As Illinois Democrats welcome their party’s national convention next month, one of their crown jewels for environmental activism — an electric school bus factory — is fighting for its life.
In Joliet, 40 miles southwest of the Chicago convention site, the parking lot at the Lion Electric Co. is eerily quiet.
On a recent weekday, it had just over 100 parked cars for employees and visitors, along with acres of empty blacktop. In a triumphant ribbon-cutting a year ago, Gov. J.B. Pritzker said 1,400 jobs were coming.
Lion Electric executives won’t say how many workers the Saint-Jerome, Quebec-based company employs in Joliet or how many buses it is building. But after three companywide layoffs, they say the plant is operating significantly below the 200-bus-per-month capacity they advertise on their website.
In an interview, they attribute the slowdown to the complex and still-incomplete rollout of government subsidy programs in the United States and Canada.
“It’s not an issue of our capabilities and it’s not an issue of demand,” said Nate Baguio, Lion Electric’s senior vice president for commercial development. “It’s just that the speed at which these programs move is the limiting factor.”
Lion Electric is struggling even as the world continues to set heat records, and as the Democratic Party in the United States and the Liberals in Canada seek to keep their promises to fight climate change.
The company’s problems could get worse if Republicans in Washington and Conservatives in Ottawa return to power and sweep zero-emission subsidies aside.
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Former President Donald Trump, for example, has pledged that if he reclaims the White House, he’ll end what he calls the “all-electric nonsense’’ of President Joe Biden and the Democrats.
In the United States, the Environmental Protection Agency had approved nearly $3 billion in clean school bus subsidies by last month, according to the World Resources Institute, a nonprofit group which promotes sustainable growth.
That’s enough for 8,500 buses, but the institute said that because of the agency’s complex approval process, only about 750 had actually been delivered by Lion Electric and other manufacturers.
In Illinois, schools used EPA backing to order 609 electric buses. That’s second only to California among U.S. states. Of these, 132 had been delivered.
Congress initially allocated $5 billion for the subsidies in 2021.
Spokeswoman Angela Hackel said the EPA expects 2,300 electric, natural gas or propane-powered school buses to be operating in the United States during the coming academic year.
She described the approval timeline for EPA subsidies as short and didn’t respond to questions about Lion Electric’s finances.
In Canada, spokesman Micaal Ahmed said the government’s Zero Emission Transit Fund has agreed to electric bus purchase subsidies worth $1.3 billion.
That’s half of what lawmakers allocated to the fund in 2021. Fund officials are evaluating additional subsidy applications to determine how to spend the rest.
Pierre Fitzgibbon, Quebec’s economy minister, said the slow rollout of U.S. and Canadian subsidies is “clearly affecting the liquidity of the company.’’
Fitzgibbon said he’s asked the federal government to make a specific statement that electric school bus subsidies are one of the pillars of its fight against climate change.
Without such a federal commitment, he said, Lion Electric will find it increasingly difficult to go back to Wall Street to raise more capital.
Lion Electric is dependent on government subsidies but doesn’t benefit directly.
Rather, the zero-emission transit fund writes its checks to local schools, but not until they install charging stations, take delivery of the buses, pay for them and begin hauling students.
This can take two years or more after regulators approve a school board’s application. Such time lags also occur in the United States, where the EPA follows similar procedures.
Lion Electric has received 1,250 orders tied to a preliminary green light from the Canadian zero-emission transit fund.
But the fund hasn’t given its final blessing to most of these orders, so the company has delivered just 50 of the buses, said Patrick Gervais, vice president of truck sales and public affairs.
Josipa Petrunic, president of the Canadian Urban Transit Research and Innovation Consortium, said the threat to Lion Electric isn’t just that Conservatives could take power and cancel subsidies.
She said a significant number of the company’s existing orders — worth $475 million — could be canceled between now and 2026.
That’s when parliamentary authorization for the current version of the zero-emission transit fund expires. School boards may be too uncertain about whether the subsidies will continue after that to maintain existing orders or place new ones, Petrunic said.
“For Lion Electric and others who have pivoted entirely to zero emissions product lines, it could be an existential matter for their survival,” said Petrunic, whose Toronto nonprofit helps the Canadian government administer bus subsidy programs, primarily for urban transit fleets.
