The Big Winners When Higher MPG Takes Effect


As the White House, EPA, NHTSA and automakers hash out new fuel efficiency standards scheduled to be finalized by September, investors would be wise to stop focusing on the automakers and dial in to the implications for parts suppliers.

This is where the new CAFE standards will have the greatest impact.

J.P. Morgan has put together a list of companies that should benefit from automakers pushing to increase the mileage cars, trucks and SUVs. And yes, the list goes well beyond , which makes turbochargers that dramatically improve the mileage we get.

According to J.P. Morgan, here are some other companies to watch and why their technology will be in demand.

  • 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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