THE MORNING RANT: Government is Paying Manufacturers to Produce Electric School Buses, and Then Paying School Districts to Buy Them

There have been some ridiculous market distortions imposed by our government in its effort to replace vehicles powered by gasoline and diesel with those powered by electricity, but perhaps none is more ridiculous than the various subsidies designed to electrify America’s school bus fleet.

The federal government is providing multi-million dollar subsidies to school bus manufacturers for producing electric school buses, and the government is also providing multi-billion dollar subsidies to local school districts to buy these electric buses. One school bus manufacturer, Blue Bird Corporation, is riding high right now, as both streams of free federal money are flowing into its coffers.

To put it more simply, Blue Bird is receiving federal grants to manufacture electric school buses, while the revenue it receives from selling these school buses is also being provided by federal grants. There would be no market for this product without the government subsidizing all aspects of its manufacture and sale.

In a July 2024 press release, Blue Bird proudly announced that it was receiving an $80 million grant from the Department of Energy to expand its electric school bus operations. The money comes from an appropriation under the Biden administration’s “$2 billion investment to convert long-standing automotive facilities to manufacturing electric vehicles and components, retain and expand good-paying manufacturing jobs, and bolster domestic supply chains.” Per the Blue Bird press release, the funds will be used to convert a plant in Fort Valley, GA that was idled in 2019.

In a separate press release from November 2024, Blue Bird announced strong full year results, driven by delivery of more than 700 electric school buses. Funding for these buses came from the EPA’s “Clean School Bus Program” which awards money to local school districts, which in turn use the money to buy electric buses from Blue Bird. At approximately $375k per bus, those 700 federally funded buses brought in revenue of around $260 million.

There are three phases to the EPA’s Clean School Bus Program, totaling $5 billion. Only one phase, at $1 billion, has been completed. Blue Bird is already accumulating orders for additional federally funded EV buses. CEO Phil Horlock stated that another 630 EV buses have been ordered and are in Blue Bird’s backlog, all to be funded by EPA grants to school districts. For those doing the math, that’s another $200 million or so of Blue Bird revenue that will be provided by US taxpayers. For comparison’s sake, Blue Bird’s total revenue in 2022 was about $800 million.

Prior to tapping into this gusher of free federal money, Blue Bird had been recording losses and hemorrhaging money, forcing it to downsize other operations. Per a May 2022 article in the Macon Telegraph, “On the heels of reporting a $12.1 million loss in its fiscal second quarter, Blue Bird Corporation laid off 115 production workers at its Fort Valley manufacturing facility.”

The stock price of Blue Bird (Nasdaq: BLBD) fell below $8 per share less than two years ago, with the company reporting losses for consecutive years. But with the cascade of tax dollars being steered to Blue Bird for electric buses, the stock has recently been trading at around $40 per share. From a recent Business Insider piece titled ”The Best-Performing EV Stock This Year Is A School Bus Manufacturer” comes this quote from CEO Horlock during a recent earnings call, “This is an entirely different Blue Bird bus revenue and gross margin structure compared with just a year ago with bus prices up significantly." What CEO Horlock means is that rather than selling gas and diesel-powered buses in a competitive bidding process for about $125k per unit, Blue Bird is now being paid by the government to manufacture electric buses, which are then sold for about $375k per unit in a non-competitive environment in which the $375k is also provided by the federal government.

Unfortunately for the school districts obtaining free electric school buses, they must also scrap their reliable old gas and diesel buses as part of the deal, leaving them with highly unreliable electric buses. From a news item in the Times-Union newspaper last February, five of the seven electric school buses operated by the Bethlehem (New York) Central School District had been inoperable in preceding weeks.

Aside from being unreliable, electric school buses are also a horrible fit for places with cold winters. The Department of Energy offers some pretty outrageous advice on how to overcome the inherent problem of electric school buses losing their charge in winter. These include:

• Minimize Door Openings: “Consider if you can reduce or minimize the time the doors are open on the bus.”

• Add Heated Driver’s Seats: “Heating a driver’s seat requires much less power than heating the cabin air.”

• Evaluate Worst-Case Cold Weather When Performing Route Analysis: “Consider driving your ESB on various routes during its first season operating in cold weather, starting with the shortest, least demanding route.”

• Store ESBs Indoors Overnight: “If indoor storage is not possible, storing the bus in areas with sunshine during the day helps the bus use less power for cabin heating…”

Alternatively, school districts can forego the free federal money and continue to transport their school kids using reliable, heated, time-tested, gas and diesel buses. Many school districts are doing just that, determining that free electric buses are still too expensive, because not only do they have reliability and performance shortcomings, but school districts must also scrap their perfectly good diesel-powered buses upon receiving their government-funded EV school buses.

The Modoc Joint Unified School District in the northeast corner of California had been awarded $2.4 million from the EPA for six electric buses before withdrawing from the program. The school district’s superintendent, who noted that temperatures get extremely cold in Modoc, stated "Basically, we're being told that you can't run the heaters, which means you can't defrost your windows because they take too much battery power. So, we were told they would get 200 miles on a charge, but the people in the field were telling us 70 with a loaded bus. That just doesn't work."

It has often been said that EVs are the solution to a problem that doesn’t exist. In the case of electric school buses, it’s even worse. The electric school bus push is creating a set of problems where none even existed before. But it’s also creating a mighty taxpayer-subsidized revenue stream for one school bus manufacturer.

[buck.throckmorton at protonmail dot com]

posted by Buck Throckmorton at 11:00 AM

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