Bus Manufacture in the UK

Ian Paisley Excerpts

Monday 31st October 2022 Commons Chamber

[Nigel Adams (Selby and Ainsty) (Con)]

I am pleased to have secured this debate on the importance of bus manufacturing, specifically electric bus manufacturing, in the United Kingdom. Electric buses play a vital role in helping us to reach net zero and reduce pollution in our congested cities. It is for that reason that the Government announced a £200 million boost to support the roll-out of zero-emission buses in March 2022—the zero-emission bus regional areas, or ZEBRA, scheme.

The UK has three main bus manufacturers: Alexander Dennis in Falkirk, Scotland and in Scarborough; Switch Mobility, formerly known as Optare, which is based in Sherburn in Elmet in my constituency; and Wrightbus in Northern Ireland. They have all developed electric buses and have a small number in service across a handful of our cities. The competition comes from China, with Chinese companies manufacturing around 420,000, an estimated 98% of the global electric bus fleet. These have been in service since May 2020.

[Ian Paisley (North Antrim) (DUP)]

The right hon. Gentleman has initiated an important debate this evening. A few years ago, 70% of the buses Wrightbus was making would have been diesel buses, but in the last year and a half, 70% of its production has been electric buses. There is a market out there for these wonderful, low-emission products but they will only be purchased if Transport for London, Leicester Council and other councils are encouraged through an incentivised scheme to buy British. What does he think should be done to encourage them to buy British products?

[Nigel Adams]

I wholeheartedly agree with my hon. Friend. That is the point of this debate. There is incentive. The Government are saying all the right things about wanting to see electric buses on our streets and they have launched this scheme, but the reality, as he will know, is that the organisations and local authorities that are buying the buses are not necessarily buying British. I will move on to the reasons shortly.

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[Nigel Adams]

My right hon. Friend is right. As we sit here now, China more or less has a monopoly on global bus supply. If we take Wrightbus, Plaxton, Alexander Dennis and Switch into the mix, the industry employs 3,500 individuals directly and an estimated 10,000 indirectly within the supply chain. This is an important sector.

I have been to the Switch factory in Sherburn in Elmet, which has orders from Transport for London, First Bus, Manchester Airport parking, City of York park-and-ride, Dubai and New Zealand. As I mentioned, Switch is part of the Hinduja Group and has started manufacturing UK-designed buses in India, including double-decker buses for the Indian market.

[Ian Paisley]

Is the right hon. Gentleman amazed that we have companies in the United Kingdom that build buses for Australia, New Zealand, the United States of America, Germany, Hong Kong and countries all over the world, yet a scheme that is designed to help manufacturers is putting money into the pockets of China and not supporting indigenous employment in the United Kingdom? That is just not right, is it?

[Nigel Adams]

Not only does it not smell right; it is absolutely not right that we are not purchasing British-manufactured buses.

The model for supplying electric buses is very different from the model for supplying the existing fleets of diesel-powered buses, but electric buses are an excellent fit for the needs of a local bus service. Electric buses do not have the same range as diesel buses, but this is not a disadvantage because the distance travelled each day by local buses on a defined route is known precisely and is within the range of an electric bus working from a local depot. However, the cost of an electric bus is higher than that of an equivalent diesel bus and operators are not experienced in running electric bus fleets. For that reason, the industry is moving to a slightly different model, which should be investigated further, where buses are provided via service contracts, which cover the cost of the buses, the operation of the buses and the charging infrastructure. They can also cover, as part of that, battery upgrades and replacement costs. However, electric buses are far more cost-effective, with lower costs per mile once the transition is made and the infrastructure for charging and servicing is in place.

The key to this is the battery, which is a key component in an electric bus, or any other electric vehicle. For that reason, there is a lot of focus on battery technology, battery capacity and expected battery life. It might be thought that the bigger the battery capacity, the better the range of bus. That is not necessarily the case, but that has not prevented battery capacity from being a key part of the specification, including in some tender documents.

Therefore, battery capacity has been a factor that is believed to have unduly influenced some purchasing decisions. Buses manufactured in China are typically heavier than UK buses, so they have larger capacity batteries. In the case of Switch, the bus is designed around a lighter framework and less weight. Operating methods have a major impact on the capacity of battery required.

The ZEBRA scheme is especially important because, in addition to encouraging the take-up of electric buses, it is encouraging the purchase of new buses to replace an ageing fleet. The pandemic has had a profound effect on the number of passengers using local bus services and even now passenger numbers are far lower than they were before the pandemic. During the pandemic, bus services were supported by the Department for Transport. In August 2022, a further £130 million was made available to support bus services, which is a considerable sum. However, bus operators are now experiencing reduced passenger numbers and the inflationary pressures of fuel and wage rises. It is not surprising, therefore, that they are not placing orders for new buses in larger numbers. In North Yorkshire, a large number of bus services are currently not viable because of reduced passenger numbers.

