The Big Winners When Higher MPG Takes Effect

• New alternators/starters with electrical wiring will become "beefier" according to J.P. Morgan. Lear is in the sweet spot to benefit.
• Belt-driven air conditioning compressors will eventually become electric powered. Look to Visteon to supply those parts.
• As steering systems go from hydraulic power to electric power, TRW will be a primary player
• And as low rolling resistant tires replace conventional ones, the major global tire companies will clearly play a role.

J.P. Morgan believes TRW and Visteon are particularly well situated for the changes that will drive automakers to build cars that get better mileage. Increasingly, vehicles will have components powered by electronics or we will see more start-stop engines in cars and trucks. As those changes take effect in the years to come, the suppliers will be at the forefront of that transition.

So when should you play this CAFE regulation investment?

Given the fact this will be a long-term transition for the automakers, you have some time. Especially if your goal is to stay invested for a while. But make no mistake, for the auto industry to get to a point where the line-up of cars and trucks are averaging well over 50 MPG, there will be significant changes in the components driving those vehicles.

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