Monday, August 01, 2005

Investing in the Clean Car Revolution

Earlier in June, Merrill Lynch and WRI put together a short report titled Energy Security and Climate Change: Investing in the Clean Car Revolution. The bottom line of the report is that global market and regulatory environment will increasingly drive competition in the global automotive industry. This is the same conclusion as the changing drivers report from WRI/SAM. What this report does is to speculate that diesels and hybrids, along with lighter materials will have an increasing role to play due to concerns about fuel use and climate change. As a result, Merrill Lynch identifies seven companies which might be a good buy. These seven are:
* BorgWarner Automotive (U.S.) : BWA is player in technologies that improve fuel economy, and reduce emissions.
* Denway Motors (China): Denway has about 50% stake in Honda operations in China.
* Faurecia (France): Faurecia is a European leader in Diesel Particulate Filter business (>60% market share).
* Hyundai Motor Company (Korea): Hyundai is rated neutral because it has the potential to improve its export performance, but may need significant investment in cleaner technology.
* Keihin (Japan): Keihin is a key player when it comes to switching dirty two-stroke engines with cleaner four-stroke engines in two and three wheeler vehicles in developing countries.
* Magna International (Canada): The report identifies Magna's expertise in hydroforming among other opportunities for vehicle lightweighting.
* Toyota Motor Corporation (Japan): Toyota is not only the financially most stable OEM, but is a dominant player in the hybrid vehicle market which is just beginning to grow.

You might ask why the report does not identify Garret (Honeywell) for its turbo chargers, or many other such examples, but I do not have time to go in to that.

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