Management

China to compete in school bus market?

Posted on June 1, 2007

TORRANCE, Calif. — Now that they have penetrated the U.S. tour and charter market with motorcoaches, will it be much longer before Chinese vehicle manufacturers compete for a slice of the U.S. school bus market?

It sounds ludicrous on the face of it, but don't count them out, say top executives at Blue Bird Corp., IC Corporation and Thomas Built Buses.

"Every U.S. manufacturer should be concerned with competition from offshore," said John O'Leary, Thomas' president and CEO. "The Chinese and others have demonstrated the ability to deliver acceptable quality and low cost in just about every market they've entered."

The motorcoach and transit markets are already in the sights of Chinese bus manufacturers. Their strategy has been to build the bus bodies in China and to ship them to the U.S., where they are married to domestically manufactured chassis. Or to manufacture the buses in China with American components and have them shipped to the U.S. for sales.

In either case, the result is an Americanized product that sells for significantly less than European or domestically produced buses. Some cost-conscious bus operators have cautiously begun to order motorcoach models that are as much as $100,000 cheaper than comparably spec'd domestic models.

"As an American manufacturer, it would be naïve for us not to think of China as a threat," said Roger Howsmon, senior vice president of sales and marketing for Blue Bird.

Michael Cancelliere, vice president and general manager of the Bus Vehicle Center for IC Corporation, agrees that the notion of a Chinese-manufactured yellow school bus is "not a far-fetched idea," but, like O'Leary and Howsmon, he's got reservations.

"The school bus industry is significantly different than the motorcoach market," Cancelliere said. "While many Chinese manufacturers currently make motorcoaches today, China does not have a domestic school bus market as we know it in North America."

There are other hurdles the Chinese would face in trying to penetrate the school bus market, "such as supply chain issues, regulations and the exorbitant cost of freight that would be related," Howsmon said.

"Becoming a player in our market requires more than just building a bus," O'Leary said. "Meeting state and local specifications, and managing the manufacturing complexity that goes with it are significant hurdles for any new player."

Creating a nationwide dealer network would also be a challenge. "Having a strong distribution network in place such as Blue Bird's would make an offshore manufacturer's task of penetrating our market more difficult," Howsmon said.

In some ways, U.S. bus manufacturers will benefit from the vast number of options required to meet the specifications of different states. The sheer complexity of meeting those wide-ranging needs creates perhaps the biggest obstacle for offshore manufacturers who might want to compete for a share of the yellow school bus market.

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