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Fitch: Tighter U.S. Fuel Economy and Emissions Standards Will Benefit Some Auto Suppliers

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CHICAGO--(BUSINESS WIRE)--

In a new special report, Fitch Ratings discusses the implications on auto manufacturers and suppliers of the new fuel economy and emissions standards enacted in August 2012 by the U.S. Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA). The new standards take effect for the 2017 model year and are projected to require the U.S. light-vehicle fleet to achieve a fuel efficiency of as high as 54.5 miles per gallon (mpg) by 2025.

Fitch expects auto manufacturers will employ various solutions to meet the new standards, including the development of more efficient powertrains, an increased use of electrification and a greater use of lightweight materials. However, much of the development work will go towards increasing the fuel efficiency of traditional internal combustion engines, which Fitch believes will still be the primary form of propulsion for most light vehicles in 2025.

Although the new standards do not take effect for several years, auto manufacturers and suppliers are already investing heavily in research and development to meet the new requirements, making this a credit issue now. Achieving the new targets will be a significant challenge for auto manufacturers, but certain auto suppliers stand to benefit significantly from the new rules. In particular, suppliers of technologies that improve engine fuel efficiency, transmission and related components suppliers, and suppliers of technology used in hybrid and electric propulsion systems stand to benefit the most.

Thirteen auto manufacturers, including all of the Detroit Three, and the State of California support the new standards. Industry support is due primarily to a desire to see one set of consistent fuel economy and emissions standards in the U.S., rather than a state-by-state patchwork of regulations. Nonetheless, meeting the standards will involve various risks, including a potential for problems with new technologies, materially higher vehicle production costs, and, perhaps, a lack of customer acceptance of vehicle design changes.

The full report 'The New U.S. Auto Fuel Economy and Emissions Standards: What They Are and Who Will Benefit' is available at 'www.fitchratings.com.'

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: The New U.S. Auto Fuel Economy and Emissions Standards: What They Are and Who Will Benefit

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=693150

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Fitch Ratings
Stephen Brown, +1-312-368-3139
Senior Director
70 West Madison Street
Chicago, IL 60602
or
Craig Fraser, +1-212-908-0310
Managing Director
or
Media Relations:
Brian Bertsch, New York, +1 212-908-0549
brian.bertsch@fitchratings.com

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