The evolving electric bus market

U.S.-based electric bus maker Proterra is partnering with Japanese investment firm Mitsui to expand a program that slashes buyers' upfront costs — by allowing them to lease instead of buy the vehicle's battery, which is a major expense.

Why it matters: It's part of the wider evolution of the growing electric bus industry.

• "There are a lot of innovative models coming up around EV buses in particular. Upfront costs are still high, but there's a growing number of ways to get around that," Colin McKerracher of the consultancy Bloomberg NEF tells Axios.
• "Municipal buses will probably go electric faster than any other major vehicle segment," he said.

Driving the news: Mitsui is putting $200 million behind Proterra's leasing program in an effort to speed up North American sales growth. The 12-year leases include performance warranties and midlife replacement.

• "The battery leasing credit facility, the first of its kind in the North American public transit industry, is expected to lower the upfront costs of zero-emission buses and put Proterra electric buses at roughly the same price as a diesel bus," the companies said.

The big picture: Electric buses are competitive with internal combustion models over time, thanks to the absence of diesel fuel costs.

• But they're more expensive on the front end.
• And, the vast majority of deployment is in China.

By the numbers: Proterra CEO Ryan Popple, whose company largely serves U.S. transit agencies, tells Greentech Media that leasing immediately ends the gulf between a $500,000 diesel bus and a $750,000 electric model.

• “On a percent basis, it takes the upfront premium for an electric bus from 50 percent to zero,” he said to Greentech.

The Proterra-Mitsui venture is the latest move in financing. Last year, bus maker BYD teamed up with Generate Capital to launch a programthat enables leasing of electric buses.

• "The area where it's unique is Proterra and Mitsui have segregated the upfront cost and associated risk of the core differential on electric vs. diesel or [compressed natural gas] buses, which is the battery itself," Wood Mackenzie analyst Ravi Manghani tells Axios.
• "This approach mitigates the inherent hesitation of electric buses and makes the sales cycle mimic that of traditional buses," he says.

Go deeper: Electric buses are having a moment