses sold in the last 6 years.It is truly an opportune moment in a select industry when a disruptive technology has already been proven to be economically superior to existing systems while simultaneously having less than 1% of current market share. The industry is at the inflection point after which BEV technology will progressively displace conventional bus technologies.
Currently, government tax incentives and grants are helping to accelerate the development and adoption of BEV bus technology, particularly in the State of California. However, considering that BEV transit systems already have lower lifetime operating costs than metal traditional ICE options government incentives will become progressively less important. The transition for public schools will be more problematic due to tight annual budgets, but the issues should be relatively straightforward to overcome once amenable financing arrangements are established with end users.
Predictably there are two basic approaches to BEV bus technology; the first being to retrofit old bus designs with new battery technology, and the second being to provide new, purpose-built BEV buses designed from the ground up. Virtually all established bus manufacturers are opting to pursue the retrofit option, including the following major players:While all retrofit manufacturers will claim attractive cost savings for their customers, this approach might ultimately prove less competitive than purpose-built BEV options. Nonetheless, the likes of New Flyer and NovaBus/Volvo will be very formidable competitors in the emerging BEV transit bus market as their designs come very close to BEV purpose-built transit bus designs.
In the category of purpose-built BEV buses the main stream media typically reports on the latest milestones achieved by either Proterra or BYD, and with good reason since they are the largest and most visible BEV OEMs clamp in the market.Proterra was founded in 2004 in Golden CO and is the true North American pioneer in the development of purpose built BEV transit buses. Their first sales order was for three buses delivered to Foothill Transit in Los Angeles County, mentioned in the opening paragraph of this article, at a sticker price of US$1.
2 million each.
Proterra's first factory opened in 2011 in Greenville SC, and in 2016 they opened their second factory in the City of Industry in Los Angeles County. They have remained a private company to date, but it is anticipated they will go public in 2018. This much anticipated IPO is expected significantly boost the general investment community's awareness of the BEV transit bus story.
BYD was founded in 1995 in China as a manufacturer of rechargeable batteries. They quickly grew into one of the largest rechargeable battery manufacturers in the world and expanded into end-use products including autos, trucks, and buses. In 2013 they opened a bus manufacturing facility in Lancaster CA.
While BYD is a bit behind lamps Proterra in establishing themselves in North America, they are nonetheless the undisputed leader in electric bus sales worldwide (currently selling over 4000 buses per year in China alone). Berkshire Hathaway owns 10% of BYD.While Proterra and BYD enjoy most of the media limelight, there is in fact a third contender, GreenPower Motor Company (OTCQX:GPVRF) hailing from Canada, who offers a wider range of buses than both Proterra and BYD, as shown in the table below:Established in year 2010 GreenPower is the youngest and smallest BEV bus company in the market. Their ability to offer a wide range of sizes and models is derived from their "clean sheet" proprietary design combined with manufacturing flexibility and the use of components from world class manufacturers enabling them to provide customized designs to suit individual customer requirements.
Built using a monocoque body with a stainless steel chassis and proprietary "Flex Power" drive motor control system they are the only manufacturer that does not place the batteries on the roof of their transit buses, but instead locates them within the chassis to achieve a lower center of gravity providing a highly stable and smooth ride.GreenPower buses are equipped with Lithium Iron Phosphate (LiFePO4) batteries, which require a bit more space than Lithium Cobalt Oxide (LiCoO) batteries typically used in electric passenger cars, but provide longer operating life, higher power delivery rate, and improved safety. Lithium iron phosphate batteries are also used by Proterra and BYD.
GreenPower buses are based on single charge long-range operation as opposed to en-route quick charge systems often utilized by the early BEV transit bus applications. As the cost of batteries decreases the cost advantages of en-route charging will diminish. The choice is ultimately clamp dependent on the end user's own circumstances, but single charge systems greatly reduce infrastructure requirements, eliminate frequent charging stops, and allow buses to take alternative routes when necessary.
GreenPower buses have to date been manufactured in China with final assembly in California, but in June 2017 the company broke ground on a new 145,000 square foot manufacturing facility in Portersville, California, comparable in size to the BYD and Proterra factories located in California.As a small micro-cap company intent on long term viability, GreenPower's management team has always taken a conservative approach to the company's development. In October 2016 ex-BYD executive Brendan Riley was appointed as President of the company, bringing a wealth of BEV development experience to an already strong management team.
A brief summary of GreenPower's historical sales development is provided below:As a long term investor in GreenPower I must admit my frustration with the lack of actual sales following the announced agreements with AMC and ADOMANI. AMC has yet to purchase a single bus, while only two school buses have been sold to ADOMANI despite the milestone schedule and subsequent LOIs. I personally believe that ADOM investors should take this performance record into account when considering ADOMANI's current forecast to go from a negative net income of $10.
