Issues such as low speed, low efficiency and congestions are
common across cities in South America. With more than 12 million
people, Sao Paulo is the region’s largest city and has become a
role model for mobility initiatives. In 2021, more than 4.5 million
passengers were transported per day, according to SPTrans – Sao
Paulo’s transport department. Sao Paulo operates a bus fleet of
13,800 vehicles. Gradually, Sao Paulo has become a hub for pilot
projects in the mobility sector. For example, Sao Paulo was one the
first cities to restrict cars and trucks in the city center. Sao
Paulo has adopted bus corridors and improved the average speed of
buses. The use of articulated and bi-articulated buses on some
routes also improved the efficiency of public transport.

Looking ahead, new initiatives are likely to focus on climate
and environment. Sao Paulo’s climate committee created in 2009
suggested rules for cleaner public transportation. In 2021, a new
schedule was adopted: the carbon emission will be cut by half in
2027 (based on total emission in 2016), and by 100% in 2037.
Particulate matter has to be cut by 90% in 2027, and by 95% in
2037. The new rules mean that bus fleet operators will have to
spend more on cleaner buses and the necessary infrastructure. Sao
Paulo is one of the cities in South America that takes part in the
Zero Emission Bus Rapid-deployment Accelerator (ZEBRA) program that
promotes a transition to new technologies and will that change the
automotive industry.

According to S&P Global Mobility Medium and Heavy Commercial
Vehicle (MHCV) Industry Production forecast, Brazil was the fourth
largest bus and chassis producer in the world in 2021, and nearly
90% of buses produced in Brazil have urban applications. Brazil
will keep its rank in 2022. In the future, Brazil’s bus production
needs to transition to electric powertrains to keep its position
and to continue to increase its output. Brazil is the major bus
producing country in the region and serves with its chassis bus
bodybuilders across South America. Brazilian OEMs have served the
region for decades and offers now CNG/LNG vehicles to comply with
Euro VI. These brands are now challenged by Chinese OEMs that offer
complete buses at lower prices. This has been witnessed recently by
the successful bids of BYD, Foton and Yutong in Chile and Colombia,
insofar as a big part of the bids consist of electric buses.

Among bus producers, BYD was the pioneer bringing its electric
models to be assembled in Sao Paulo state. Volvo, Mercedes-Benz,
and Volkswagen already developed their models with launch timing in
2023. On the other hand, Scania and Iveco have natural gas as
solution for alternative propulsion; meanwhile, Agrale has built
partnerships to enter in the electric field. Furthermore, Higer is
another beginner in electric vehicles offering their products in
Brazil. But it hasn’t all been good, the lack of government
incentive incentives for new technology creates barriers for
electricity. The shortage of components brought instability and
concerns for industry. The price of new technology is another
penalty, and the final price – it estimated an electric bus is
three times more expensive than conventional bus. Of course, the
initial costs will fall as the technology becomes more common.
However, in the first moment the increase of operation costs will
bring adjustments in subsidies or public ticket prices.

In fact, buses will be the entry point for electrification in
South America, although the some movement has been noted in
medium-duty segment, in minor scale. OEMs settled in Brazil have
great potential to increase their production and rebound their
profit margins due to new technologies and increase their
penetration in South America countries, which brings more revenues
for their headquarters. Moreover, the use of electric technology
has increased globally, and the change will be needed to maintain
Brazil at a competitive level for the bus industry. On the
passenger side and bus driver side, the comfort and safety offered
by electric buses may attract more users for public transport, and
a reduction in occupational diseases and accidents for bus fleet
operator. A reduction of greenhouse gas emissions has positive
results for climate, meanwhile the public sector promotes social
wellbeing with reduction of government health expenditures. In
other words, it may be good for industry, good for users and good
for the climate all at once.

This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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• Source: http://www.spglobal.com/mobility/en/research-analysis/the-inevitable-transformation-of-the-bus-industry.html