01-05-2024 09:00

Eurobus Nordic: Transforming public transportation one electric bus import at a time

Importing electric buses from China to the Nordics, Eurobus Nordic knows first hand the risks that come with international trade. One tool to help manage those risks is Nordea's trade term loans, which help the company bridge gaps in the trade cycle and improve its working capital.

As Nordic cities shift to sustainable public transportation to reduce their carbon footprint, one company at the heart of that transition is Eurobus Nordic. The Norway-based company imports electrical buses from China for sale to the Nordic markets.

A single order from a local government can exceed 50 buses, which means Eurobus’s imports from its Chinese bus supplier, Golden Dragon, are big in size and cost. There are always risks in the process, says Lasse Andersen, owner and chairman of the board of Eurobus.

“We have a close connection with Nordea, which helps us manage these risks in a good way,” says Andersen.

Eurobus uses letters of credit from Nordea to guarantee that its Chinese supplier will be paid by a specific date, typically 90 days from when the buses are shipped.

“When we see we have a position in a tender, we start very early and analyse the risks and policies, including the customer’s ability to pay up front. We work with Nordea to ensure we are doing each trade in a safe way. Together, we’ve developed a good solution that allows us to act fast in these tender negotiations. That gives us a leg up against competitors,” Andersen says.

Using trade term loans in turbulent times

Bjørn Arne Kloster-Jensen, Nordea Trade Finance Adviser in Norway

Andersen notes that COVID-19 pandemic brought many challenges, including raw material shortages, manufacturing delays and shipping bottlenecks. On several occasions, Eurobus has used the option to add financing to its letter of credit, a short-term loan that allows the company to postpone the due date of the payment beyond the terms of the letter of credit.

While Nordea has offered such loans under different labels and in varying formats in the past, we have now launched this offering under one standardised trade term loan offering.

“Trade term loans have become increasingly relevant in the past few years, given the market turbulence and insecurity. Documentary products cover the risk while trade term loans cover the financing, giving companies the working capital to pursue the trade,” says Bjørn Arne Kloster-Jensen, a Nordea trade finance adviser in Norway.

The geopolitical picture continues to pose challenges for trade, for example with the unrest in the Suez Canal and Red Sea, a key shipping route between Europe and Asia.

“If the ship owners decide to go around Africa, the financing and time demands will increase significantly. It’s important to have the financial strength and flexibility to overcome this,” says Nina Kvendbø Frivold, finance director at Eurobus. That’s where a trade term loan can help a company meet its working capital needs.

Trade term loans have become increasingly relevant in the past few years, given the market turbulence and insecurity.

Bjørn Arne Kloster-Jensen, Nordea Trade Finance Adviser in Norway

Growing demand

Despite the challenges with shipping from China and the potential for geopolitical disruptions, Eurobus still sees major upsides to importing from China. The country is a global leader in the manufacturing and use of electric buses, spurred by the Chinese government’s investments to curb pollution. The batteries in the buses Eurobus imports from China also use a unique kind of technology, which has advantages for weathering the cold Nordic winters.

Given the slowdown in China’s economy, Chinese companies are looking to foreign markets to compensate for the drop in domestic activity. Eurobus’s Andersen says the demand for electric buses is on the rise in the Nordics. While the company has focused on Denmark and Norway, it has its sights set on Sweden next.

“We see the market growing and expect strong interest from Sweden in the coming years,” he says.

Find out how trade term loans are helping to fuel international trade.

What is a trade term loan?

Trade term loans are flexible, short-term borrowing facilities that allow importers and exporters to finance their trade commitments for specific transactions. While these loans are often connected to traditional trade instruments, such as letters of credit, they are also available as a standalone term loan where there is proof of an existing trade.

Find out more about Nordea's trade term loan offering

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