The 'Tesla of buses' just set a range record that could spell the end for diesel buses

Silicon Valley-based Proterra just set a new record for its electric bus.

Proterra said its new long-range version of its Catalyst E2 bus drove 1,101.2 miles on a single charge at the Navistar Proving Grounds in New Carlisle, Indiana. The record-breaking test shows battery tech has come a long way in allowing heavy-duty vehicles to seriously compete with their diesel-engine counterparts.

"Driven by the best cost savings-per- mile, we believe the business case for heavy-duty electric buses is superior to all other applications, and that the transit market will be the first to transition completely to battery-electric powered vehicles," Proterra CEO Ryan Popple said in a press statement.

Proterra currently sells a 40-foot Catalyst E2 with a 350-mile driving range for $700,000 a piece. As of June, Proterra had sold 400 buses in 15 states across the country.

The long-range variant will eventually go up for sale, Popple told Forbes.

Founded in 2004, Proterra has collaborated with LG Chem to develop batteries that can support heavy-duty vehicles. Proterra recently opened a new factory in Burlingame, California to ramp up production of the E2 battery packs.

The Catalyst E2, however, is more expensive than traditional diesel buses that cost roughly $500,000 each, Fortune reported.

The startup has launched a new battery financing model so transit agencies can buy the Catalyst E2 at roughly the same price as a diesel alternative, Proterra said in a statement. Park City Transit in Utah has used the option to purchase six buses, but price may end up being Proterra's biggest remaining challenge.

Proterra joins several other companies in the race to offer heavy-duty, electric vehicles. Tesla plans to reveal an electric semitrailer in October.

Proterra manufactures its buses at its plants in Greenville, South Carolina and Los Angeles. The company has raised $195 million and is eyeing a 2018 IPO.