Uptrend

January 3, 2024

The health of the school bus industry is looking bright in 2024. Excitement around the EPA Clean School Bus Program continues, as more funds are being dispersed from the $5 billion allocation. Plus, other statewide grant funds are helping fuel a green school bus boom, especially for electric.

Many school districts are increasing the adoption of low- and zero-emissions school buses due to regulatory mandates at the state and federal levels, but not without some push back from operators due to technology limitations, range and long-term funding concerns.

As we ended 2023, inflation looked to be leveling off, but interest rates remained nearly double those in 2022. Fears of a recession seemed to be waning and supply chain bottlenecks are improving.

In its Q4 2023 earnings report, Blue Bird CEO Phil Horlock indicated record school bus sales and backlog. This is a great indicator of continued growth and industry health. “Market demand for Blue Bird’s school buses remains very strong with approximately 4,600 units in our order backlog. Unit sales in the year were up 25 percent from a year ago and we grew revenue by an exceptional 41 percent, to a record $1.13 billion,” he said in December.

I look to the stock market as an indicator of economic health and many industry companies we work with are trending up, yet some are also trending downward. I keep an eye on major publicly traded companies, particularly those aligned to the school transportation industry, for information and forward guidance. Overall, I am happy to share that future outlooks are positive for many key industry suppliers. Another benchmark for industry health is OEM school bus manufacturing data. As reported on page 12, the numbers were up 17 percent at 38,528 school buses produced.

Still, the increased costs of labor and raw materials remained a concern. Industry insiders shared with me that they anticipate similar supply chain challenges with limited Type A chassis allocations from GM and Ford in 2024, same as 2023. This is due to UAW strikes, factory closures and overall demand. It’s not clear yet if this situation will improve, but a downturn in the RV business and consumer luxury car business may help with more chassis allocations downstream. Also, Ford Transit demand continues to be high across all vocational markets, impacting supply availability.

Clean diesel school bus volume grew and continued to be the number one buying choice with 22,970 units sold. Keep in mind diesel engines are going to be subject to more stringent EPA Phase 2 Greenhouse Gas (GHG) emission requirements starting this year and ramping up by 2027. The EPA still must finalize its Phase 3 regulation for 2028-2032. This will increase overall diesel engine costs due to the engineering required to meet these new emission standards and extended warranties.

Meanwhile, the new green bus market share leader is electric school buses, which saw an over 145 percent increase to 2,902 units. Propane-powered school bus volume increased slightly with 1,814 units, and CNG school buses saw a negligable gain with 195 units. Gasoline school buses were down slightly to 9,671 units sold over last year.

OEMs have continued to expand school bus electrification offerings. Keep in mind that school bus manufacturers are forecasting that a third to a half of all new school bus sales in 10 years will be electric. States like New York and California are leading the way by setting a target to make all school buses electric by 2035.

Plus, large public utilities have taken a strong interest in developing and funding school bus electrification projects so that will drive things forward, too. Some transportation directors I have spoken with have embraced electric school buses and others are apprehensive based on the battery range, the terrain the district covers and of course price.

As property taxes are a major funding mechanism for operating revenue of municipalities, school districts and transportation departments, the latest outlook by the National Association of Realtors predicts that existing U.S. home prices will rise by 13.5 percent next year and mortgage rates will be between 6 and 7 percent by spring 2024. Chief Economist Lawrence Yun added that the consumer price index is calming, indicating that the Federal Reserve should adjust its monetary tightening posture.

The Biden administration is closing in on the end of its first term, so we will see if it remains for a second. The result could directly impact sustained funding for greener school buses. Meanwhile, according to a recent STN readership study, 676 subscribers identified their top 2024 buying trends are new diesel buses, brakes, lighting and LEDs,
wheels/tires, air conditioning, and GPS and vehicle tracking.

Be sure to utilize this ultimate resource guide of contacts and data to discover new products and the companies that sell them. Let’s keep driving forward together.

Editor’s Note: As reprinted in the Buyer’s Guide 2024 issue of School Transportation News.