Purpose of this article.
Any product that uses fossil fuel to generate power will eventually be a candidate for repowering (conversion to electric power.) It may be a battery, solar panel, or fuel cell, but it must reduce its impact on global warming. The conversion will have short—and long-term effects on the OEM’s aftermarket business.
This case study focuses on school buses, but the discussion about the impact on the OEM applies to any product and market. The school bus-specific information illustrates how difficult the decision to convert existing products from ICE to electric motors will be. It should motivate OEMs to think about how they want to react when their industry is in the crosshairs.
Introduction
Repowering, the process of replacing or upgrading a product’s power source, is a significant customer decision that can bring short-term and long-term financial benefits to your aftermarket business.
As an OEM leader, your decisions in this process are crucial and carry a significant responsibility. They will shape the future of your business and the environment, making you a key influencer in the industry.
Many industrial products qualify for repowering. Here are a few examples:
- Trucks
- Electricity generation
- Data centers
- Trains
- Aircraft ground handling equipment
- Building HVAC
- Ships
- Construction and farm equipment
- Fire engines and ambulances
- Buses
- And almost everything that uses fossil fuels to generate power
The rest of this article will concentrate on school buses, as other categories have been covered extensively in trade magazines. Additionally, the decision to convert buses from internal combustion engines to electric drivetrains is a focus for the school bus electrification community due to financial considerations and another identified reason.
Why repower school buses?
According to the Electric School Bus Initiative at the World Resources Institute (WRI) Ross Center for Sustainable Cities, the United States has approximately 480,000 diesel-powered school buses. These buses produce exhaust pollutants that can cause asthma, the leading cause of children missing school. These pollutants also seriously impact children’s cognitive development.
Since low-income students usually live in crowded cities, they are frequently forced to go to school on the bus and have greater exposure to diesel exhaust. The children living in very rural areas usually ride the school bus for much longer than those who live in cities and suburban areas, so they also have considerable daily exposure to diesel exhaust particles.
School districts or committees that are strapped for funds can justify not paying for electrical school buses until parents, teachers, and doctors get together and change the argument from climate change to “their children” getting sick. Once they decide to move to electric buses, the rest of the discussion is about money.
Buy a new bus(es) or repower your current fleet
There are three choices:
- Buy new electric buses
- Convert your existing fleet
- Buy used ICE buses and convert them
First, let’s eliminate option 3: buying a used ICE bus and converting it to electric power. For the same bus class, the conversion costs will be the same for the current fleet and a newly purchased used bus, and then you have to add the price of the used bus. According to Gregory Poole Cat, also a Blue Bird bus dealer, “a refurbished bus that’s not too old and doesn’t have many miles will be a much safer investment if buying used. Some estimates say that a used school bus with between 80,000 and 180,000 miles may cost between $3,000 and $10,000, and prices may be slightly higher if it’s in great condition. Typically, schools purchase new buses, though it’s possible to find used buses in excellent condition.”
The out-of-pocket maintenance cost will always be higher for used buses than new or low-mileage repowered electric buses.
Now comes the comparison. I am referring to the Class C bus, which we picture when we talk about school buses and is shown in the picture at the top of this article.
- According to Gregory Poole Cat, the cost of electric buses for Type C or Type D buses ranges from $320,000 to $440,000, while diesel versions cost about $140,000 – $160,000. This comparison demonstrates the cost difference between the two types of buses.
- Repowering an ICE bus costs $120,000 to $180,000. While the bus is in the conversion shop, replacing the brakes and remanufacturing the steering mechanism makes sense. Most bus owners will repaint and replace the seats to complete the job.
- According to the Electric School Bus Initiative, “Electric school buses have lower maintenance and fuel costs over their lifetime, so, according to our analysis, a school district operating an electric school bus can expect to see nearly $100,000 in average lifetime fuel and maintenance savings!” This substantial cost-saving potential and the health benefits of reducing diesel fumes should strongly incentivize school districts and committees to consider seriously repowering their existing fleet or buying new electric-powered buses.
- Summary:
| Repowered Bus | Electric Bus | |
| Initial Cost | $140,000 – $160,000 | $320,000 – $440,000 |
| Converting | $120.000 – $180,000 | NA |
| Total | $260,000 -$340,000 | $320,000 – $440,000 |
Additionally, many grants and other stimuli are available to reduce the financial burden of switching from ICE to electric buses. I will not discuss them because they frequently change, and some are state-funded and can’t be generalized.
Here is a recent article about a California school district:
Thomas Insights recently reported that the Oakland Unified School District (OUSD) in California has completely electrified its school bus system, making it the first major U.S. school district to do so. The fleet has 74 all-electric buses made by Zūm, a Redwood City-based mass transit system company.
Related article: A New Business Model That Kicks Butt
How repowering from ICE to electric buses affect the OEMs and dealers
In the short term, repowering will help dealers and OEMs in two ways:
- They will be performing the actual conversion. Bus OEMs sell conversion kits that include all the parts required to repower a bus. OEMs, dealers, and bus maintainers will buy the kits and perform the upgrade labor. One OEM estimates that the repower parts will start at $120,000, and the associated labor will bill between $20,000 and $80,000. I am not projecting how many ICE buses will be repowered, but remember, the U.S. diesel bus fleet has about 480,000 potential candidates.
- Each conversion will include replacing the engine, transmission, and anything associated with the vehicle’s drive line. Someone will buy and remanufacture all these parts and put them into circulation. All non-repowered buses are candidates for remanufactured parts.
Switching to electric buses in the long term will dramatically reduce the number of buses in the entire U.S. fleet requiring significant repairs. A typical internal combustion engine (ICE) motor has about 200 parts that need maintenance and possible replacement. An electric vehicle’s expensive and complex transmission and differential are not present. Also, fuel pumps, mufflers, and related parts fall into the same category.
You can watch an excellent on-demand Babcox Media webinar titled EV Maintenance Opportunities. It is targeted at automobile repair shop owners and experienced maintenance technicians and discusses the types of maintenance they can perform on electric vehicles. I highly recommend viewing it.
Electric buses, like electric cars, have high tire wear due to the heavy battery system. However, they are still equipped with a 12-volt battery, wheels, steering, air conditioning, and suspension systems like their ICE predecessors, and the demand for their maintenance will not significantly change. Also, electric school buses require annual safety inspections.
Conclusion
In the short term, there will be more work for mechanics who work on ICE-powered buses, while in the long term, there will be a demand for fewer mechanics but less than we initially thought. This may be good since the older mechanics will be entering retirement age, and finding qualified people to replace these experienced mechanics will be a significant challenge for our repair businesses.
Short-term aftermarket service will increase when a repower decision is made. As the backlog waiting to repower a bus declines, the overall demand for service work will also decline. It is up to the dealership owner or manager to adjust the number of service people to match the dealership’s service demand.
Any company or industry can utilize the lessons highlighted throughout the article.
Image credit: Photo by Dan Dennis on Unsplash
About Middlesex Consulting
Sam Klaidman is the founder and principal adviser at Middlesex Consulting. He assists his B2B product manufacturing clients grow their aftermarket (service) revenue and profitability by applying methodologies and techniques associated with customer value creation and customer experience. He aims to help clients design and commercialize new services and the associated business transformations. You can contact Sam here.