Four auto stocks that may benefit from tighter emission regulations

These components manufacturers are well positioned to capitalize on automakers' push for fuel efficiency and improved green credentials.

Vikram Barhat 8 April, 2016 | 5:00PM

Ever since the news of German automaker Volkswagen's emission-rigging scandal came to light in September of last year, there has been a heightened scrutiny of vehicle emissions and fuel efficiency. As regulators impose newer and tighter standards, automakers globally are scrambling for ways to improve fuel efficiency of vehicles and reduce their carbon footprint.

"If car companies' use of diesel as a means of reducing CO2 emissions from their entire product portfolio is restricted, technologies other than gasoline engines must be ready to launch today," said Morningstar senior equity analyst Richard Hilgert in a recent article. However, he added, alternative powertrain technologies are neither widely affordable, nor are they ready to meaningfully replace engines powered by conventional fuels. In fact, he believes that a substantial number of passenger vehicles around the world will contain diesel engine powertrains by 2025.

And therein lies an investment theme. Automakers consider companies that supply automotive systems and components that help improve fuel economy as crucial to meeting future clean air regulations. Some of these auto components makers are well positioned to capitalize on automakers' push for fuel efficiency and improved green credentials as nations legislate to regulate emission, according to Morningstar equity research.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Aptiv PLC76.28 USD1.18
BorgWarner Inc35.51 USD3.23
General Motors Co24.39 USD4.14
Johnson Controls International PLC33.87 USD1.47
Tenneco Inc Class A6.86 USD3.94

About Author

Vikram Barhat

Vikram Barhat  Vikram Barhat is a freelance writer.

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