Will We Be Driving Aluminum Cars In Ten Years Time?
The automobile industry has long been one of the key end markets for steel. Steel remains the most used metal in automobile manufacture, allowing automakers to achieve desired standards of strength and safety for their vehicles at relatively low costs vis-a-vis other materials. However, given that transportation remains one of the leading causes of air pollution in the U.S. and worldwide, there has been a tightening of regulation governing automobile emissions and fuel efficiency globally. Given the increasingly stringent regulations pertaining to automobile emissions and fuel efficiency, reducing the weight of automobiles has become an extremely important consideration for automakers. Steel is facing increasing competition from lighter materials such as aluminum, as automobile manufacturers look to reduce the weight of their vehicles in order to conform to these regulations. In this article, we will look at the current trends in steel usage by the automotive industry, the changing landscape of regulations governing automobile emissions and fuel efficiency, the implications for steel producers, and steps taken by these companies to rise to these challenges. Ultimately, we will try to answer the question: Will we be driving aluminum cars in ten years time?
Current Status of Steel Usage in the Automotive Industry
As per estimates by the World Steel Association, the automotive sector accounts for roughly 12% of the overall global steel consumption. [1] ArcelorMittal (NYSE:MT), the world’s largest steel producer, is also one of the leading global producers of automotive steel, accounting for around 16.7% of the world’s automotive steel sheet market in 2014. [2]
Steel is currently the dominant material in automobile manufacturing, accounting for roughly 60% of the weight of an average automobile in North America. [3] However, in the light of changing requirements of automakers, this figure is likely to decline going forward.
Fuel Efficiency & Emissions Reduction Regulation
The primary reason why steel could lose out to other materials such as aluminum going forward in automotive applications, is the changing requirements of automakers, driven by regulations governing fuel efficiency and emissions reduction. For example, the U.S. government has targeted a doubling of average automobile fuel efficiency in the U.S. from 27.5 miles per gallon in 2012, to 54.4 miles per gallon in 2025. [4] In the EU, existing regulations target a reduction in automobile emissions from 130 grams of carbon dioxide per kilometer in 2015, to 95 grams of carbon dioxide per kilometer in 2021. [5] These regulations are indicative of the global emphasis on improving fuel efficiency and reducing emissions. There currently are no targets for emissions reductions or fuel efficiency improvement in China. However, with the Chinese government committing to cap greenhouse gas emissions by 2030, there may be similar regulation imposed in China, the world’s largest automobile market, in the near future. [6]
One of the ways to improve fuel efficiency and reduce emissions is to reduce the weight of the automobile. As a rough guideline, a 12 kilogram reduction in the weight of an automobile saves roughly one gram of carbon dioxide equivalent emissions per kilometer. [7] Given the stringent targets for fuel efficiency and emissions reduction, technological improvements in engine technology alone are unlikely to be sufficient to achieve the targets in the given timeframe. [8] This necessitates a reduction in the weight of automobiles, opening the door for aluminum to challenge steel’s position as the pre-eminent material for automotive applications.
Challenge to Steel from Aluminum
As shown in the figure below, aluminum offers superior weight savings as compared to materials such as high strength steels, though at slightly higher costs .
Steel and Other Materials, Source: Ernst & Young
As a result of the need to make their cars lighter, manufacturers have been incorporating a greater proportion of aluminum into their vehicles. In North America, average aluminum content in automobiles has increased by 44.3 pounds per vehicle between 2012 and 2015. [9] This corresponds to an increase in the percentage contribution of aluminum to the average curb weight of an automobile in North America from 9% in 2012 to 10.4% in 2015. [9] As per projections by Ducker Worldwide, average aluminum content in cars in North America is set to increase to 19% of a car’s curb weight by 2025. [9] Since aluminum is a lighter metal than steel, the increase in terms of volume of aluminum used in an average automobile is a better reflection of the increase in the scope of application of the metal. The volume share of aluminum in automobiles is expected to rise from 6.6% in 2015 to 26.6% in 2025. [9]
Volume Share of Aluminum in Automobiles in North America, Source: Ducker Worldwide
Given the favorable regulatory environment, the scope of aluminum as a material used in automobile manufacturing is certainly set to increase. Aluminum producers such as Alcoa (NYSE:AA) have been increasingly focusing on their automotive end markets to capitalize on this opportunity. Though the automotive end market accounted for only 5% of Alcoa’s revenues for the first half of 2015, the company’s revenues from its automotive customers grew 50% year-over-year in the first half of 2015. [10] In order to counteract the threat from aluminum, steelmakers have invested heavily to produce solutions for the automotive industry.
Response from Steelmakers
Steel companies such as ArcelorMittal and U.S. Steel (NYSE:X) are investing heavily to produce advanced high-strength steels, in order to maintain steel’s position as the material of choice for the automotive industry. Advanced high strength steels have minimum tensile strengths of 500 to 800 Megapascals (MPa), as compared to around 200 MPa for conventional steels. [11] These steels offer significant weight savings as compared to traditional steels of comparable strengths.
ArcelorMittal has collaborated with Original Equipment Manufacturers (OEMs) in order to develop steel solutions that cater to the manufacturers’ requirements in terms of weight reduction as well as safety. [2] Examples of success stories from these collaborations are ArcelorMittal’s proprietary S in Motion steels which provide 19% weight savings for a typical C-Segment vehicle. [12] In addition, the company has also unveiled other classes of advanced high strength steels such as the proprietary Usibor and the Fortiform range of steels, tailored specifically for automotive applications. [7] Around 30% of ArcelorMittal’s R&D budget is devoted to developing solutions for the automotive market. [7] Similarly, U.S. Steel’s proprietary DUAL TEN and TRIP range of steels are also targeted towards the automotive sector.
What the Future Holds
As mentioned previously, steel companies are investing heavily to produce solutions for the automobile industry. The fate of steel vis-a-vis other materials such as aluminum would largely depend on how successful the steel companies are in producing new lightweight materials at competitive prices to aluminum. In addition, advancements in material science and the production of alternative materials such as plastic composites at competitive prices are a threat to both aluminum and steel. At the current pace of development of lightweight steels, aluminum will certainly increase in application in automobiles. As mentioned previously, the application of aluminum may rise roughly fourfold to 26.6% by volume of an average automobile in North America. Thus, ten years from now, we may not be driving aluminum cars, but certainly cars with a much greater proportion of aluminum, than at present.
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- Steel by Topic, World Steel Association [↩]
- ArcelorMittal’s 2014 20-F, SEC [↩] [↩]
- Sustainability and Steel in Automotive Applications, American Iron & Steel Institute [↩]
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- Reducing CO2 emissions from passenger cars, European Commission [↩]
- US and China strike deal on carbon cuts in push for global climate change pact, The Guardian [↩]
- ArcelorMittal unveils Fortiform, a range of new advanced high strength steels for safer and lighter cars, ArcelorMittal News Release [↩] [↩] [↩]
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