Falkirk-based Alexander Dennis signs bus deal with China's BYD

The deal will involve incorporating all electric technology into ADL's single decker buses

A Scottish bus manufacturer has signed a deal potentially worth £2bn to build vehicles for the world's biggest producer of electric buses.

The agreement between Alexander Dennis Limited (ADL) and Chinese firm BYD came during the UK state visit by Chinese president Xi Jinping.

The initial deal is for the manufacture of 200 single deck buses a year.

The firms are also in "advanced discussions" to extend their alliance to include double decker buses.

ADL is already the UK's biggest bus manufacturer, employing 2,500 globally including more than 1,000 staff at its base at Larbert, near Falkirk.

The Chinese firm BYD has specialised in green energy technologies and is the world's biggest manufacturer of rechargeable batteries.

Since moving into the automotive industry in 2003, it has become a world leader in solely-electric powered buses.

The initial contract represents turnover of about £660m over the next 10 years. If the double decker agreement also goes ahead, that would triple the value of the deal to almost £2bn.

More than 1,000 staff are employed at the manufacturing base in Larbert

Founding chairman of BYD Wang Chuan-fu said: "Working with top industry partners such as ADL will enable us to speed up acceptance of our vision for fully-electrified public transport systems that can make a major contribution towards the clean air challenges facing cities around the world.

"ADL's know-how and local market experience in the UK, combined with their global expertise in the double deck sector and our class-leading knowledge of electric technology, creates the perfect platform to jointly develop a range of cost effective, emission-free vehicles to suit every requirement."

ADL chief executive Colin Robertson said: "This is the start of an exciting journey with enormous potential and we are delighted to be working with BYD.

"Their expertise in electric vehicle technology is second-to-none, while we have a global reputation for robust, reliable, high performance vehicles that deliver what they promise - and are backed by world-leading parts and service support, both in the UK and international markets.

BYD and ADL first indicated their intention to work together in July this year when the former confirmed it had won an order for 51 full electric single deck buses for Transport for London.

ADL is already the UK's largest manufacturer of buses

Alexander's assault on battery market

Douglas Fraser

BBC Scotland business and economy editor

There's a battle to dominate the battery business, and the deal with Alexander Dennis brings the Scottish bus-builder on board.

It is the bit of consumer electronics and transport that has lagged other technologies, but the deal for all-electric buses from Falkirk is a potentially important part of the effort to revolutionise energy storage and its uses.

BYD is leading the charge for China. The Chinese firm is 20 years old and employs 180,000 people, boasting the largest global market share of mobile phone and rechargeable batteries.

On the other side of the Pacific, its rival is Tesla, which is also pushing into the transport market.

Both are ramping up their battery production and innovating to find the best, most efficient ways to power cars, buses and trucks.

BYD already has a bus operating in China, and trials in California. While it is selling electric cars in its home market, its export strategy appears to focus on establishing its brand in commercial vehicles, and from that base, it could plug into the car market.

The deal with the Falkirk bus-builder appears to reflect problems BYD has had in building sufficiently robust bodies for road conditions. While chassis production is expected to start in China, the Scottish company hopes to attract that role as well.

The most recent market update from Alexander Dennis is upbeat - expecting 20% growth in revenue this year towards £600m, with profits up too as it invests in its plant. It has big orders for Hong Kong and Kuala Lumpur, while orders for New Zealand and Toronto will be built at plants nearer the customer.

Discussions to build all electric double deckers are said to be at an "advanced stage"