Analysis: Electric bus maker BYD shows China complications in Biden climate push

GreenPower Motor

14/07/2021 12:00

* BYD blocked from U.S. funds to electrify bus fleets
    * Transportation accounts for the largest share of U.S.
emissions 
    * Ban on BYD could stall Biden's green agenda
    * BYD hires lobbyists to push changes to 2019 law 

    By Jarrett Renshaw and Tina Bellon
    July 14 (Reuters) - A California electric bus factory just
north of Los Angeles looks like a vision of President Joe
Biden's battery-powered, American-manufactured, climate-friendly
future.
    Some 500 unionized workers assemble battery packs, weld
frames and install seats, steering wheels and fare boxes, making
zero-emission public transportation on a factory floor at BYD
North America that is the size of nine American football fields.
    Converting transit buses to battery or fuel-cell power is
considered one of the fastest ways to reduce greenhouse gas
emissions from the transportation sector, which at 29% accounts
for the largest share of U.S. emissions. 
    But BYD, a unit of China-based BYD Co Ltd  002594.SZ , is
ineligible for billions of dollars expected to flow out of
Washington in coming months to electrify bus fleets, due to a
2019 law written with the company in mind. 
    BYD North America spokesman Frank Girardot said BYD is going
to fight the decision because it does not receive state funding
through its Chinese parent company. "Locking us out of the
lucrative transit market is a bad thing for the American
consumer, taxpayer and worker," Girardot said.
    Taking out one of the two main players in the electric bus
sector, even with other rivals expected to ramp up production,
means Biden will be hard-pressed to quickly electrify the
nation's bus fleet, endangering a key piece of the president's
climate agenda, transportation experts warn.
    "It's very difficult with the current manufacturing
infrastructure in this country and with BYD out of the process,
to imagine getting this large fleet changeover anytime soon,"
said Jeff Davis, a senior fellow with the Eno Center for
Transportation, which tracks federal transit funding and policy.
    The ban also threatens one of the few examples of unionized
labor in the green economy, a pillar of Biden's economic agenda,
and marks the latest test in the strained relationship between
the U.S. government and companies with ties to China. 
    A White House official expressed confidence the country can 
ramp up production, saying a combination of robust federal
funding for zero-emissions buses paired with support to vehicle
and battery manufacturers would "build sufficient domestic
capacity to support an accelerated transition to EV buses.” 
    Biden and a group of bipartisan lawmakers have agreed to
spend an unprecedented $7.5 billion to replace some 50,000
diesel buses - or roughly 70% of the U.S. transit fleet - with
electric buses over the next eight years, as the administration
aims to cut U.S. emissions in half by 2030.  urn:newsml:reuters.com:*:nL2N2OJ2ZO
    BYD North America mainly competes in the U.S. electric bus
market with California-based Proterra Inc  PTRA.O . They have
each sold about 1,000 electric buses in the United States to
date. And Proterra plans to build a domestic cell- manufacturing
facility over the next few years. For a FACTBOX of other players
in the sector, click  urn:newsml:reuters.com:*:nL2N2OJ2ZO  
    Other busmakers are expected to help fill the gap over time,
including U.S.-based GILLIG, Canadian NFI Group Inc's  NFI.TO 
New Flyer unit, and Canada-based Novabus, a Volvo  VOLVb.ST 
subsidiary, according to Dan Raudebaugh, executive director of
the Center for Transportation and the Environment. 
    But they all lag behind BYD in current e-bus production
capacity. 
    GILLIG, NFI and Novabus are long-standing diesel bus makers
that in recent years began selling hybrid, electric and hydrogen
versions of their models. Other companies, including Canada's
Lion Electric Co  LEV.TO  and GreenPower Motor  GPV.V   GP.O ,
U.S. REV Group Inc's  REVG.N  ENC and UK's Arrival  ARVL.O , are
also just beginning to ramp up their transit business.
       
    'BUILD AMERICA' vs CHINA FEARS 
    Chinese companies have production capacity for a host of
other environment-friendly essential items, such as microchips,
solar panels and batteries that the United States lacks. As
lawmakers seek "Build America" provisions in
multitrillion-dollar infrastructure spending bills working
through Congress, the issue of Chinese ownership could come up
often. 
    BYD's parent is traded in Hong Kong and Shenzhen. The
company says 60% of its stock is owned by U.S. investors. Warren
Buffett claimed an 8.2% stake https://berkshirehathaway.com/letters/2020ltr.pdf
 in his last annual letter.  
    But after a 2019 congressional report detailed how BYD has
benefited from Chinese state-owned investment funds and state
subsidies to build battery cells plants that are part of the
company's supply chain, it and Chinese rail company CRRC were
targeted in an amendment to the National Defense Authorization
Act.
    Starting in 2022, federal dollars cannot be used to purchase
passenger rail cars or buses from state-owned or
state-controlled enterprises, the amendment says. 
    "China has poured more than $10 billion into the electric
vehicle battery industry since 2012, equating to a subsidy of
around $10,000 per electric car, and higher for electric buses,"
the report said. 
    BYD North America denies the report and says that, as a
separate business unit, it does not receive direct Chinese
subsidies, which are instead provided to companies doing
business in China.
    While Democrats and Republicans agree on little, they have
come together on bills targeting China and seeking to limit the
country's economic influence. 
    Last month, when Democratic Representative Pete DeFazio, the
chairman of the House Transportation Committee, took to the
house floor to tout the importance of an infrastructure bill and
used some of his time to attack BYD without mentioning them by
name. 
    "We are going to get two Chinese companies, predatory
Chinese companies, out of here, making electric buses and rail.
DeFazio said. 
    
    BYD PLANS TO FIGHT BACK 
    BYD and its North America management are touting its
pro-union status as it prepares to fight to be excluded from the
amendment. 
    It has hired a high-profile lobbying firm, Capital Counsel,
with close ties to Democrats and Biden to help convince
lawmakers and the White House to make changes to the 2019 law,
according to federal lobbying records. 
    Robert Diamond, who ran Biden's New York presidential
campaign, and Lyndon Boozer, who has deep relationships to House
Democrats, are working on behalf of BYD, records show. The firm
was paid $50,000 in the first quarter.    
    BYD has also hired law firm O'Melveny & Myers to address
lawmakers' concerns and write a report arguing it is not the
type of Chinese state-owned entity contemplated by the 2019 law.
    "There's all this talk about China stealing jobs, but (BYD)
is creating jobs, they're offering people careers. People have
successful lives, some are buying houses now, the whole
community has benefited," said Willy Solorzano, organizer with
the local chapter of the Sheet Metal Workers union. The average
unionized BYD worker makes $20 an hour, he noted. 
    Some local transit agencies say leaving out BYD doesn't help
them. 
    "It takes the most competitive provider out of the market,
which creates a collusive environment for the other remaining
players to raise the price," said Macy Neshati, CEO of Antelope
Valley Transit Authority, which serves the Los Angeles county
area and has converted almost its entire bus fleet of around 85
buses to battery-powered BYDs.        

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
2019 Congressional report     https://www.congress.gov/116/meeting/house/109442/documents/CHRG-116hhrg37138.pdf
 
FACTBOX-Five Facts on why electric buses are key to Biden's
green agenda      urn:newsml:reuters.com:*:nL2N2OJ2ZO
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Jarrett Renshaw and Tina Bellon; Editing by
Heather Timmons and Edward Tobin)
 ((jarrett.renshaw@thomsonreuters.com; (646) 223-6193;))