California City to Buy Chinese Electric Buses Financed by Taxpayers

May 1, 2013 -- Shocked! That's how U.S. makers of electric buses say they feel, following a decision by the transit authority of Long Beach, Calif., to buy 10 electric buses made by China--but financed by U.S. taxpayers.

The contract, worth more than $12 million, was awarded in April by a 5-2 vote of Long Beach Transit's board of directors.

Ebus, a U.S. maker based in Downey, Calif., protested the decision. The company, one of four losing domestic bidders, complained that the terms of the competition had been changed at the last minute in a way that favored the winner, China-based BYD.

Andy Eklov, owner of Ebus, tells the Long Beach Press-Telegram that Long Beach originally asked for buses capable of being re-charged periodically during daily use, rather than overnight in one longer session. The change, he contends, worked in BYD's favor.

That's not true, Long Beach's transit marketing manager, Kevin Lee, responds. Regarding re-charging intervals and many other particulars, he tells the Telegram, "We left it up to the companies to decide what they thought the best solution for Long Beach Transit [would be]. In the end, BYD had the best solution for us. The BYD option made the most sense."

Micheal Austin, a BYD vice president, tells ABC News that what tipped the procurement decision, he thinks, was the ability of BYD's buses to re-charge in a single overnight charge of 4-5 hours. "That was unique," he tells ABC. "The others had smaller batteries and needed in-route charging."

The contract commits Long Beach to pay $12.1 million for 10 buses, plus $2 million for the design and construction of a charging facility, according to the Wall St. Journal.

BYD, in which Warren Buffett is an investor, has manufactured 1,000 electric buses, most of which operate in China. A small number operate in Europe and South America. At the time of its winning bid, it had no operational production facility in the U.S. The company subsequently has announced plans to assemble Long Beach's buses at a former RV-facility in Lancaster, Calif.

Austin says the new facility will satisfy U.S. government "Buy American" procurement standards, meaning that towns like Long Beach will be able to get taxpayer subsidies for up to 80 of the cost of any BYD buses that they purchase. He told the Journal that such subsidies were one of the main reasons BYD wanted to crack the U.S. market.

The "Buy American" standard, he says, requires that 60 percent of each bus's content be U.S.-made. That's not an easy standard to meet, he tells ABC, because "large-scale battery manufacturing is not alive anymore, in the U.S." BYD will meet the requirement by using U.S. components for the frame and interior.

Proterra, a U.S. maker in Greenville, S.C., likewise is unhappy with Long Beach's decision.

Ian Shackleton, VP of sales and marketing for Proterra, tells ABC News that, in his view, Long Beach has opted to buy a product "no one has ever seen or heard of." He questions whether BYD will be able to deliver 10 U.S.-assembled buses by June 14 (as the contract requires), since BYD's Lancaster factory has not yet to begin work.

To allay any worries on that point, BYD has taken out a performance bond. A spokesman tells the Long Beach Business Journal that the company has taken out a $14 million bond to ensure that the demands of the project are met. "BYD," he tells the Journal, "will take all the financial risk, without any additional costs to Long Beach Transit."

One critic of the deal, noting that BYD has no track record as a bus manufacturer for the U.S. market, likens Long Beach's decision to "chasing ghosts." Shackleton agrees. "They've done everything on a promise," he says of BYD. "It's like fighting a shadow."

The playing field, he thinks, is anything but fair.

"I'm a U.S. taxpayer. Could Proterra go into China and put a proposal on the table to produce our buses, without having to contend with obstacles and hurdles? No."