The tough U.S. fuel economy standards announced by President Barack Obama on Tuesday represents a bonanza for companies that supply hybrid technology and other gas-conserving components needed to meet the new benchmarks.
Potential winners range from established suppliers such as BorgWarner Inc, Honeywell International Inc and Johnson Controls Inc to battery makers such as start-up A123 Systems, Continental AG and LG Chem Ltd, analysts say.
To improve fuel efficiency by as much as 40 percent, major automakers will need to order a lot more turbochargers, more advanced lithium-ion batteries and more electric motors for cars and trucks already under development.
"There are a lot of suppliers out there with credentials that are lining up to get into this gold rush," said Larry Rinek, an expert in fuel efficiency at consulting firm Frost & Sullivan. "This is going to be a drama to watch."
Other analysts expect steel to be swapped for lighter aluminum and plastics. Copper demand could grow as electric motors are rolled out to meet the rising production of hybrids.
The hitch: analysts expect American consumers will pay more than projected and face sharply limited choices.
With General Motors Corp and Chrysler LLC operating under government funding, analysts also expect demands for large new subsidies to automakers and incentives to get consumers into greener and smaller cars....
...Barclay's Capital analyst Brian Johnson, meanwhile, said the new policy reinforced his view that BorgWarner and Johnson Controls could benefit from increased demand for turbochargers and lithium-ion batteries.
BorgWarner and Johnson Controls shares each closed around 3 percent higher at $29.82 and $19.95, respectively, while Honeywell was up less than 1 percent at $33.09.
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The bump in demand for those advanced batteries, now widely used to power everything from cell phones to power tools, reflects the view that more automakers will be pushed into the market for hybrids now dominated by Toyota Motor Corp and Honda Motor Co Ltd.
"The new regulations will ensure that manufacturers immediately reconsider conventional hybrids, plug-in hybrids, electrically powered vehicles and battery electrics to have a variety of them ready for consumer purchase in the next decade," Kelley Blue Book analyst Jack Nerad said.
Analyst Charles Bradford of Affiliated Research Group expected the steel content in vehicles to drop, while aluminum and plastic usage would rise. Continued...