Cost of CO2 regulation provides auto suppliers with new opportunities
Analysts at Macquarie Equities Research have concluded that the global trend of tougher regulation on carbon dioxide emissions is producing significant cost for original equipment manufacturers (OEMs) and consumers in the automotive sector, but is creating revenue opportunities for supplier industries.
The EU has the strictest emissions standards, which has lead to European consumers seeing the highest costs per vehicle. However European OEMs and suppliers are in a better position with regarding to technologies CO2 reducing technologies.
The US auto industry faces the challenge of not only federal regulation but state regulation on CO2 emissions. This has become particularly problematic in states such as California. Macquarie believes that this could be good news for premium European brands, as targets made Europe quickly translate to the US.
Emerging markets such as Brazil and China are not as quick as their European competitors to implement CO2 regulations but do do so over a longer time horizon.
Average margins in the industry have not seen an overall decline as most actors have been subject to regulatory costs relatively evenly.
Macquarie cites revenue opportunities for suppliers such including gaskets, heat shields, clamps, injection systems, filters, catalytic converters, turbo chargers.
Macquarie's top picks for auto-industry are Daimier and VW. In terms of suppliers, linkage to CO2 reducing technology may provide a significant growth area. Companies likely to flourish in the sector include Conti, Norma and ElringKlinger.