NEW YORK (AP) -- Energy legislation, stimulus benefits and rising interest in energy-efficient vehicles could prop up demand for natural gas vehicles, said an analyst on Monday who recommended key industry companies.
Lazard Capital Markets analyst Graham Mattison said a recent conference call with Richard Kolodziej, president of Natural Gas Vehicles for America and Paul Kerkhoven, director of Government Affairs for NGVA, suggested that demand for natural gas vehicles remains solid despite the overall slow down in vehicle sales.
"This is supported by owners seeking to lower their fuel costs and also to meet increasingly stringent emission rules," Mattison noted from the call.
In addition, political support for natural gas vehicles is building on both federal and state levels, Mattison said, pointing out the 50 co-sponsors for the House version of the NATGAS act and Oklahoma's recent law that increases the state's support for the industry.
"We continue to view these legislatives proposals as significant catalysts for the industry," he said. Mattison also expects the industry to win a hefty share of grants from the American Recovery and Reinvestment Act, primarily for transportation and refuse fleets. Mattison said municipal transit buses and refuse truck fleets will drive the natural gas vehicle market in the coming years.
Mattison rates natural gas provider Clean Energy Fuels Corp. and Canadian clean engine maker Westport Innovations Inc. "Buy" with price targets of $10 and $9, respectively. Shares of Clean Energy Fuels fell 38 cents, or 3.9 percent, to $9.45. Westport shares dropped 36 cents, or 5 percent, to $6.84.
Mattison rated Fuel Systems Solutions Inc., the maker of parts for fuel-delivery systems, "Hold" due to near-term pressure from lower commodity prices. Still, the company is positioned to benefit in the long run from expected growth in the global gaseous vehicle fuel markets. He did not provide a price target. Shares of the company fell $1.47, or 5.8 percent, to $23.77.
There are 8 million natural gas vehicles in the world but very few in the U.S. Of the 234.6 million vehicles traveling on American roads, just 95,000, or 0.1 percent, are natural gas vehicles.
In Argentina there are 1.5 million natural gas vehicles, and both Pakistan and Iran have nearly a quarter of their vehicles running on natural gas.
The European Union has mandated that 20 percent of all their vehicles run on natural gas by 2020, and they are set to beat that timeline. In 1997, Europe had about 400 CNG fueling stations. By 2006, that number had jumped to 2,105, or an increase of over 400 percent.