“Lion Electric is one of the more robust manufacturers of school buses in the zero-emission landscape,” Petrunic said. “If they’re in trouble, it’s hard to see how anyone else could do it.
“That means the future of decarbonizing school buses is entirely at risk. It means your kids are going to continue breathing the most horrific air in a belching school bus. And I think that speaks to everybody, regardless of whether you even believe in climate change.’’
Bright prospects
Lion Electric doesn’t know how many orders may get scrapped as school boards brace for the end of the current zero-emission transit fund, Gervais said.
But the company has been building up inventory and is poised to deliver buses quickly as subsidies start flowing, Gervais said.
According to Craig Irwin, an analyst at Roth Capital Partners LLC, the slow rollout of government subsidies could force Lion Electric back to Wall Street this year to raise money.
As of March 31, Lion Electric had $5 million in cash and $26 million in borrowable money in a revolving credit line from banks, according to its financial statements.
But this year, the company’s shares have fallen 52% to 86 cents, compared with a 15% gain in the Standard & Poor’s 500-stock index.
Because school buses operate two hours in the morning and two hours in the afternoon and return to the same charging station each night, experts consider them a stepping stone to the electrification of medium- and heavy-duty trucks. Lion Electric also makes battery-powered trucks.
Transportation is the largest source of greenhouse gas emissions in Illinois. Diesel fumes contain many additional toxins, including benzene and arsenic.
In May, Harvard University researchers reported each electric bus saves the United States an average $84,200 by reducing greenhouse gas emissions, adult mortality and childhood asthma.
The savings are even bigger in Black and brown, urban neighborhoods where many freight facilities are located, the researchers said.
Lion Electric’s prospects seemed far brighter when Democratic Party luminaries, including U.S. Sens. Dick Durbin and Tammy Duckworth and U.S. Reps. Lauren Underwood and Bill Foster, gathered at the Joliet plant for a ribbon cutting in July 2023.
“This new facility delivers a tremendous boost for Illinois’ clean energy economy and our environmental leadership, too,” Pritzker told hundreds who attended.
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However, Lion Electric has been trying for weeks to lease out about a third of its Joliet manufacturing space, according to a Colliers.com real estate listing. So far, no takers have emerged.
How did the U.S. EPA and Canada’s zero-emission transit fund fall so far behind in distributing electric bus subsidies?
Part of the problem was COVID-19, which hadn’t reached its peak when U.S. and Canadian lawmakers approved the subsidies in 2021.
The pandemic disrupted government operations and triggered inflation and supply chain backups that lingered for years.
Another problem was the sheer scale of what the governments were doing, said Yan Cimon, a Universite Laval business professor in Quebec.
Cimon said to launch the program, they had to adapt existing regulations and new government institutions such as the zero-emission transit fund to the unprecedented technical and financial challenges of electrifying vast vehicle fleets.
Then, they had to teach business people and government officials across the vast, diverse and politically divided countries how to apply.
Manufacturers such as Lion Electric are particularly vulnerable to delays, Cimon said, because they require massive investments as they’re starting up.
Between November and April, the company cut a quarter of its workers, leaving 1,150 on the payroll, according to the Toronto Globe and Mail. Gervais wouldn’t say how many work there now.
Albert Smith, 50, has assembled buses at Lion Electric for 16 months. The Joliet resident earns $22.30 an hour but supplements his income by working as a bartender three or four nights a week.
“I’m really proud that I’m doing something to better the air quality in our ecosystem,’’ Smith said of his work on electric buses. “But I don’t really feel any job security.
“The way things have gone downhill, we’re all wondering if we’ll come in one day and the doors will be shut,’’ he said.
In December, Smith voted yes when the International Association of Machinists union tried to organize the Joliet plant.
The National Labor Relations Board hasn’t announced a result because Lion Electric is challenging some of the ballots. Last month, 300 workers at the company’s Saint-Jerome, Quebec, plant voted to join the union.
Political minefields
Meanwhile, the zigs and zags of government subsidies have produced a weird patchwork of deployments.
Starting this week, the electric school bus capital of Illinois will be Herscher, a village of 1,500 people 65 miles southwest of Chicago.
That’s because Lion Electric is delivering 10 more electric buses, bringing Herscher’s total to 25, or half its fleet.