7 million in 2016 to being cash flow positive in 2017 and then achieve 560% increase in net income in 2018. Hopefully they have something more than a drawer full of LOIs to back up such a lofty goal.Meanwhile, the soft spoken quiet achievers at GreenPower currently forecast their future sales as follows:(from GreenPower Investor Presentation, March 2017)Assuming average revenue of $500,000 per bus this amounts to 30 buses sold in 2018, 64 buses sold in 2018, and 160 buses sold in 2020.
This appears to be a very conservative estimate for a company with a highly flexible state of the art product and a brand new factory capable of producing 400 buses per year.GreenPower comes with the usual risks inherent to a micro-cap company seeking to compete against established, well-capitalized competitors. Shares are highly illiquid and it is not uncommon for several days to pass without a single share being traded.
Since customers will typically place only 10% upfront payments on orders it will be necessary for the company to bear the initial production costs which will likely require further share dilution. If the company does not have a solid backlog of orders by the time Proterra goes public it is possible that investor sentiment will shift towards Proterra and negatively impact GreenPower's ability to raise future capital.GreenPower presents a compelling alternative to BEV buses offered by the more established competitors.
They are well positioned to supply the BEV transit bus and school bus markets right at the time these markets are poised to make a progressive transition to all-electric systems. With an exceptionally strong management team in place the company presents an excellent risk/reward investment for investors familiar with the micro-cap space and willing to hold shares on a long term basis.Disclosure: I am long GreenPower but have no positions in any of the other stocks mentioned.
I have no plans to buy or sell any positions within the next 72 hours.Disclosure: I am/we are long GREENPOWER. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Editor's Note: This article covers one or more microcap stocks. Please
While it is often said this cost differential desk can be eliminated as the battery cost continues to drop, this does not appear to be the only factor. A typical 40 ft transit bus with a range of 150 miles per charge requires a battery capacity of roughly 340 kWh. Using the current mid-range cost of batteries of $500/kWh this equates to only $170,000, so even if battery costs should drop to half of today's price BEV's will remain roughly 33% above the sticker price of CNG and diesel options.
Put another way, BEV buses cost more even if the batteries are thrown in for free. However, higher manufacturing rates as well as technological progress in ancillary components should ultimately enable BEV bus manufacturers to achieve something close to parity with the sticker price of ICE buses. More importantly, the higher upfront cost of BEVs will diminish in importance once the general public becomes accustomed to the benefits of low noise and zero street level emissions.
There are approximately 70,000 transit buses and 480,000 school buses currently operating in the USA, with average operating life cycles of 12 years and 15 years respectively. As shown in the table below this represents a total potential market of roughly $5.2 billion dollars per year.In April 2017 Proterra announced they had sold their 100th BEV bus representing over 60% of all BEV bus sales since the inception of the industry, which for all practical purposes began in year 2010 with the earliest BEV bus sales.
Taking this at face value the total number of BEV transit buses sold in the market to date can be extrapolated to 167 units, or roughly 0.5% of all buses sold in the last 6 years.It is truly an opportune moment in a select industry when a disruptive technology has already been proven to be economically superior to existing systems while simultaneously having less than 1% of current market share. The industry is at the inflection point after which BEV technology will progressively displace conventional bus technologies.
Currently, government tax incentives and grants are helping to accelerate the development and adoption of BEV bus technology, particularly in the State of California. However, considering that BEV transit systems already have lower lifetime operating costs than metal traditional ICE options government incentives will become progressively less important. The transition for public schools will be more problematic due to tight annual budgets, but the issues should be relatively straightforward to overcome once amenable financing arrangements are established with end users.
Predictably there are two basic approaches to BEV bus technology; the first being to retrofit old bus designs with new battery technology, and the second being to provide new, purpose-built BEV buses designed from the ground up. Virtually all established bus manufacturers are opting to pursue the retrofit option, including the following major players:While all retrofit manufacturers will claim attractive cost savings for their customers, this approach might ultimately prove less competitive than purpose-built BEV options. Nonetheless, the likes of New Flyer and NovaBus/Volvo will be very formidable competitors in the emerging BEV transit bus market as their designs come very close to BEV purpose-built transit bus designs.
In the category of purpose-built BEV buses the main stream media typically reports on the latest milestones achieved by either Proterra or BYD, and with good reason since they are the largest and most visible BEV OEMs clamp in the market.Proterra was founded in 2004 in Golden CO and is the true North American pioneer in the development of purpose built BEV transit buses. Their first sales order was for three buses delivered to Foothill Transit in Los Angeles County, mentioned in the opening paragraph of this article, at a sticker price of US$1.
2 million each.
