Telling someone who's interested in buying one of your products that you have a new deal that can save them $75,000 sure seems like a good way to encourage purchases. And that's the effect of a new $200-million credit facility to support battery leasing for its buses that Proterra announced this week.
Proterra opened the new credit facility in partnership with Mitsui & Co., Ltd., a Japanese investment and trading company. The big benefit to city fleets and others who buy big passenger buses is that the up-front cost of a Proterra bus with the batteries leased is about the same as a diesel bus, and then instead of buying a bunch of fuel each month, the lessee instead pays a fee to the new credit facility. Amply Power has an interactive map that shows potential fuel savings for bus fleets thinking about going electric in some major cities in the U.S.
In the end, Proterra says, the battery leasingroterrs set up makes electric buses cost roughly the same as a diesel bus, but without any dirty in-city emissions. Proterra will also own and service the batteries, and there is a performance warranty that guarantees the buses will retain their energy capacity throughout the 12-year life of the bus. A bonus to Proterra is that when the lease is up, it can use its E2 battery packs in a secondary application, like stationary grid storage.
The idea to lease the batteries is not new, and Proterra already has over a dozen customers involved in its battery leasing program that was started after the 2015 Fixing America's Surface Transportation (FAST) Act specifically authorized the ability to lease batteries separate from a vehicle. The dozen customers (all in the U.S. so far, but Proterra's leasing plan is open to customers in the U.S. and Canada) are leasing the packs in around 80 buses. Compare that to the 90-plus customers who have purchased one of the 700+ Proterra buses the company has sold. The only companies who have said publicly that they are leasing the batteries in a Proterra electric bus are Park City, Utah and MetroLink in Moline, Illinois.
I spoke with Proterra CEO Ryan Popple via email about the new program.
Sebastian Blanco: You've been selling the buses for many years already, so why set up this massive battery leasing program now?
Ryan Popple: We've been offering battery leasing for several years now but not on a scale that benefits all customers. The partnership with Mitsui allows us to use a scalable private sector resource to help offer this service to all customers. You don't often find a financing model that also solves a technical problem. Battery technology is rapidly evolving and as a manufacturer, we were trying to solve the unique challenge of ensuring that they're able to take advantage of the wave of battery innovation that will continue to come. With this battery leasing program, we provide new batteries at mid-life which will be the latest battery technology we are offering.
Blanco: What is Mitsui's role in this, and what do they offer that Proterra couldn't do on its own?
Popple: We did a global search to find the best partner who had the expertise and capacity to help us scale. Mitsui was competitive and creative, and we're very excited to partner with them on the battery leasing program and explore potential second-life opportunities for batteries once they are no longer usable for transit applications.
Blanco: Your announcement talks about how battery leasing makes the electric buses cost about as much as a diesel bus up front and then how the cost set aside for fuel can pay for the lease. Can you give me some more concrete numbers here?
Popple: The financial savings depends on customer-specific energy cost. As an example, a 40-foot Proterra bus without batteries could cost around $550,000. The annual lease price for our standard Proterra E2 vehicle is less than $40,000, which can provide customers with a total savings of around $75,000 during the 12-year lifecycle of the vehicle versus a standard diesel bus.
Blanco: Which of your electric bus models can be acquired by a transit customer with a leased battery? Any and all?
Popple: All buses can be acquired using a battery lease.
Blanco: Is there a minimum number of buses a customer has to order in order to be able to lease the battery?
Popple: No. The battery leasing program is open to any customer for any size fleet.
Blanco: What percentage of your bus customers do you expect will choose to lease the battery instead of buy, going forward?
Popple: We see this program as removing one of the top barriers to transitioning to an electric bus fleet by competitively pricing the upfront cost of an electric bus to a diesel bus. As the Park City mayor mentioned [in the release], they don't see any reason to purchase batteries for their buses anymore and we look forward to other customers taking advantage of the battery leasing program.
Blanco: How does leasing the battery change the way that your transit customers will go about getting their bus batteries fixed or maintained, compared to purchased batteries?
Popple: The battery leasing program helps customers by lowering the upfront cost of a bus to be competitively priced with a diesel bus. Customers can utilize the operating funds previously earmarked for fuel to pay for the battery lease, and Proterra will own and guarantee the performance of the batteries through the life of the bus.
The conversation has been edited and condensed for clarity.
