Natural Gas Vehicle Investing
Ford's (NYSE: F) CNG F-150
Take off your investor hat for a moment and place yourself in the shoes of a consumer.
Ford (NYSE: F) will be offering a new version of the F-150 pick-up truck for 2014, its number one car for civilian and business use. Only this time it will come with the option of being retrofitted to consume compressed natural gas (CNG) or liquefied petroleum gas (LPG).
If you want CNG installation, you would have to spend $315 for the engine outfitting, followed by actual installation of the CNG tank, which would cost anywhere from $7,500 to $9,500 from one of Ford’s hand-picked servicing companies.
Now let’s factor in the cost of natural gas prices, which is currently the equivalent of roughly $2.11 per gallon, as CNNMoney reports. Gasoline prices are currently $3.64 per gallon and could climb higher.
Would you spend up to $10,000 to adapt to a cleaner-burning fuel? Ford is certainly hoping you'll say yes.
The American giant is hoping to attract mainline consumers who are so tired of paying high-priced and fluctuating gasoline prices that they'll go the extra mile and switch over to natural gas.
Businesses have long been asking Ford to suit the F-150 for natural gas so they can take advantage of low natural gas prices and run on clean-burning energy.
Even if the consumer market doesn’t bite when it comes to converting to CNG, F-150 model sales will still increase from commercial demand alone, and offering the CNG option to average consumers will certainly not hurt Ford. I suspect a sizable chunk of Ford customers who are not in the commercial sector will convert their F-150s over to CNG.
The F-350 pickup already comes CNG-ready.
The CNG tank would be placed in front of the flatbed and under the toolbox. The F-150 can go up to 750 miles, all depending on the size of the CNG or LPG tank. If limited natural gas stations are a concern, you can go the extra mile by installing a compression station in your garage.
Since the housing sector is on the rebound, pickup trucks like the F-150 have risen in sales in 2013.
Stock for Chrysler, Ford, and GM (NYSE: GM) have increased to some of their highest values since 1993 in the first half of 2013, Bloomberg reports.
As of June, F-series sales for Ford surged 22 percent to 367,486.
But Ford is hoping to further blow the competition out of the water by introducing the CNG/LPG option for seven other vehicles in the next few years, including the F-Series up to F-650, the Transit, and stripped chassis vehicles.
But most importantly, Ford is competing with the limited-production Honda (NYSE: HMC) Civic Natural Gas, the only CNG car for civilian use
The F-150 engine that will be compatible with natural gas will be the 3.7 liter V6 engine. Mileage for the 4 x 2 has an EPA certified rating of 17 mpg for the city and 23 mpg for the highway. The 4 x 4 model has 16 mpg for the city and 21 mpg for the highway.
The Honda Civic has 27 mpg for the city and 38 mpg for the highway.
Ford may be encroaching on Honda’s civilian CNG market, but the Honda CNG and the 2014 F-150 will cater to two different kinds of consumers. Honda’s CNG vehicle will continue to attract people looking for a smaller and more manageable vehicle, while Ford will appeal to those who prefer pickup trucks and a little more horsepower.
But Ford has a slight advantage, since the F-150 will draw in average consumers and people who work in the commercial sector.
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Natural Gas Investment
There is a risk of CNG vehicles being affected if natural gas prices ever surge above $4, but it is the best time to begin investing in natural gas vehicles. Natural gas is generally cheaper and releases 30 percent fewer emissions.
Prices have been inching up, but with the current glut of natural gas due to overproduction, and the Department of Energy’s unwillingness to approve more LNG exporting facilities, clean-burning gas will remain depressed for quite some time.
But there is another angle to investing in natural gas, since there is still life in the sector in regards to CNG vehicles for commercial and civilian use.
If you live a populated state like California or New York, where gasoline prices tend to surge above $4, then spending an extra 10K will be well worth the money.
Look in the commercial sector as well; AT&T (NYSE: T), UPS (NYSE: UPS), and FedEx (NYSE: FDX) are just a few customers of Ford for CNG transportation.
Airports and taxi services in Denver and Phoenix have been using CNG vehicles, and demand will continue to increase as natural gas prices remain low.
And keep an eye out for LNG consumption on a domestic level.
We know that LNG has the most value in Asia, but LNG is also being considered as a viable fuel source for heavy-duty vehicles here in the United States.
Clean Energy Fuels Corp. (NASDAQ: CLNE) converts vehicles to natural gas and constructs fueling stations. The company has a project in the works called America’s Natural Gas Highway, an effort to construct 150 LNG fueling stations along major trucking highways across the United States by year’s end.
And you may think of CNG vehicles and stations as something you’ll only see on opposite ends of the country, but more state and local governments across Middle America are adopting CNG vehicles and offering tax incentives for infrastructure and consumption.
Check out states like Oklahoma, home to the Cushing oil boom, where natural gas production has surged. Look at the East Coast states as well, especially states that host the Marcellus Shale.
You can also broaden your horizons and look to Latin American countries like Brazil and Argentina, where CNG vehicles are encouraged by governments there and are in high use by taxi and bus services.
Internationally, Brazil, Argentina, and India have the highest numbers of CNG vehicles in the world.
Even Iran has developed its own fully robust CNG economy, especially since its oil economy has been essentially crushed by sanctions from the West. But don’t count on outside investment there anytime soon.
Prices are tough for natural gas producers right now, but other investment avenues are opening up within the natural gas sector.
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