Despite the Trump administration’s recent rejection of an Obama-era plan to improve automobile fuel efficiency, the trend toward electrification and hybridization of motor vehicles is not about to let up any time soon. Rolling back emissions standards may relieve some cost pressures on the auto industry, but as crude oil prices pick up and consumers begin to feel the pinch at the pumps, demand for electric and hybrid vehicles isn’t going away. Auto industry suppliers specializing in parts for such automobiles, like BorgWarner Inc. (BWA), Delphi Technologies PLC (DLPH) and Visteon Corp. (VC), are well positioned to benefit from the trend, according to Barron’s.

Electric Car Boom

As of the close of trading on Wednesday, BorgWarner is up 39% over the past year, Delphi is down less than 1%, and Visteon is up 23%, while the S&P 500 is up 16%, and some of the big automakers like Ford and GM, are up 3% and 16%, respectively, over the past year. Year to date (YTD), BorgWarner is up 5.5% and is trading at a forward price to earnings ratio (forward P/E) of 11.37; Delphi is down 4.5% on the year and trades at a forward multiple of 9.56; and Visteon is down 7% so far this year and trades at a forward multiple of 15.23.

At about 1% of global vehicle sales, electric cars are still a relatively small part of the total market for automobiles, but that is expected to change in the not too distant future. According to Valeo, one of the biggest suppliers to the auto industry, electric cars will make up as much as 10% of total vehicle sales by 2025. Last November, the Swiss multinational investment bank, UBS, was predicting that electric car sales would be at least 16% of total sales by 2025. (See also: 6 Stocks for the Electric Car Boom Not Named Tesla).

Big Winners

Given this trend, Cowen & Co. analyst Jeffrey Osborne gave BorgWarner, Delphi and Visteon, outperform ratings earlier this week with price targets that imply respective gains of 11%, 27% and 17% based on Wednesday’s close.

As a supplier specializing in engineered systems and components for automotive powertrain applications, BorgWarner’s “strong presence in turbos, hybrids and 48-volt systems” make it well positioned to take advantage of the trend to toward more fuel-efficient vehicles, according to Osborne. He also expects that the company will engage in mergers and acquisitions (M&As) over the long term to fill in any gaps in its electric-vehicle portfolio, reported Barron's.

Delphi, which specializes in supplying electronics for automobiles, is set to benefit in the short term from a focus on making more fuel-efficient parts for traditional autos while it is also well-positioned for the long term in making parts for fully electric and hybrid vehicles. Osborne expects above-market sales growth to accelerate in 2020 as more of its parts find their way into vehicles and the company takes advantage of scale in power electronics. (See also: Blackrock: U.S. Auto Industry Faces a Hard Road Ahead).

As for Visteon, a designer and manufacturer of electronic products for automobiles, Osborne is excited about the company’s “SmartCore and DrivCore domain-controller platforms,” which have great long-term potential, according to Barron’s.

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