Compressed Natural Gas Is Catching On: Cummins Inc. (CMI), Westport Innovations Inc. (WPRT)

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Following the latest announcement for more than 900 new buses fueled by natural gas for Los Angeles and San Diego’s public transport needs, it’s now clear that compressed natural gas, or CNG, is really catching on with fleet operators. This trend has been a boon for engine maker Cummins (NYSE:CMI) Westport, a joint venture between Cummins Inc. (NYSE:CMI) and Westport Innovations Inc. (USA) (NASDAQ:WPRT) . One look at a five-year stock chart and you’ll see what I mean:

CMI Chart

CMI data by YCharts

It’s a trend that shows no signs of slowing down. Presently there are more than 7,000 buses in municipal service across North America fueled by natural gas. That number will continue to grow as more operators commit to 100% natural gas fueled buses. That’s the driving force behind this latest deal as purchaser LA Metro takes another step closer to its dedication of being 100% fueled by natural gas.

Cummins Inc. (NYSE:CMI)This order, as well as other substantial recent orders, is evidence of the growing acceptance of natural gas in the transit market according to Cummins Westport president Jim Arthurs. It’s really simple to understand why 30% of new transit orders are for vehicles fueled by natural gas. Those transit operators save about $1.50 per gallon and enjoy a simple one-year payback. Economics aside, transit operators also reduce greenhouse gas emissions by 28% when switching from diesel to CNG.

This one-two punch has meant big things to other industry participants, like Clean Energy Fuels Corp. (NASDAQ:CLNE) . The company is a key partner for transit operators as it builds and operates the critical CNG refueling infrastructure. The company has ambitious plans to grow its natural gas refueling stations as more operators make the switch.

The good news for these companies is that transit operators are not the only companies catching on to the benefits for CNG. Refuse companies like Waste Management, Inc. (NYSE:WM) are also switching over to CNG. The fact of the matter is that switching over to CNG enables the company to take its “Think Green” motto to another level. Like transit operators the company enjoys a one-year payback on a new garbage truck. The economics again are simple, it costs the company roughly $30,000 more to purchase a CNG fueled truck, but the company will save around $27,000 per year in fuel. It’s no wonder why 85% of the company’s new truck purchases are now those fueled by natural gas.

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