Ford Motor Company (F), Tata Motors Limited (ADR) (TTM): As China Goes Green Is Coal Fading to Black?

Page 1 of 2

On Wednesday, China did the unthinkable by putting environmental concerns ahead of growth. For a country lauded (and feared) as the world’s new superpower, this initiative calls into question some of the energy assumptions we investors hold dearest. To put things in perspective, let’s take a look at one chart, five companies, and a prediction so crazy it just might come true.

Ford (F) General Motors Company (GM)

Changing colors and cars
Green is the new red in China. Recently elected Chinese Premier Li Keqiang announced on Sunday that China would ramp up efforts to curb pollution, and by Wednesday its government had passed new stringent fuel standards.

The revised regulation mandates an average 34 mpg for passenger cars by 2015, and 47 mpg by 2020. The most recently available data on China’s 2009 fuel efficiency clocked in at approximately 30 mpg. For a peck of perspective, the United States issued new fuel standards last August that call for 35.5 mpg for cars and trucks by 2016 and 54.5 mpg by 2025.

There are obvious automotive winners and losers. Tata Motors Limited (ADR) (NYSE:TTM)‘ stock dropped 4% on Thursday on fears of falling Jaguar Land Rover sales. Morgan Stanley estimates that the automaker will need to improve average fuel efficiency by 10% to keep its luxury cars on China’s lots.

On the other end of automobiles, Ford Motor Company (NYSE:F) seems well-poised to continue its 31-mpg Ford Motor Company (NYSE:F) Focus takeover. The Chinese bought more Focuses in 2012 than any other vehicle, and the Blue Oval sold 33,632 in January 2013 alone.

The beginning of coal’s end
But there’s a deeper story to Li Keqiang’s green garnish. The country’s air and water pollution records are abhorrent, and these new fuel standards might be the first of many regulations that choose environmental benefit over economic growth. Don’t believe me? Just ask a Nobel-winning Harvard economist.

Dr. Simon Kuznets developed a simple but shockingly accurate chart to map out any country’s environmental and economic development. It’s known (big surprise) as the Kuznets curve:

Source: Author

Dr. Kuznets predicted that when a country first begins to boost its manufacturing economy, environmental concerns are put on the back burner and degradation runs rampant (think Dickensian London). But at some point, environmental benefits begin to outweigh economic growth, and the country works to strike a balance between the two ideals (think logging regulation in the U.S). To put Kuznets’ theory into practice, here’s where China might’ve moved this week:

Source: Author

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

The 10 Biggest Tax Havens in the World to Stash Your Money

The 15 Most Murderous Countries in the World

10 Largest Colleges in the World: Bigger Isn’t Always Better

Comedians in Cars Getting Coffee: The 6 Comedians Seinfeld Needs to Interview

Easy Money: The 10 Most Successful Investors in the World Today

The 10 Most Deadly Diseases in the World Today

The 5 Most Expensive Luxury Motorhomes in the World

20 Largest Stock Exchanges in the World

6 Richest Painters In The World 2014

The 6 Countries with the Best Hospitals In The World

10 Largest Beer Brewing Companies in the World

The 10 Richest Fitness Gurus In the World to Pump You Up

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!