Description

With an operating lease from a manufacturer, an asset such as an electric bus is leased to an operator for an agreed period, with vehicle operation expenses fully covered in the agreement. Monthly payments are calculated based on the total kilometres the operator wishes to protect and the length of the contract. With low initial outlay, maintenance cover and control over the bus at the end of the agreement, it provides a low-risk solution to upgrading to electric buses and can be applied to other sectors such as energy efficiency.

Instrument category

Leasing and asset finance models

Implementation status

Low - limited evidence available

Enabling conditions and success factors

• Well developed market dynamics such that different parties involved can implement robust contractual arrangements and fall back on legal recourse if necessary.

Instrument benefits

• Overcomes high upfront costs that are often a barrier to progress.
• Some models transfer the risk of maintaining the asset to the manufacturer.

Challenges and risks to implementation

• Clear terms of agreement must be reached between parties.

References

Case studies

Leasing model for electric buses and charging infrastructure in Shenzhen, China