NFI Group dips its toes into Australian market

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This article was published 23/07/2021 (1314 days ago), so information in it may no longer be current.

Winnipeg bus maker, NFI Group Inc., is looking to broaden the global market for battery electric buses into the Australian market via its U.K. subsidiary in partnership with an existing Australian manufacturer.

While the arrangement does not come with any book of business or sales already concluded, company officials and analysts see it as a low-risk, low cost way for the largest North American bus maker to dip its toes into a market that’s about the same size as the Canadian market.

The Australian partner, Nexport, a supplier and producer of electric buses, will attempt to gain market share for a zero emission bus technology that has proven successful in a number of other international markets.

Alexander Dennis Ltd., the double-decker bus maker which NFI acquired in 2019, makes the ADL Enviro family of battery electric buses which feature an electric chassis built and designed by the Chinese bus and battery company, BYD.

ADL has now taken orders for 1,000 of these buses in the U.K., Ireland and New Zealand. Australia has regulations in place that give preference to domestic content and while ADL has previously been active in the Australian market with a venture that it subsequently divested, it is believed the current arrangement with the new battery electric model has a chance to succeed.

Paul Soubry, CEO of NFI Group, said “We get the best of both worlds. We give them a proven platform, bring in the bits and Nexport does the final assembly and does the sales. We don’t have to set up a factory and we can work with a partner and get incremental sales.”

NFI Group has been disrupted as much as any other manufacturer by the COVID-19 pandemic. According to the American Public Transit Association transit ridership in the U.S. is only now getting above 50 per cent of pre-COVID rates, up from 35 to 40 per cent as recently as April.

The company is also in the middle of a system-wide efficiency program of its Canadian and U.S. operations that has led it to decide to close ADL’s three North American production facilities, one in the Toronto area and two in Indiana. The three facilities did not produce high volumes of buses and were doing even less during the pandemic. The three facilities employed about 250 people. Soubry said the modest numbers of ADL vehicles made and sold in North America will be transferred to another NFI facility that has yet to be determined.

In the context of the search for more cost efficiency, Chris Murray, managing director of equity research with ATB Capital Markets Inc. who covers NFI, said the Australian play makes a lot of sense.

“I think this is an incremental next step,” Murray said. “I think it is fair to think about this as a measured, relatively low risk entry into that market.”

Murray said it is also an example of the evolution of the ADL’s market development

“One of the reasons NFI liked Alexander Dennis is that the company has always demonstrated an ability to find different ways to gain entry into different markets,” said Murray. “Australia is the next logical step in what they are doing.”

There are about 24,000 large buses on the roads in Australia where transit systems are a mix of public and private sector run routes. Soubry said having a partner on the ground that already has relationships in the market will help in breaking into that market.

About 80 per cent of the buses on the road in Australia are made domestically and each of the country’s six states and two territories have there own regulatory quirks.

“So if you were thinking about building a bus elsewhere and importing them into Australia, that would have a low probability of success,” said Soubry.

martin.cash@freepress.mb.ca