Fuel Economy Standards Update

Will New Fuel Economy Standards Increase Profits for Car Makers?

Written by Green Chip Stocks
Posted April 9, 2012 at 1:44PM

A new report just released by Citi Investment Research and Analysis paints a very optimistic future for American automakers should the proposed new national gas mileage and emissions standards get put into practice.

The report, “Fuel Economy Focus: Perspectives on 2020 Industry Implications,” analyzed the potential impact of the new government-imposed fuel economy standards. Turns out the ‘Big Three’ could enjoy a bump of 6.3% in profits, meaning an extra $2.44 billion to be exact. In fact, the industry as a whole is likely to see a 5.3% increase in profits in 2020.

Additionally, the report found the ‘Big Three’ would see baseline vehicle sales improve by 4%.

The new standards for models by 2025 as proposed back in November 2011 by the EPA, DOT and National Highway Traffic Safety Administration is 49.6-mpg fuel economy and 163 grams of CO2 per mile.

The report found that these new standards could be met with existing technology that improves the engine’s efficiency and overall performance. It doesn’t hurt that these technologies are also very cost-effective for consumers.

Auto companies aren’t the only ones who can gain from the new standards. Fuel economy technology suppliers will also certainly see a pop in sales. The report lists the following companies as the key beneficiaries along with reasons why each will see profits rise:

  • BorgWarner: Most of its sales are from turbochargers, dual-clutch transmissions and other fuel saving technologies.

  • Delphi: Its wheelhouse is in powertrain technologies and electronic distribution systems.

  • Johnson Controls: One of the leaders in the growing start-stop hybrid market.