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The bus of the future

NFI Group sees smooth road ahead for its zero-emission buses

Martin Cash By: Martin Cash 
Posted: 3:00 AM CST Tuesday, Jan. 12, 2021

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SUPPLIED</p>

SUPPLIED

Like every other company, NFI Group had a rough ride in 2020, but unlike many other industries, the road ahead should be much smoother for the local bus manufacturer.

That’s because there is growing evidence that zero-emission bus (ZEB) technology will lead the transportation sector and there is renewed commitment by governments in its key markets to make funds available to replace diesel buses with ZEBs despite the dramatic fall in transit bus ridership in North America during various levels of regional lockdowns.

At NFI Group’s virtual investor day presentation on Monday, Canadian, U.S. and U.K. industry officials all had the same message — ZEBs will be the bus of the future.

Paul Soubry, CEO of NFI Group, as well as a number of company officials, detailed the manner in which the company is, and will continue to be, a leader in the world of ZEBs. (Over a 12-year lifespan one ZEB eliminates the equivalent of CO2 emissions from 336 cars over that same time frame.)

Soubry said it is more of an evolution than a revolution to ZEB, pointing out the company sold its first electric trolley buses 50 years ago.

"The reality is our business is transitioning to zero emission," he said.

The company also released guidance for 2021 and beyond that suggests a rapid return to growth. The market was obviously pleased with the projections bidding up NFI stock more than 15 per cent on Monday to close at $29.20, triple the low of $9.12 earlier last year.

The company is in the middle of wide-ranging program to integrate its portfolio of acquisitions that will produce about $65 million in annual savings. (It permanently eliminated more than 500 positions earlier this year across its operations.)

It has agreements from creditors to manage debt covenants and expects to generate from US$220 million to US$240 million in operating profit next year and projections are that ZEB revenue will account for 20 to 25 per cent of 2021 revenue, which will be back to 2019 levels.

Both Josipa Petrunic, the CEO of the Canadian Urban Transit Research & Innovation Consortium (CUTRIC), and Paul Skoutelas, CEO of the American Public Transportation Association (APTA), were optimistic about increased levels of financial support from Canadian and U.S. governments for ZEBs and the infrastructure needed to run them.

Paul Soubry, CEO of NFI Group.</p>

Paul Soubry, CEO of NFI Group.

In the Canadian government’s climate plan document that was released in December, called A Healthy Environment and Healthy Economy, it stated the government’s commitment "to help procure 5,000 zero-emission public transit buses and school buses, including by leveraging the Canada Infrastructure Bank. To support this goal, the Canada Infrastructure Bank’s Growth Plan has earmarked $1.5 billion to expand and accelerate the adoption of zero emission buses."

Petrunic said, "There are good signals from public policy leaders. Now the technology development and hard work is ahead of us."

In the U.S., Skoutelas pointed out that the chairman of Joe Biden’s transition team is the CEO of L.A. Metro and the expectation is that the new administration will be very sympathetic towards transit authorities’ acquisition of ZEBs and the infrastructure needed.

"We are very enthusiastic about the outlook," he said. "President-elect Biden has embraced and does embrace public transport. We are looking for an administration that will have public transport investment as a centrepiece of its infrastructure plan."

New Flyer has been the heavy-duty transit bus market leader for some time, with about 41 per cent of the U.S. and Canadian market. Its U.K. division — it acquired Alexander Dennis Ltd. , the leading double deck bus manufacturer in 2019 — has more than 70 per cent of the double decker market in the U.K.

After 10 years in development, NFI’s battery-electric buses also have a commanding market share.

Soubry took umbrage at the suggestion that his company is not up to the industry disruption that electrification will cause.

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"We have been innovating and disrupting for decades," he said.

And while ZEBs can cost twice as much as standard diesel propulsion buses, battery costs have come down 80 per cent since New Flyer built its first battery electric bus. A few years ago the company set up a distinct division that builds charging infrastructure and with charging standards now in place, it is now the fastest growing part of NFI’s business.

In 2020, NFI delivered close to 200 ZEBs, still a small percentage of the close to 6,000-plus buses the company shipped.

But eight per cent of its backlog orders are for ZEBs and 31 per cent of the total public bid universe is for ZEBs.

NFI has now sold ZEBs to 15 of the 25 largest transit authorities in North America, most of whom have set zero emission target dates in the next couple of decades.

martin.cash@freepress.mb.ca

Martin Cash

Martin Cash
Reporter

Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.

   Read full biography

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