ZEBRA is a major driver of investment in new buses and a key enabler as a step towards net zero. The £198.3 million of funding announced in March is sufficient to fund 943 new buses. That funding is built on the £71 million announced last year to support up to 335 new zero-emission buses in five areas, as well as hundreds more zero-emission buses that have been funded in London, Scotland, Wales and Northern Ireland.

I hope that that provides you with an insight, Mr Deputy Speaker. I know that they will be thinking of nothing else in Ribble Valley aside from the electric bus market. I now wish to move on to how the Government’s ZEBRA scheme is working in practice and to look at the recent decision by Nottingham City Council to purchase buses from the Chinese manufacture Yutong.

Nottingham City Council has received £15 million of Government funding, yet it awarded the first 12 of its single-deck buses to Yutong. Within the tender, it did not ask for range requirements, instead asking for a specific battery capacity; it asked that the capacity exceeded 420 kW, which basically excluded all UK manufacturers. That is like asking someone to provide the size of the fuel tank rather than the range or the miles per gallon of a vehicle.

UK manufacturers run smaller, more efficient batteries than the Chinese manufacturers, so tend to achieve a similar range with a smaller battery. Nottingham City Council has set a target of becoming a carbon neutral city by 2028, yet it is prepared to ship buses from around the world, rather than buying from carbon neutral UK bus manufacturers. That does not make a lot of sense. It is also believed that the Chinese-made Yutong buses were not the cheapest to tender. I will give some other examples.

[Nigel Adams]

As a former Minister for Asia, I know that too well. I have been at the Dispatch Box, where the Minister for Science and Investment Security, my hon. Friend the Member for Wealden (Ms Ghani), is sat this evening—we all look forward to what she has to say—and she was sat where I am, quite rightly giving me stick up and down dale about human rights abuses in China. I will be interested to hear what she has to say on this particular subject.

Let me give the House some more examples, including the decision taken by Leicester City Council, where the first ZEBRA buses were delivered—also Chinese. Cardiff Council ordered 36 zero-emission buses from the same Chinese company, and Newport City Council ordered a further 16 Chinese buses. They were all supported by UK Government funding.

I mentioned light goods vehicles, especially those used for delivery services. Bus manufacturing is a skilled, bespoke process, as operators seek individual design features. Light goods vehicles are manufactured on a production line and use mass manufacturing techniques; these are high-volume processes. Light goods vehicles are ideally suited to be electric vehicles, because they travel regular routes and not especially long distances. They are the next major EV opportunity, and the technology being used in electric bus transmission is directly transferable.

[Ian Paisley]

One of the ways in which the Government could buck the market and protect British manufacturing would be to say that 50% of the next number of ZEBRA buses that are ordered must be hydrogen buses. That would guarantee the location of the market and that buses are built by UK companies; it would force the market to go down that route and not force them only to buy electric buses.

[Nigel Adams]

That would make sense. I would like to think that the purchasing authorities taking such decisions bear those factors in mind. The battery example calls into question whether the process is completely joined up between DFT and the passenger authorities and local councils making the decisions.

The zero-emission bus market is forecast to see significant growth and provide great export opportunities globally, with compound annual growth rates of more than 25%. The EV bus and light commercial vehicle market is projected to be worth about $50 billion by 2030. There is, however, a high risk that British manufacturers could lose out to international competitors whose Governments have taken bolder steps to support their domestic markets when it comes to growth and export opportunities. Switch, which is based in my constituency, has announced its plans to invest £300 million across the UK and India to develop its range of electric buses and light commercial vehicles, demonstrating its commitment to a shift to zero-emission vehicles.

The transition from internal combustion engines to battery technology is a major disruption to motor manufacturing, and Chinese companies have responded to that and enjoyed huge volumes of exports around the world. Based on a large Chinese domestic market, with 420,000 electric buses already amounting to 98% of electric buses worldwide, the UK faces a major challenge in gaining market share. However, the products available from UK manufacturers are competitive and ideally suited to the UK market, for which they were originally designed. The products are also suited for export. The double-decker, which I am proud to say was designed in my constituency, is to be built in volume in India to meet that specific market.

Without nurturing the transition and supporting British companies in the move to electric buses through the support that the Government are providing, we are in danger of losing the ability to compete. The Government have provided funding to enable local bus operators to transition to EVs. We have three fantastic bus manufacturers that can between them deliver the products required, and supply the orders and exports. As I mentioned, the next opportunity is likely to be light vans and delivery vehicles, for which electric vehicle manufacturing expertise will be critical. UK companies are prepared to invest, but they need the Government to back them, rather than to unintentionally support Chinese manufacturing jobs.

