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#Opus: Large potential in North America

As we have reported previously, Swedish vehicle inspection specialist Opus hosted a Capital Markets Day last week. One aspect worth highlighting was the company’s position and potential in the North American market. Not least due to new and tougher environmental laws that could be announced as soon as fall 2015.

Opus Group’s American subsidiary is already the market leader in the USA, with some 28 million inspection per year and a market share of 44%. The new environmental laws should expand the total market size further. Said Opus’ CEO Magnus Greko:

We expect the federal authority EPA to lower the maximum allowed ozone level from 80 pp. to 65-70 ppb. Our preliminary analysis shows that this causes up to 7 million additional cars to be included in the group of cars that needs inspection.”

EPA is revising emission levels every fifth year, but the last time their recommendation was stopped by Washington. Magnus Greko therefore sees the chances as rather high, that the decrease will become reality this time.

The exact level of maximum emission is important. With a maximum level of 70 ppb, 348 regions (counties) are in breach and therefore required to implement some kind of control. With a maximum level of 65 ppb, the corresponding number would be 558 regions, according to EPA. The decision is expected to be announced in October 2015.

Out of the 35 states that have some form of mandatory vehicle inspection, Opus is active in 21 as of today. Focus is primarily on emission, rather that safety inspection. Only 12 states have recurring safety controls.

On top of the growing market, Opus recognises several expansion possibilities in North America, including a service concept that enables the customer to pay e.g. his registration fees in connection with the inspection. A couple of smaller set-ups like this are already in place and New York has signed a new one which will be up and running by the end of the year.

There are also further possibilities for the rental business for inspection equipment. Initially, Opus secured 4500 out of 8000 possible contracts in California. As a next step, a further 3000 contracts will be tendered during 2015 and 2016.

Additionally, the acquisition of Drew Technologies in early 2015, opens the door for increased equipment sales. The company has also high expectations on the technology for remote control of emission and the car’s computer system.

Asked about the ongoing tender process for vehicle inspection in Illinois, CEO Greko leaves the outcome open. Opus had won the first contract but competitor Applus appealed the decision and the process has been restarted. Said Greko: “The new specifications are significantly different to last time. It’s a completely new ball game.

All-in-all, Opus seems very well positioned to keep expanding in North America over the coming years. 

Nordic Investor


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