Tuesday, March 11, 2014

If You Missed the Clean Diesel Technologies Rally.... (CDTI, HPTG)

Did you miss today's 123% pop from Clean Diesel Technologies, Inc. (NASDAQ:CDTI)? If you didn't chase it higher after the bullish gap left behind at the open, then good for you - you made the right choice. As tempting as CDTI looked then (and still does), the bulk of any near-term gain here has already been realized, and there's no real point in jumping on the bandwagon now. Fear not if you missed the big move from Clean Diesel Technologies though. There's another, smaller name playing the same game, and you won't have to pay a fortune for it just to take a big risk.

That "other" name is HydroPhi Technologies Group, Inc. (OTCMKTS:HPTG), and though it's not a direct competitor to CDTI [the two could actually be partners, in a sense], it could benefit from the same force that's ultimately driving Clean Diesel Technologies here.

HydroPhi Technologies Group is the maker of a device called the HydroPlant. Roughly the size of a breadbox, a HydroPlant separates the water into its basic elemental forms - hydrogen and oxygen - into gases that are then injected into the airflow of a diesel engine. The hydrogen injected in the diesel combustion chamber (the higher oxygen levels don't really affect the contained explosion) leads to greater fuel efficiency and lower greenhouse gas emissions. How much? Preliminary tests of the HydroPlant device installed on transit buses suggest 20% greater fuel efficiency, and 70% less admissions of polluted exhaust. The numbers jive with the theoretical calculations HPTG suggested before field tests began.

Great, but what's that got to do with Clean Diesel Technologies, Inc.? More than you might think.

Although today's news from CDTI was in regards to a major fuel efficiency equipment contract with a major manufacturer of gasoline-burning, a big chunk of what the company is developing is true to its name.... clean diesel technologies. CDTI makes a variety of hardware for diesel engines, including oxidation catalysts and emission control systems.

Truth be told, though a worthy endeavor, Clean Diesel Technologies hasn't been a rewarding stock at any point in the last several years (at least not for long). But, with higher standards for automotive fuel efficiency looming, desperate car makers are increasingly turning to companies like CDTI - and now HydroPhi Technologies Group - to meet those upcoming minimum requirements. And as it turns out, it's easier to make those advancements with diesel engines, which are becoming more and more common in passenger vehicles. That reality (mandated in many ways) puts HPTG as well as CDTI in the proverbial driver's seat.

Just to put things in perspective, President Obama said in late February he was pushing for the EPA and the DOT to require 9.75 mpg from class 8 trucks made after 2018.... tractor trailers, or "rigs", in common parlance. The current average is about 6.5 mpg. While Clean Diesel Technologies' catalytic equipment may help reach that goal, it's going to take more than a catalytic converter to make diesel engines that efficient. A HydroPlant may become necessary to reach the government's near-term standards.

It's not just on tractor trailers that the DOT and/or the EPA is raising the fuel efficiency bar. Expectations of passenger vehicles are on the rise too. By 2025, the U.S. government is going to require that new cars be capable of a whopping 54.5 mpg. That's nearly double today's typical mileage. The reality is, it may not be possible to reach that goal with most gasoline powered cars, but with diesel engines - putting all known efficiency technologies under the hood - that goal may be within reach.

The bottom line is, the same rising tide that drive CDTI up today will eventually grab HPTG too. It's just a matter of when. Thing is, it may happen in the blink of an eye, the way it did for Clean Diesel Technologies.

For more on HydroPhi Technologies Group, visit the company's website here.

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