[The Minister for Science and Investment Security (Ms Nusrat Ghani)]

I congratulate my right hon. Friend the Member for Selby and Ainsty (Nigel Adams) on securing tonight’s important debate and setting out clearly some of the challenges that UK bus manufacturers face. He knows that if I were on the Back Benches, this is exactly the sort of debate that I would have instigated, so I am actually pleased that he has raised this tonight. I give him an absolute assurance that this is not the end of the discussion; now that I am aware of this, it is only the start.

I share my right hon. Friend’s concerns that the procurement of these Chinese-made buses could adversely impact the UK bus manufacturing network and centre. In particular, I was concerned to hear my right hon. Friend say that some of these procurements that take place with China are not always the cheapest contracts, which is not great when it comes to making sure that we get good value for money. In particular, he mentioned that when councils are writing their specification tenders, UK manufacturers cannot bid as only the cheaper Chinese product fits their specification. I am sure that will be heard loud and clear in my Department and at the Department for Transport, and they will no doubt be writing in response.

It is true that, since 2019, Chinese companies have been enjoying huge volumes of exports around the world, with 98% of electric buses being found in China. I also share the concerns of my right hon. Friend the Member for Scarborough and Whitby (Sir Robert Goodwill), who chairs the bus and coach industry all-party parliamentary group, that we can allow one country to monopolise the market and that we should be doing everything we can to make sure that our supply chains are as clean and as transparent as they can be.

I will try my best to respond to all the points raised, but I will just run through what we are doing within the sector to help bus manufacturers. As my right hon. Friend mentioned, this sector is incredibly important for the Government’s green growth, making sure that we are levelling up across our country and driving emissions to net zero by 2050. In a previous life, I was the bus Minister, making sure that we were indeed supporting zero-emission buses.

My right hon. Friend mentioned how important the sector is to jobs. The sector employs 155,000 people—6.1% of total UK manufacturing employment—and a further 347 jobs are estimated to be supported by the industry in the wider economy. Within the framework, UK bus manufacturers are uniquely positioned, employing more than 3,000 people across England, Scotland and Northern Ireland. This is a sector that we need to protect.

My right hon. Friend the Member for Selby and Ainsty mentioned the prominent British companies, Alexander Dennis, Switch Mobility and Wrightbus, which employ more than 3,500 workers directly and 10,000 indirectly. These manufacturers also have the aptitude and capacity for completing the transition to fully electric bus fleets in the UK by the year 2030 without the need to import buses—that was a very important point to land.

As I am also joined by the Secretary of State for Northern Ireland, my right hon. Friend the Member for Daventry (Chris Heaton-Harris), it would be remiss of me not to mention his visit to Ballymena factory to pay tribute to the company’s net zero emission products and to affirm the Government’s support for hydrogen. I believe that he also declared the innovative technology fund, which provided £11.2 million for Wrightbus. It is incredibly important that we are doing everything we can to support UK manufacturers.

[Ian Paisley]

It was an honour to be at the Wrightbus plant with the Secretary of State. He was so enthusiastic. I think he actually said that he was really into buses—he is a wee bit nerdy about that. It was brilliant to see a person who really took a specific interest in the manufacturing process and in understanding how important it is in terms of jobs leading through to good green technology. Will the Minister take up the point that I made during the debate, which is about ringfencing the next phase of ZEBRA funding for hydrogen buses? If that happens, British manufacturing will be protected.

[Ms Ghani]

To quickly address the hydrogen point, I am not sure that ringfencing is the appropriate word for me to use at the Dispatch Box, but there is funding available for hydrogen buses; I believe the ZEBRA scheme is helping the West Midlands Combined Authority to deliver 124 hydrogen buses and refuelling infrastructure. As my hon. Friend is raising the profile of the business in his constituency, it is right that we do everything we can to ensure that the money is spent locally within the UK.

One point my right hon. Friend raised was why councils were shipping buses to the UK when they are not the cheapest option or carbon neutral. As he mentioned, the DFT’s latest ZEBRA scheme has been designed in line with the principles set out in the national bus strategy for England, placing partnership work between local transport authorities and bus operators at the heart of improving bus services.

That is why the DFT has asked for local transport authorities to submit proposals that have the support of bus operators, to ensure that they work together. Once funding has been awarded to local transport authorities, they will work with bus operators to implement the proposals, but ultimately decisions about the procurement of zero-emission buses will be made locally by local transport authorities or bus operators. DFT is not able to require bidders to design their procurement process in a way that would explicitly favour UK bus manufacturers.