e-Buses: Spearheading Transport Decarbonization in Emerging Markets

Daniel Layug, CFA
4 min readFeb 2, 2022


Road transportation accounts for 11.9% of global greenhouse gas emissions.[i] Two-thirds of this comes from the internal combustion engines in passenger cars, motorcycles, buses and other public transportation vehicles.[ii]

In emerging markets, the electrification of transportation has been proceeding at a slow pace due to previously high green premiums vs gas vehicles. Petroleum-powered vehicles are ubiquitous because of the fuel’s high energy density (a li-ion battery occupies ~2.5x the space per km travelled) and petroleum’s relative affordability.

Tipping point in the path to net zero transportation

Without subsidies, EV private cars are not yet scaling in emerging markets because of higher upfront costs and the lack of charging infrastructure. So how can developing countries take measurable steps to decarbonize their transport systems?

The answer is EV buses. One 30-seater e-Bus can mitigate ~40 tons of CO2e emissions per year. Buses offer a modular solution to build out a transportation network vs investments in fixed infrastructure. There is a global supply chain of different types, categories and sizes. Buses also offer the benefit of low-cost transportation for a large number of people and the flexibility to alter routes and times to optimize utilization.

A 2018 bus from DC Circulator’s electric fleet; Photo from the Circulator website

In 2021, sales of e-buses hit $13Bn globally, primarily in China. Bloomberg predicts that EV sector investments in 2022 will overtake renewable energy investments as the sector with the largest energy transition investment.[iii]

Total Cost of Ownership is finally lower in 2022 for EV than diesel

A Total Cost of Ownership analysis (“TCO”) looks at alternative products, while considering the acquisition costs, operating expenses, replacement/upgrade costs, and residual values over the lifetimes of the products.

For geographies such as emerging South Asia, it is now more capital efficient to purchase a new EV bus than a diesel bus. While the acquisition cost of an EV bus is 2x more expensive than a comparable diesel bus, this premium is offset by the higher operating expenses of diesel vehicles. Over 12 years, the aggregate fuel cost, maintenance, and battery replacement of an EV bus total to makes up for the lower capex of a diesel bus.

Taking the present value of all operating expenses and assigning a cost for charging infrastructure, the TCO of an EV bus (10% discount rate) is ~2% better than a comparable diesel bus, sans subsidy. This positive TCO is projected to get better as li-ion battery prices decline from $100-$150/kWh to $60-$100/kWh in the next 5 years (a battery makes up ~40% of the cost of an EV).

Additionally, the energy used to charge an EV battery must be as clean as possible to lower Scope 2 emissions. South Asia’s energy mix is still 46.7% coal and oil.[iv] A project proponent can get close to clean energy by powering daytime charging with a grid-tied solar PV system in countries that do not have a green energy procurement mechanism.

Short haul EV bus fleets can be NPV+ investments

Cities and townships can lessen carbon monoxide pollution and reduce greenhouse gas emissions with EVs. At the same time, they can generate market returns from investing in short-haul EV bus fleets, charging infrastructure and grid-tied solar PV. The key to positive Net Present Value projects without a government subsidy in emerging markets are:

1. Bankability: Investing in a fleet and supporting infrastructure requires large capital to fund unsecured revenue streams. This requires the project proponent to have a high enough credit quality with a bank that is actively looking at financing energy transition projects.

2. Minimizing charging capex: Charging stations are non-revenue generating cost centers. Thus minimizing the dispersion to a handful of spaces (ie parking lots) is important to keeping capex down. Concentrating multiple stations in few spaces allows a proponent to use queuing theory to optimize the appropriate number of stations for the fleet. Minimizing the number also reduces the risk of obsolescence if the stations need to be replaced with faster chargers.

3. Hitting a minimum travel distance: At market rate passenger fares, a US$100,000 e-bus needs to carry passengers an aggregate of 100-150km per day (depending on availability and occupancy) to be NPV+.

De-risking fleet investments with an enabling environment

Decarbonizing transportation is integral to our path to net zero. While emerging markets around the world have set out NDCs and corporates feel the pressure from investors and the public to abate, more investments need to pour into the electric vehicle sector. The ideal locations for e-bus adoption are areas with:

· Large growing populations

· Strong automotive and electronics manufacturing base

· Lower tax zones (import duties, income tax, VAT)

· Private sector commercial fleet operators

The main takeaways are: 1) EV buses can allow us to reduce pollution and GHG emissions; 2) Investing in a fleet and supporting infrastructure is profitable; and 3) EVs can scale economically in emerging markets, particularly in areas with enabling environment.

[i] Our World in Data: https://ourworldindata.org/emissions-by-sector#energy-electricity-heat-and-transport-73-2

[ii] International Energy Agency: https://www.iea.org/data-and-statistics/charts/transport-sector-co2-emissions-by-mode-in-the-sustainable-development-scenario-2000-2030

[iii] BloombergNEF Energy Transition Investment Trends 2022 Report (January 19, 2022)

[iv] BloombergNEF Country Transition Tracker 2021

Disclaimer: This post reflects my personal views and not those of the International Finance Corporation, World Bank, or any other member of the World Bank Group



Daniel Layug, CFA

Climatetech | Sustainable Finance & ESG Investing | Georgetown Alumni Investor Network | INSEAD Young Alumni Achievement Awardee | GenT Asia Leader of Tomorrow