On paper, the United States is poised for a transit revolution. Historic federal funding, via the FTA’s Low/No Emissions Program (5339c) and the Inflation Reduction Act, has synced with aggressive mandates in states like California, New York, Virginia, and Washington to fully decarbonize fleets by 2040. But while transit agencies in Europe and Asia are accelerating adoption within healthy, competitive markets, their American counterparts face a starkly different reality.
In the U.S., the electric bus market is effectively broken. Skyrocketing prices, a duopolistic supply chain, and a wave of manufacturer bankruptcies have created a crisis where policy ambition is running years ahead of industrial capacity. To bridge this gap, US agencies are looking outside the box to fix a system that money alone cannot solve.
The need for this rethink became urgent as soon as early adopters put new battery-electric buses (BEBs) to the test. Within months of rolling out the first BEBs into revenue service, the limitations of battery technology became undeniable. Many recent BEB models need more frequent repairs, and they’ve been found to offer significantly shorter battery range compared to both their advertised capabilities and that of comparable internal combustion engine (ICE) vehicles. This is a particular challenge in regions of the country that experience very cold or very hot weather, long-distance routes in lower-density areas, or steep topography. With shorter-than-expected battery ranges, transit managers must account for midday recharging time in their schedules.
This triggers escalating operational costs:
- Schedule inefficiency: To provide the same frequency as an ICE route, schedulers must run more vehicles (and pay more labor-hours) to cover for those BEBs charging mid-shift.
- Infrastructure costs: Unlike ICE vehicles, BEBs require expensive depot chargers ($50,000/unit) or fast-charging pantograph stations (up to $500,000/unit).
- Service trade-offs: Without significantly higher operating budgets to compensate, agencies risk service cuts, which discourage ridership.
Agencies also face a severe shortage of rolling stock (inventory that rolls, as opposed to fixed assets like stations). Federal "Buy America" regulations (requiring 70% domestic manufacturing) and overly fragmented purchasing by transit agencies have limited the selection for both electric and diesel buses alike, driving prices up to three times the European average. The American bus market has seen a mass exodus: since 2003, at least ten manufacturers have left, with Nova Bus exiting and Proterra and Lightning Motors going bankrupt in just the last three years.
This has left a duopoly of New Flyer Industries (NFI) and Gillig for large buses, pushing the price of a 40-foot electric bus from $800,000 in 2017 to $1.4 million today. The situation is even more critical for smaller electric vehicles used in paratransit and microtransit services; currently, only the Ford eTransit meets both Buy America and ADA regulations. Other potentially promising vehicles, such as the Mercedes eSprinter or the Volkswagen ID.Buzz, do not meet Buy America requirements and do not offer wheelchair-accessible configurations to serve riders with disabilities. This means that transit agencies pay inflated prices for their electric vehicles, and they must reserve ICE vehicles to provide accessible service, raising their operating costs. Faced with these inflated costs and limited options, states like California are already delaying mandates to give the market time to stabilize.
Despite these headwinds, many agencies are showing dauntless leadership. King County Metro in the Seattle area ordered its last hybrid-electric vehicle in 2023, and by late 2026 it will open one of the nation’s largest electric bus depots capable of charging 120 BEBs. In Missoula, Montana, Mountain Line boasts a 40%-electric fleet today and is set to achieve 90%-electrification by late 2026. The agency worked closely with OEMs to test heated battery systems to optimize performance in their cold winter climate. Other transit agencies have pivoted away from BEBs and towards hydrogen fuel-cell buses, notably AC Transit and SamTrans in California.
The most exciting development of 2025 is the arrival of foreign OEMs establishing US factories to build electric buses that comply with Buy America. This influx is finally expanding the menu of options:
- Karsan (Turkey) is opening an Illinois factory to build the e-Jest, a 20-foot minibus ideal for microtransit. Pilot customers include Minnesota Valley Transportation Authority (MVTA) and the Chattanooga Area Regional Transportation Authority.
- Holon (Germany) is building a factory in Jacksonville, FL, to support autonomous shuttles.
- Solaris (Spain) recently won contracts with King County Metro and San Francisco’s Muni.
- May Mobility is launching the electric Technobus in 2026 to support its autonomous service in Ann Arbor.
(Note: Agencies remain restricted from purchasing from Chinese OEMs like BYD due to the National Defense Authorization Act.)
Local and state policymakers can cultivate this nascent boom even without federal intervention. Here are three steps to reduce costs and support operators:
- Leverage Cooperative Purchasing: Agencies should utilize agreements like 791 Cooperative or NEORide. Pooling purchases improves economies of scale and reduces unit costs. State regulators could even make funding conditional on using these frameworks to ensure efficiency.
- Demand Price Transparency: Regulators should require agencies to share vehicle and component pricing through these coop networks. This transparency acts as a crucial check against inflation.
- Localize Manufacturing: Cities should actively recruit foreign OEMs using tax incentives and workforce training programs, acting as local sponsors for initiatives like the Department of Commerce’s SelectUSA program.
The road to a fully electric bus network will be bumpy. But by learning from pilots, pooling purchasing power, and welcoming new market entrants, transit agencies can turn these headwinds into a tailwind for a cleaner future.
Strategy Principal at Via
