While Volta Trucks of Sweden recently blamed Proterra’s stumbles for its own insolvency, thus far there are no signs of similar fallout for the bus and battery maker’s Canadian customers
Editor’s Note: One day after we published this story, Volvo Group announced it is buying Proterra’s battery business. The transaction is expected to close in early 2024.
When word got out in August that electric bus and battery systems manufacturer Proterra had filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code, there was fear that the filing would hamper the progress of EV heavy truck and bus adoption and industry growth in Canada.
Based in California and founded in 2004, Proterra designs and manufactures EV buses, batteries and charging systems for fleets of heavy-duty vehicles. It has several prominent Canadian customers such as the Toronto Transit Commission, Bow Valley Regional Transit Services in Banff, Alta., the City of Edmonton and BC Transit.
Proterra says it delivered 199 new transit buses and battery systems for 1,229 vehicles in 2022. But it admits its failure to meet supply deadlines and the attendant penalties drove it to bankruptcy.
What this means going forward is where it gets murky. When Proterra announced the filing, it said its goal was to “strengthen its financial position through a recapitalization or a going-concern sale.” And, for now, it continues to operate. But that doesn’t necessarily mean clear sailing for its customers.
A case in point: In October, Sweden’s Volta Trucks declared its own bankruptcy, blaming Proterra’s situation for undermining its manufacturing plans. Since Proterra was Volta’s battery supplier, the uncertainty of future supply meant Volta couldn’t meet its production goals or raise additional funding.
While the Swedish EV truck maker’s insolvency will not affect North America since it doesn’t sell or service its EV trucks and buses here, it again raises the spectre of potential fallout for Proterra’s Canadian customers.
The EV bus and truck sector is trending upward
Generally speaking the opportunity for growth looks promising for Canadian manufacturers in the bus and truck sectors, says Chandran Bhardwaj, senior analyst with the Pembina Institute, a think tank with a focus on energy.
“Globally and in Canada, the electric vehicle industry (including the EV bus and truck sector) is trending upward,” Bhardwaj says.
“Canadian electric bus manufacturers have a dominant market share – about 45 per cent of the North American bus market. As well, 99 per cent of the electric buses sold in North America were manufactured in Canada or the U.S., indicating a strong domestic manufacturing ecosystem.”
But, says Shayna Rector Bleeker, cofounder of 7Gen, events like the Proterra insolvency can shake Canadians’ confidence in the EV industry.
7Gen focuses on mobilizing capital to develop projects to electrify fleets in Canada’s cities. Rector’s diagnosis of the insolvency is that “even advanced companies like Proterra can simply run into financial trouble.”
She says problems in the industry such as overly cautious decision-making by fleet managers and lack of regulations requiring zero-emission transportation in Canada’s cities have slowed deployment.
“Ideally, climate tech start-ups like Proterra could get access to both more confident sales and patient capital to carry through the critical scaling up phase,” Rector says.
Electric Autonomy reached out to Proterra for comment but got no reply.
Proterra’s Canadian customers
One of Proterra’s recent and public customers is BC Transit — a provincial crown coporation transit authority with 1,200 buses in its fleet.
Its goal is a fully electric fleet by 2040.
Earlier this year, BC Transit took delivery of its first Proterra test bus and put it into service in Victoria. It was expecting to take delivery of 10 more by the end of this year.
Chad Berndt, director of Electrification BC Transit says, “We continue to work with Proterra as they progress through their Chapter 11 bankruptcy protection process, and we are focused on the delivery of our first 10 electric buses in Victoria B.C. These buses are currently in production at Proterra’s factory in Greenville, South Carolina, and we expect them to arrive this winter.”
Along with the 10 buses, BC Transit purchased supporting infrastructure such as charging units and charging management system software from Proterra.
Despite the bankruptcy, the crown corporation is confident Proterra will meet its commitments. Should it fail, the BC Transit says its contract allows it to buy from other manufacturers.
As for the Proterra charging system it acquired, BC Transit says it’s compatible with other buses.
Industry response to insolvencies
Proterra buses are actively deployed in at least three provinces: Ontario, British Columbia and Alberta.
The Toronto Transit Commission (TTC) is one of Proterra’s most well-known Canadian customers, while one of the biggest Proterra orders came from the Edmonton Transit Service in 2020 for 60 electric buses. (The TTC is operating 25 Proterra buses currently, according to the transit authority’s website.)
Neither transit authority has made a comment about whether or not Proterra’s financial woes will impact their future orders or the fleet’s plans to fully electrify. It does not appear either transit fleet has pending orders with Proterra. Edmonton’s order was completed in 2022, while Toronto’s was fulfilled in 2021.
But the City of Edmonton is listed as having just over $8 million in unsecured claims to Proterra, according to the bankruptcy protection documents. While the Bow Valley Regional Transit Services has just over $1 million in unsecured claims.
In a press release Proterra confirmed, “The Company intends to continue to operate in the ordinary course of business as it moves through this process and plans to file the customary motions with the Bankruptcy Court to use existing capital to fund operations, including paying employee salaries and benefits, and compensating vendors and suppliers on a go-forward basis in accordance with Chapter 11 rules, all while ensuring business continuity for customers.”
Generally though, among various industry experts, the prevailing attitude seems to be the demise of one company does not automatically signal a threat to the electrification of the entire medium- and heavy-duty vehicle sector.
It may even mean an opportunity to buy out companies in financial distress and gain market share.
Rector says Proterra and Volta Trucks’ challenges shouldn’t discourage Canadians from taking advantage of the breakthrough innovation opportunity available in clean tech and in the electrification of transport.
This is because “the technology is sound, and companies like Proterra made wonderful advances,” she says.
And Berndt says BC Transit, at least, is aware that the transition to EV buses will be no slam dunk.
“The energy transition is a challenging endeavour and we hope the industry will be as successful as possible,” he says. “A sustainable future depends on it.”