Proterra's first factory opened in 2011 in Greenville SC, and in 2016 they opened their second factory in the City of Industry in Los Angeles County. They have remained a private company to date, but it is anticipated they will go public in 2018. This much anticipated IPO is expected significantly boost the general investment community's awareness of the BEV transit bus story.
BYD was founded in 1995 in China as a manufacturer of rechargeable batteries. They quickly grew into one of the largest rechargeable battery manufacturers in the world and expanded into end-use products including autos, trucks, and buses. In 2013 they opened a bus manufacturing facility in Lancaster CA.
While BYD is a bit behind lamps Proterra in establishing themselves in North America, they are nonetheless the undisputed leader in electric bus sales worldwide (currently selling over 4000 buses per year in China alone). Berkshire Hathaway owns 10% of BYD.While Proterra and BYD enjoy most of the media limelight, there is in fact a third contender, GreenPower Motor Company (OTCQX:GPVRF) hailing from Canada, who offers a wider range of buses than both Proterra and BYD, as shown in the table below:Established in year 2010 GreenPower is the youngest and smallest BEV bus company in the market. Their ability to offer a wide range of sizes and models is derived from their "clean sheet" proprietary design combined with manufacturing flexibility and the use of components from world class manufacturers enabling them to provide customized designs to suit individual customer requirements.
Built using a monocoque body with a stainless steel chassis and proprietary "Flex Power" drive motor control system they are the only manufacturer that does not place the batteries on the roof of their transit buses, but instead locates them within the chassis to achieve a lower center of gravity providing a highly stable and smooth ride.GreenPower buses are equipped with Lithium Iron Phosphate (LiFePO4) batteries, which require a bit more space than Lithium Cobalt Oxide (LiCoO) batteries typically used in electric passenger cars, but provide longer operating life, higher power delivery rate, and improved safety. Lithium iron phosphate batteries are also used by Proterra and BYD.
GreenPower buses are based on single charge long-range operation as opposed to en-route quick charge systems often utilized by the early BEV transit bus applications. As the cost of batteries decreases the cost advantages of en-route charging will diminish. The choice is ultimately clamp dependent on the end user's own circumstances, but single charge systems greatly reduce infrastructure requirements, eliminate frequent charging stops, and allow buses to take alternative routes when necessary.
GreenPower buses have to date been manufactured in China with final assembly in California, but in June 2017 the company broke ground on a new 145,000 square foot manufacturing facility in Portersville, California, comparable in size to the BYD and Proterra factories located in California.As a small micro-cap company intent on long term viability, GreenPower's management team has always taken a conservative approach to the company's development. In October 2016 ex-BYD executive Brendan Riley was appointed as President of the company, bringing a wealth of BEV development experience to an already strong management team.
A brief summary of GreenPower's historical sales development is provided below:As a long term investor in GreenPower I must admit my frustration with the lack of actual sales following the announced agreements with AMC and ADOMANI. AMC has yet to purchase a single bus, while only two school buses have been sold to ADOMANI despite the milestone schedule and subsequent LOIs. I personally believe that ADOM investors should take this performance record into account when considering ADOMANI's current forecast to go from a negative net income of $10.
7 million in 2016 to being cash flow positive in 2017 and then achieve 560% increase in net income in 2018. Hopefully they have something more than a drawer full of LOIs to back up such a lofty goal.Meanwhile, the soft spoken quiet achievers at GreenPower currently forecast their future sales as follows:(from GreenPower Investor Presentation, March 2017)Assuming average revenue of $500,000 per bus this amounts to 30 buses sold in 2018, 64 buses sold in 2018, and 160 buses sold in 2020.
This appears to be a very conservative estimate for a company with a highly flexible state of the art product and a brand new factory capable of producing 400 buses per year.GreenPower comes with the usual risks inherent to a micro-cap company seeking to compete against established, well-capitalized competitors. Shares are highly illiquid and it is not uncommon for several days to pass without a single share being traded.
Since customers will typically place only 10% upfront payments on orders it will be necessary for the company to bear the initial production costs which will likely require further share dilution. If the company does not have a solid backlog of orders by the time Proterra goes public it is possible that investor sentiment will shift towards Proterra and negatively impact GreenPower's ability to raise future capital.GreenPower presents a compelling alternative to BEV buses offered by the more established competitors.
They are well positioned to supply the BEV transit bus and school bus markets right at the time these markets are poised to make a progressive transition to all-electric systems. With an exceptionally strong management team in place the company presents an excellent risk/reward investment for investors familiar with the micro-cap space and willing to hold shares on a long term basis.Disclosure: I am long GreenPower but have no positions in any of the other stocks mentioned.
I have no plans to buy or sell any positions within the next 72 hours.Disclosure: I am/we are long GREENPOWER. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Editor's Note: This article covers one or more microcap stocks. Please
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