We should have bought the electric school buses from China
Bullets:
The Biden Administration signed a $160 million contract with a Canadian firm to build 435 electric school buses, which is over $360,000 per bus.
But the company, Lion Electric, delivered fewer than half of the buses before declaring bankruptcy. What's more, many of the buses that were sent to school districts had structural problems that made them hazardous.
China has an export ban on graphite used to make batteries for electric vehicles, and Western firms are struggling to build batteries, and the vehicles, which they have never tried to build before.
But the problems at Lion run far deeper than the supply chains for the battery. Poor design, manufacturing defects that resulted in power steering and brake failures, and even "defective windshields" plagued buses that were sent to school districts in Maine.
China has over a decade of mass producing electric buses of all types. Large electric buses from Chinese factories typically cost under $100,000 each, and come with long warranties.
Report:
Good morning. China makes most of the electric vehicles in the world, and China owns most of the supply chains to build electric vehicles. And in 2023, after high tariffs were put on Chinese electric cars to protect automakers in North America and Europe, China announced a ban on exports of graphite.
Graphite is a key material to build the batteries for electric vehicles, and China’s export ban on graphite was targeted against carmakers outside China. So supply chain guys start looking for alternative sources, given that China is the world’s top producer of graphite.
Turkey and Brazil combined equal about half the world’s graphite reserves—now that’s graphite in the ground, not current production—China is in 3rd place, then Madagascar, Mozambique, Tanzania, Russia. There is no good news here if you’re a European or North American buyer of graphite who cannot now source from China, because every one of those countries on that list is much more friendly with China, than with us.
Besides being the top graphite producer, and exporter, China is the top refiner of the world’s graphite. The rest of the world, combined, times 9, and that’s where China is on graphite refining. Here’s the CEO of Northern Graphite, “what China is saying to the West is that we have to find our own way to build electric cars.”
And before the ban nobody had a clue how we were going to solve the supply-demand imbalance for graphite, even with China’s help. The light purple bars on this graph are “potential production”, not actual—and it still falls short of what graphite demand is.
That’s the background, and so we already know that this story probably doesn’t have a happy ending. The Biden Administration signed a contract with an electric bus maker in Canada, the Lion Electric Company, $160 million to build 435 school buses. Now the company is bankrupt and most of the buses still haven’t been delivered.
Let’s stop here and do the math on what we know so far. 160 million dollars divided by 435 buses is over $360,000 per bus. $360,000 each. Let’s head over now to see how much it would have cost to buy the electric buses from Chinese factories, where they can get all the graphite they want, no problem, and have a lot of experience building electric buses.
There are a jillion electric buses on the road here in China now, and these are the factories those are coming from. Here is an electric city bus, 60 passenger capacity, at $85,000. Buy more than 10 and it’s 67,000 dollars each.
Here’s another with an 8-year warranty, $100,000 or so out the door. Assuming that it doesn’t cost $200,000 to paint one of these things yellow, we would have saved a fortune just by buying our school buses from them.
But we didn’t, and many of the buses didn’t get built at all, even at $360,000, and the EPA is doing an investigation to find out where the money went, and why the buses that did get delivered don’t work, the buses that were sent to a school district in Maine.
We’ll go to Maine, then, the Portland Press Herald, reporting on the buses which we know to be very defective. And they lead off with another problem: besides being a waste of time and money, they can’t just walk away now. If they remove those buses from the fleet, they have to pay back a lot of the money that helped subsidize the purchase of the buses in the first place. If they replace these defective electric buses with regular diesel buses, they have to pay fines to Washington.
But the buses are dangerous. One of the directors said that his bus would shut off if they hit a bump. Another director was in a different bus when the power steering failed, so he had to crash into a snowbank to avoid an accident. There were no kids on the bus, thankfully, and he was able to steer it into a snowbank instead of a deep ditch or some trees, thankfully. He called his boss, from the scene of the accident, and said that’s it, we’re done.
Later the company recalled a part that caused short-circuiting due to leaking water, loss of power steering, and braking problems. These are school buses, in the snow, and the power steering and brakes don’t work.
Preliminary inspections by the Maine State Police found loose body rivets, inoperative fans, bad design, problems with emergency doors. Couple of things here—we can’t blame any of this on the Chinese graphite ban. These are welding problems, electrical system problems, mechanical problems that have nothing to do with supply chain problems for the battery. Then, these are buses that have been delivered to the customer—school districts. Why weren’t these issues caught at the factory? The fan doesn’t work, the rivets are loose, but let’s send it to Maine so they can put their kids on the thing.
