Chile: Budget Restrictions Drive Bus Retrofitting as an Alternative to the Traditional Fleet Renewal Model

The advance of electromobility in Chile has entered a new phase of pragmatic adjustment. Although decarbonization goals for public transport remain firm—with the capital’s Red Movilidad network having reached 62% electric bus penetration by early 2026, according to the Ministry of Transport and Telecommunications (MTT) —the recent budget cut is putting the traditional capital‑intensive model to the test.

To date, the public transport electrification process has relied heavily on acquiring entirely new units—a scheme highly exposed to fiscal constraints and medium‑term economic cycles. In this scenario, the search for financial efficiency and optimization of existing assets is gaining ground as a complementary strategy to sustain the pace of electrification, especially outside the Metropolitan Region.

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Across‑the‑Board Cuts

The Ministry of Finance ordered a 3% across‑the‑board cut to public spending for 2026, which in the case of the MTT translated into a reduction of $56,161 million (CLP) from an original budget of $1,872,061 million (CLP). The bulk of the cut will fall on the Secretariat and General Administration of Transport, with a decrease of $50,394 million (CLP), while the Undersecretariat of Telecommunications (Subtel) must adjust another $5,766 million (CLP).

The most significant impact will hit the National Public Transport Subsidy, with a reduction of approximately **$45,410 million (CLP)** . Of that amount, $15,250 million (CLP) corresponds to a reduction in the Public Transport and Regional Connectivity Support Fund—a mechanism intended to finance transport initiatives outside the capital. In addition, RED Movilidad will see cuts of around $2,084 million (CLP).

Former Undersecretary of Transport, Cristóbal Pineda, expressed concern about the effects of these adjustments: “There is a big question mark about what will happen to electromobility projects, especially in the regions, where we already had tenders,” according to a note from The Clinic.

Transport engineer Ariel López warned that “subsidies in Chile are mainly aimed at subsidizing fares. All the money the State takes away from transport, the transport sector will pass directly on to the passenger.”

The specific measures of this adjustment have already had concrete consequences: a stalled initiative in Osorno that contemplated incorporating 116 electric buses and 50 traditional units, as well as electric buses in Arica that ceased operations due to operational financing problems and a lack of subsidies.

The Retrofit Law: A Legal Framework at the Right Time

A key milestone in this operational shift is the entry into force of Law No. 21,793—known as the Retrofit Law—which for the first time establishes a formal regulatory framework to transform internal combustion vehicles to 100% electric technology and authorize their circulation on public roads.

The regulation was promulgated on December 17, 2025, and published in the Official Gazette on January 14, 2026. It amends the Transit Law No. 18,290 by incorporating a new Article 90 bis, which empowers the Ministry of Transport and Telecommunications to authorize and certify establishments or workshops that carry out transformation, adaptation, or conversion of propulsion types of motor vehicles in use—from internal combustion to electric.

Until now, these operations were relegated almost exclusively to closed industrial circuits such as mining. The new regulation establishes that transformations must be carried out in accordance with the rules that the MTT issues for this purpose, which must contain, at a minimum, the scope and technical procedures to be followed according to vehicle models.

For Felipe Cevallos, co‑founder and general manager of Reborn Electric Motors—a company based in Rancagua that has manufactured and retrofitted buses to electric traction since 2016—the law was a pending debt.

“It is a very powerful law that will allow us to accelerate the migration to sustainable mobility much more,” he stated, emphasizing that the regulation “creates a legal framework that allows us to move forward in a good way, and also allows the national industry to grow and develop,” he said in an interview with Chilean newspaper 24 Horas.

An Alternative to Purchasing New Units

From an economic perspective, the figures are decisive. Transforming an existing diesel bus into an electric one costs approximately 50% of the cost of importing a new unit. This significant reduction makes retrofitting a particularly attractive option in a context of fiscal constraint.

In addition to direct savings, retrofitting offers other operational advantages:

• Streamlined operability – It bypasses lengthy tender and importation processes, offering a more expeditious solution for regions hit by budget adjustments.
• Reduced maintenance – It retains the operational advantages of the electric motor, such as lower energy consumption and reduced maintenance schedules.
• Speed of implementation – Transformation times can be completed in a few weeks.
• Advanced technology – Telemetry systems are implemented that monitor performance in real time, facilitating early fault detection and route optimization.

“Today, the model of purchasing an entirely new fleet is the most exposed to fiscal fluctuations. In that context, electric retrofitting and local manufacturing allow progress without waiting for large investment processes”

Ricardo Repenning, co‑founder and Technology Manager at Reborn Electric Motors

Local Technical Capability Validated in Extreme Conditions

The accumulated experience in the country demonstrates that there is local technical capacity to take on the challenge. National engineering companies already have more than 140 units manufactured and operating in high‑demand operations, validating the technology in complex climatic and geographical conditions.

Reborn Electric Motors has successfully delivered more than 100 buses to mining and tourism companies. The company has developed solutions adapted to the country’s geography and climate—from the extreme heat of the Atacama Desert to the low‑temperature zones in the south—making a difference compared to standardized imported solutions.

“Today the difference lies in the ability to develop solutions adapted to each operation,” explains Repenning. “The integration of the powertrain and control software allows performance to be adjusted according to local geography—something that is not always possible with standardized solutions.”

Local development in Chile also reduces dependence on foreign suppliers, guarantees immediate availability of technical support, and optimizes operating costs compared to full fleet renewal.

Challenges: Regulations and Ecosystem Consolidation

Despite the sector’s optimism, the effective implementation of this regulation depends on the prompt publication of its technical regulations, which will define certification protocols and safety standards required for retrofitting plants and modified vehicles.

The sector recognizes that the consolidation of this industry depends on factors that go beyond technological innovation. The main challenge is systemic: the creation of clear regulations that facilitate project evaluation and the implementation of the law throughout the national territory.

The promulgation of the Retrofit Law positions Chile as a pioneering country in Latin America, with a necessary regulatory framework in a sector where many neighboring countries still lack clear rules. This regulatory advantage is complemented by a demanding market.

Sectors such as mining, which operate under global safety and performance standards, act as an ideal testing ground for validating these technologies in Chile before they scale to other markets in the region.

The Ideal Space for Fleets in Latin America

The Latam Mobility 2026 Tour will arrive in Santiago, Chile, on August 25, bringing together experts and strategic players to further strengthen the sustainable mobility ecosystem in the region.

The tour will end in Mexico City on October 12 and 13, alongside the Climate Economy Forum, in a meeting that will bring together sector leaders to continue driving the transition toward more efficient, sustainable, low‑emission transportation systems in Latin America.

The transition is already underway. The Latam Mobility 2026 Tour will be the meeting point to accelerate decisions, connect key players, and collaboratively build sustainable mobility in Latin America.