Superintendent Rich Decman describes the EPA’s $9.9 million grant for buses and rechargers as free money. He’s also selling his used diesel buses. He’s planning an open house with Pritzker and the new buses in about a month.
Meanwhile, First Student Inc., the largest North American operator with 46,000 buses providing 5.4 million student trips per day, can’t get enough battery-powered vehicles.
Kevin Matthews, head of electrification, says the company operates 313 electric buses in Quebec, which offers subsidies up to $175,000 per bus.
The subsidies go a long way toward closing the sticker price gap between an electric bus and a diesel.
According to the National School Transportation Association, electrics cost $350,000 on average last year, compared with diesels at $100,000.
But First Student has no electric buses in the rest of Canada while it awaits zero-emission transit funding, and only 40 in the United States.
Still, Matthews said he’s so happy with the performance of Lion Electric and other manufacturers that he’s committed to operating 30,000 electric buses, or two-thirds of his entire fleet, by 2035.
“Electrification has significant benefits for the environment and human health, and for operational costs, so we really believe this will be the future of our industry,” Matthews said.
For Lion Electric, the problem is hanging on long enough for the cash register to start ringing.
The next time investors can take the company’s temperature will come Wednesday, when Lion Electric announces second-quarter earnings.
Last time around, the company announced steeper quarterly losses, fewer deliveries and a shrinking order book.
A repeat performance would inflame Wall Street’s jitters, since Lion Electric has promised better financial performance as 2024 goes along.
And then there are political minefields.
Many pollsters consider Trump the front-runner in the U.S. election. In Canada, the Conservatives could return to power during a vote widely expected in fall 2025.
Cimon said most Canadians wouldn’t tolerate Trump’s “drill, baby, drill” chants on environmental policy.
However, the Conservatives are promising to axe the federal carbon tax in Canada. This helps pay for tax rebates to households and low-carbon industrial projects
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.Quebec and California have been running their own cap-and-trade system for carbon credits since 2014. Cimon said they could be expected to use the proceeds to continue paying out zero-emission incentives even if federal authorities retreat.
Cimon said something similar happened during the first Trump administration.
California and states that adopted its clean-vehicle policies were strong enough — with 40% of U.S. car and light truck sales — to pressure several big automakers to continue electrifying despite Trump’s resistance.
“We don’t expect California, Quebec or British Columbia to step down on electrification,’’ said Gervais, the Lion Electric spokesman. “We believe there is a big market for the electrification of medium- and heavy-duty vehicles.’’
California offers incentives up to $360,000 for each electric bus and $95,000 for each charging station.
In 2022, Illinois made a one-time commitment of $17.7 million from its Volkswagen diesel cheating settlement to help schools buy about 60 electric buses.
But it offers no ongoing purchase subsidies and, unlike Quebec, hasn’t banned the registration of diesel school buses.
Illinois has offered Lion Electric nearly $49 million in payroll tax credits as an incentive for building the Joliet plant. But to receive this amount, Lion Electric would have to create 608 jobs by the end of next year, according to Crain’s Chicago Business.
During a recent meeting with the company’s management and a tour of its Montreal-area factory, Pritzker and his aides “saw nothing but promising developments,’’ said Alex Gough, the governor’s spokesman. Gough did not address the challenges Lion Electric is facing with the slow release of subsidies but said: “We remain excited about the company’s future in Joliet.”
Baguio said government subsidies should move faster and give preference to Lion Electric and others who build only zero-emission vehicles.
Competitors such as Blue Bird lower their investment costs by converting just a fraction of their diesel fleet to electric propulsion. When they do, they get the same zero-emission subsidies as Lion Electric.
Of the electric bus orders funded through the EPA so far, Lion Electric has won 1 in 5, with most of the rest going to diesel conversions, according to the resources institute.
In any case, Baguio said, electric bus subsidies are “a drop in the bucket” compared to the enormous costs, including geopolitical instability, that U.S. taxpayers incur to defend the country’s oil interests.
“We can’t live in a world where the sky is falling from week to week,” Baguio said of Lion Electric’s need for a predictable flow of subsidies.
“Huge, huge progress has been made,” he said, “It’s just that we’re in the beginning stages of this transition.”