Needham & Company on Energy Efficiency - Ready To Take Bigger Strides; Expect More EV Platforms to Reach the Market This Year

January 6, 2012 1:51 PM EST
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Needham & Company on Energy Efficiency - Ready To Take Bigger Strides

Analyst, Michael Lew, said, "Last year, we mentioned “seeing is believing” as an obstacle to increased investor focus on green-enabling companies supplying materials for electric vehicles (EV) and composite intensive airplanes. Since then, the vehicles have been rolled out onto the streets and the carbon fiber airplane has taken off. After a year of taking small steps to get product launched, we believe the industry will take much bigger strides this year. In our view, they’re here and get ready to see more next-generation vehicles in upcoming years."

"More EV Platforms to Reach the Market This Year: Despite the general skepticism regarding adoption, we expect to see more tier-1 vehicles on the road shortly. Ford (NYSE: F)(N/R) has begun production of the Focus Electric, which is based on the high volume gasoline powered versions. Toyota (NYSE: TM) (N/R) is slated to launch the Prius Plug-in Hybrid in 1H12. The Honda (NYSE: HMC) (N/R) FIT EV should be available for lease next summer. Fisker Automotive (N/R) has begun delivering the long-awaited Karma. In addition, the Coda Automotive (N/R) sedan should soon be rolling around on the streets with Tesla Motors’ (Nasdaq: TSLA) (N/R) Model S availability in 2H12."

"More Platforms Coming to Market This Year: There will be plenty of vehicles for investors to drive and experience - further validating the beginning of a secular transition in automotive transportation."

"But it Has Been a Bumpy Road: However, we are still in the nascent stages of a transportation industry transformation. The sluggish economy and arguably “conservative” rollout has resulted in the pressuring of supply chain stocks, including UQM Technologies (NYSE: UQM), Valence Technology (Nasdaq: VLNC), Ener1 and A123 Systems (Nasdaq: AONE). We expect these stocks to potentially rebound this year, benefitting from the combination of increased adoption and better investor sentiment. The rebound should be driven by several factors, such as vehicle availability, more stringent emissions and a broadening vehicle distribution network."

"Materials Are the Enabler: Not surprisingly, enabling materials are the key ingredients for the next generation of cleaner technology solutions. For the EV, it ranges from the separator to the electrolytes to electrode materials for the high performance lithium-ion battery. Established companies in the supply chain (such as Polypore (NYSE: PPO) and LG Chem Power-N/R) should benefit with increasing adoption. For the more fuel-efficient aircraft, carbon fiber has been the key component for the Boeing (NYSE: BA) (N/R) 787 (52% composite materials) and the upcoming Airbus (N/R) A350 (~60%) that will be populating the skies over the next decade. The U.N. IPCC (Intergovernmental Panel on Climate Change) estimates that aviation accounts for 3% of total carbon dioxide emissions. We expect Hexcel (NYSE: HXL) and other suppliers to be financial beneficiaries from the massive backlog of close to 8,000 planes that are to be built in the upcoming years."

Other Stocks of Note: GM (NYSE: GM), Daimler (NYSE: DAI), and Nissan (OTC: NSANY)


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