“Malfunctioning windshields.” I don’t even know what that means. Do they fall out? My grandfather—Mom’s dad—was a manager at GM for decades. I’ve been driving since I was 15 years old. And nobody in my family had ever heard of a malfunctioning windshield, but apparently they come standard on Canadian school buses. Maine has been sending buses to Louisiana just to get rid of them, and they are renting diesel-powered buses to replace them.
In the beginning, rural residents of Maine were concerned about the change from diesel buses to electric, because of the charging range problem. They were worried that the bus would run out of battery power and leave the kids stranded. That should have been the last thing to be worried about, turns out, if the steering and brakes can go out and the windshield can blow off. The EPA wants three fourths of all new public school buses in the US to be electric by 2035.
That’s some of the problems they’ve got in Maine. The manufacturer is now in bankruptcy, and dozens of schools districts haven’t gotten their buses. California, Montana, North Dakota, Iowa, Alabama, Maryland—they haven’t received $95 million worth of school buses, and given the problems they’ve got in up in Maine, they’re probably lucky. Better not to get them at all, than a fleet of dangerous school buses. Here’s another in Ohio, and another district in Illinois.
At the federal level, questions are being asked now about where all these billions of dollars went, and why the recipients weren’t screened better. Did federal officials look the other way when they gave these contracts to Lion, who was already in financial trouble?
Two thirds of the electric school buses in the US are funded by the federal government, and they were spending so much money nobody was doing due diligence on where it was going. Now companies that received money are going bankrupt. Lion lost $17 million in the three months before the contract award, which was $82 million.
Since 2020, net losses at lion were $301 million dollars, the stock price has gone to zero, basically. Lion Electric is now trading on the OTC pink sheets, and it’s in bankruptcy. When you see a ticker symbol with a Q in the last position, it means the company is in bankruptcy, but the stock is still trading. Last March, an investor group filed a class action suit against Lion, saying that the company wasn’t forthcoming about supply chain problems and grossly unrealistic financial projections,
And the school districts and these investors are in good company. The State of Illinois gave the company $50 million in EV incentives—a lot more than expected—to open a plant there, in Joliet. Illinois governor and both Senators went to a big ceremony to open the plant, now closed. Everyone in the school bus division has been laid off, and the only employees left at the company are in the service divisions for buses and trucks already on the road.
We don’t know much about how to build electric school buses, or electric city buses. And Europe is struggling with how to build batteries for electric cars. These are technologies that Western companies have relied on China for, and so now our companies are scrambling to find replacements for graphite to build the batteries for vehicles we’ve never tried to build before.
Remember, too, the thesis behind a lot of these high tariffs. High tariffs and trade barriers will incentivize our own companies to build electric vehicles in the United States, or in Canada or in Europe. In this case, we paid a Canadian company more than 3 times the market rate to build an electric bus. $360 thousand dollars per bus that we could have bought from a Chinese company for a hundred thousand dollars. But the buses don’t work, and neither does the idea that these high trade barriers will incentivize and protect domestic companies to build things they’ve never built before.
Resources and links:
Top Biden EV Bus Maker Nears Bankruptcy, Leaving School Districts and Tens of Millions of Taxpayer Dollars in Limbo
https://freebeacon.com/energy/bidens-favorite-ev-bus-maker-is-nearing-bankruptcy-and-producing-no-buses-leaving-tens-of-millions-of-taxpayer-dollars-in-limbo/
Lion Electric to get nearly $50 million in EV incentives — much more than expected
https://www.chicagobusiness.com/manufacturing-logistics/lion-electric-illinois-ev-incentives
Our View: Failure of Lion electric school buses is – at the very least – twofold
https://www.pressherald.com/2024/12/08/our-view-failure-of-lion-electric-school-buses-is-at-the-very-least-twofold/
Waste of the Day: $95 Million Worth of EV Buses Were Never Delivered
LION ELECTRIC ANNOUNCES FURTHER WORKFORCE REDUCTION
IN THE CONTEXT OF ONGOING CCAA PROCEEDINGS
https://www.sec.gov/Archives/edgar/data/1834974/000162828025000200/exhibit991-prxjanuary32025.htm
The Lion Electric Company (LEVGQ)
https://finance.yahoo.com/quote/LEVGQ/
Reuters, China, world's top graphite producer, tightens exports of key battery material
China’s New Graphite Restrictions
https://www.csis.org/analysis/chinas-new-graphite-restrictions
Maybe Biden doesn't hate China. Maybe he hates working & middle class children. 🤷
President Biden was foolish not to buy electric buses from BYD. They make them in California.
Biden’s hate for China appears to be racism