I went car shopping on Saturday, and I discovered something that told me a lot about why Ford Motor Company (F) is on pace to sell some 1 million of its fuel-efficient EcoBoost engine vehicles in 2015.
Now, I wasn’t shopping at a Ford dealership. I was shopping at the Porsche dealership (a majority holder of Volkswagen (VLKAY)), but what I learned from Porsche confirmed my suspicions on the next wave of “green” likely to push Ford stock, Tesla Motors (TSLA) stock, Toyota Motors (TM) stock and other “green” car makers firmly into the black.
Fuel Efficiency a Focus
My revelation came when I found out that the next generation Porsche 911 models, the 2017 iterations, will all be turbocharged.
Why is this important? Because turbo charging a vehicle enhances its gas mileage, and enhanced miles per gallon is the mandate automakers face from governments around the world cracking down on fuel efficiency standards.
A recent article in Road & Track made the following assessment of the new 911 turbocharged models and their enhanced fuel efficiency.
“It’s too soon to see new EPA numbers, but European cycles saw a 12 percent reduction in [fuel] consumption, so figure a 2-3 mpg bump across the lineup.”
Here we see that even the high-end sports car maker is toeing the line when it comes to making smaller engines and enhancing performance via fuel-efficient, forced-induction methods.
As for Ford, an article in Forbes outlined the 2007 move by engineers to get out in front of more stringent fuel economy standards by downsized engines and creating turbocharged gasoline-fueled engines that “would be the heart of their strategy.”
That decision created the wildly popular EcoBoost engine, which as Forbes points out, “is on pace to sell more than 1 million examples in the U.S. for the first time.”
Now, when Ford is doing it, and when Porsche is doing it, you know that’s a trend that’s here to stay.
This year, the positive effect of big EcoBoost sales helped Ford hit new quarterly records. On Oct. 27, the company reported North American sales that totaled $23.7 billion, with a pretax profit of $2.7 billion. That’s a new third-quarter record high for Ford, which came as a result of sales volumes that surged nearly 16% year over year.
The effect of the EcoBoost engine can be seen when looking at the Ford’s F-150 truck sales. According to Forbes, “Nearly two-thirds of F-150s are powered by either a 2.7-liter or 3.5-liter twin-turbocharged V6 and more than three-quarters of Escapes contain one of two four-cylinder turbos.”
Looking Ahead for Green Vehicle Stocks
As for Ford stock, well, so far 2015 hasn’t exactly seen turbocharged returns.
Year to date, F stock is down 6%, but much of that was due to the overall plunge in stocks in late August, and again in late September. Since the September lows, F stock has come back off the canvas, surging some 10%.
And what about the other “green” car stock that generates such a love-hate Wall Street reaction?
Year to date, Tesla stock is only up 0.5%. That’s not exactly burning up the stock charts, but it is significantly outperforming F stock on a relative basis. As for Toyota stock, the shares are down 1% year to date, with a similar trajectory as F stock.
And while the Tesla Model S or the Toyota Prius aren’t in the same appeal category as a Ford EcoBoost-equipped vehicle, the wider demand wave toward more fuel efficient models — or no fuel consumption at all — is a long-term investable trend for investors to watch.
As of this writing, Jim Woods was long TSLA.