Automobile component suppliers such as BorgWarner, Delphi and ZF Friedrichshafen stand to benefit the most from the new fuel economy and emissions standards enacted in August 2012 by the U.S. Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA).
From Fitch Ratings
Fitch expects auto manufacturers will employ various solutions to meet the new standards, including the development of more efficient powertrains, an increased use of electrification and a greater use of lightweight materials. However, much of the development work will go towards increasing the fuel efficiency of traditional internal combustion engines, which Fitch believes will still be the primary form of propulsion for most light vehicles in 2025.
Although the new standards do not take effect for several years, auto manufacturers and suppliers are already investing heavily in research and development to meet the new requirements, making this a credit issue now. Achieving the new targets will be a significant challenge for auto manufacturers, but certain auto suppliers stand to benefit significantly from the new rules.
In particular, suppliers of technologies that improve engine fuel efficiency, transmission and related components suppliers, and suppliers of technology used in hybrid and electric propulsion systems stand to benefit the most.
Nonetheless, meeting the standards will involve various risks, including a potential for problems with new technologies, materially higher vehicle production costs, and, perhaps, a lack of customer acceptance of vehicle design changes.
See the full report ($) The New U.S. Auto Fuel Economy and Emissions Standards: What They Are and Who Will Benefit