Electrifying the nation's slower, more sensible bus fleet is a bit less glamorous than powering sleek EV sedans or sports cars, but startup Proterra is persevering in its efforts to transform the multi-billion-dollar bus market.
The company is winning business and applying a bit of Silicon Valley culture, technology and entrepreneurial smarts to the conservative transit market. The company claims to have 100 electric buses shipped or under order. That's no small feat, and it has garnered some encouraging revenue for the VC-funded startup bus company.
"There's nothing like our product," said Ryan Popple, CEO of Proterra, adding that the firm "is deploying vehicles to one of the most conservative markets" and some of the "densest urban routes."
According to Popple, "There is not a lot of technology in the bus industry and little core innovation or real product development."
The CEO says that Proterra has to be a product-oriented company, not an alternative energy company. Popple doesn't want to employ a substitution model and "fundamentally build the exact same product." According to the CEO, Proterra is "not focused on a 10 percent reduction in diesel buses," but rather on "fixing a broken product" and replacing every vehicle with an EV.
Benefiting from the "battery wars"
When we spoke with the company in 2013, its buses were priced higher (at about $900,000) compared to conventional buses (at about $500,000). This year, Matt Horton, VP of sales and marketing, disclosed a new sub-$800,000 price. Proterra is taking advantage of the same strides in battery cost and performance now driving the growing consumer EV market and energy storage industry. Battery cost accounts for about 25 percent of the cost of the vehicle, according to Popple.
"Every year, we see better quotes from the battery wars," said the CEO, who also claims that in 2016, the payback versus diesel would be just two years.
The EV buses save $50,000 per year in diesel costs, and even more in maintenance, according to the company. And every bus in use equates to 30 cars being taken off the road, according to Horton.
Proterra has pursued the public sector because of the usage intensity in that market. The more miles traveled, the better the ROI for an EV drivetrain versus a diesel.
City buses drive short, fixed routes at moderate speeds, so they're an ideal application for electric vehicles. According to a previous interview with Proterra, 85 percent of city bus routes are less than 30 miles in length. Its bus can completely rapid-charge in 10 minutes or less while on a route -- so there's no range anxiety and little requirement for behavioral change.
Proterra CEO Popple is a former Kleiner Perkins investor and an early Tesla employee.
Popple spoke to GTM about the new extended-range bus and how it helps the company expand its markets from municipal fleets to private fleets, serving commercial fleet operators running full-size buses such as airports, rental car shuttles, and university campus transportation.
Popple points out that commercial fleets operating heavy-duty buses in the San Francisco Bay Area for Google, Apple and Facebook rival the municipal fleets of large local cities.
The short distances traveled by city buses allowed Proterra to minimize the size of the battery pack, with packs in the 54-kilowatt-hour to 131-kilowatt-hour range. (As a point of reference, the Tesla Model S has an 85-kilowatt-hour pack.) But longer commercial fleet routes required a different battery -- and a different approach from Proterra.
VP Horton notes, "What we’re trying to do with this new vehicle is give transit users and fleets the greatest flexibility possible." He said that there are "two different types of batteries that we can put in to the vehicle. A lithium-titanate battery pack can charge up really fast -- it doesn't hold as much energy density in that package, but it’s really good for short circuit routes -- and the whole bus can charge in less than 10 minutes." He added, "The customer can start with one kind of battery type. And later, if they change the route or service, the bus can be switched out to another type of battery."
Horton recently spoke with GTM about battery lifetimes and the residual value of a five-year-old lithium-ion battery. He added, "We actually think it’s a bad idea for vehicles like this to have a battery that’s going to be a 12-year-life battery. If you think about how fast battery technologies are evolving, why on earth would you want a 10-year-old battery? We tell all of our customers to plan on at least a mid-life battery replacement," adding, "My view is that they’re going to be very happy because they'll have a lot more battery."
The extended-range bus can travel up to 180 miles between charges with battery options from 129 kilowatt-hours to 321 kilowatt-hours and can be recharged in about an hour.
Proterra uses battery packs from Toshiba and LG Chem. Horton notes that Proterra uses automotive-grade, industry-standard batteries and is prepared to ride the commodity cost curve.
Regulations and public policy are accelerating Proterra's growth. For example, California has zero-emission requirements on a portion of buses purchased by municipal agencies. A recent highway bill directed $50 million to the purchase of EVs. Earlier this year, a number of transit agencies elected to use grants from the Federal Transit Administration to buy 28 Proterra EV buses and 7 of its charging stations.
Popple said, "Our largest customer will be taking possession of their 30th vehicle next year. EVs are almost 10 percent of their entire fleet." He noted that one of Proterra's customers had completely switched over to electric buses. "They're a small transit agency that provides service to a university, and they’ve gone 100 percent EV with us -- and now they don't have to buy another drop of diesel."
China’s BYD Motors is the largest builder of electric buses and has sold more than 5,000 units globally, according to Bloomberg. BYD was targeting an electric bus price of $800,000 with a minimum 150-mile-per-charge range using its own lithium-ion-iron-phosphate battery chemistry.
Popple was blunt: "We are beating BYD in the North American market."
Leading builders of diesel buses include New Flyer and Gillig. New Flyer shipped more than 500 units in the first quarter of this year.
Proterra noted that it's "harder to break into the school-bus market" because of the usage curve -- school buses often sit idle for part of the midday and overnight. But GTM's Katie Tweed has suggested that that "could allow them to participate in the demand response or frequency regulation markets." Popple noted that ten or twenty 320-kilowatt-hour buses sitting in a lot starts to add up to a significant storage asset.
Proterra designs and builds the entire bus -- including the electric drive, energy storage system, vehicle control systems, and fast-charging stations -- in the U.S.
Popple says the other large cost component is the body structure. Proterra uses a composite material for the body "fuselage" and builds its bus more like an airplane, according to the CEO, contrasting that with the traditional stick-built metal design.
The CEO said, "We're going to make a great vehicle for the transit market -- and the transit market has never had great vehicles."
The company has raised more than $180 million in VC funding from investors including KPCB, GM Ventures, Hennessey Capital, NMT Capital, Mitsui & Co. Global Investment, 88 Green Ventures, Vision Ridge Partners, Edison Energy, and Constellation Technology Ventures, the VC arm of Exelon.
Proterra electric bus slide deck (abridged)