Carmakers turn to natural gas engines

Photo / Thinkstock

As natural gas emerges as a feasible near-term alternative to pricey petrol, carmakers such as General Motors and Chrysler are gearing up to invest in companies that make engines and parts for vehicles that run on the fuel.

Natural-gas engine and parts makers such as Westport Innovations and Clean Energy Fuel will be among the gainers as the automotive industry looks to reduce its dependence on imported oil and tap into the United States' vast natural gas resources.

"[GM CEO] Dan Akerson has made it pretty transparent this is an area we need to get back into," says GM executive Micky Bly.

Crude oil currently trades at nearly US$95 ($115) a barrel, while natural gas trades at just US$4 per million British thermal units (mmBtu).

"Natural gas is clean, it's cheaper, and it provides a domestic source of fuel, so there's energy security involved as well," said ThinkEquity analyst Shawn Severson.

Natural gas-propelled cars are also seen by some as greener than all-electric vehicles, which charge their batteries using electricity.

Westport, which mostly makes natural-gas engines for large trucks, has a project with Caterpillar to develop engines for mining and earthmoving trucks, and this week teamed up with GM to make natural-gas engines for lighter vehicles.

"Engines for big trucks cost US$200,000-$300,000. Westport ... will invest about US$1 billion in creating such solutions," said Jack Robinson, chief investment officer at Winslow Green Growth Fund, which has a 4 per cent stake in the company.

Robinson expects green-tech companies to grow at an average annual rate of more than 20 per cent over the next three-to-five years. ThinkEquity's Severson also sees companies such as Fuel Systems Solutions and Landi Renzo benefiting from the car industry pouring money into these technologies. FSS has teamed with GM to install natural-gas engines in its vans.

- BLOOMBERG