Automobile Fuel Efficiency Norms To Drive Demand For Aluminum

August 22nd, 2017 by Trefis Team
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Downside
35.69
Market
34.57
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The automotive industry is one of the most prominent end markets for aluminum. Though steel has traditionally been the most extensively used material by automakers, automobiles these days are typically multi-material vehicles with a diminishing share of steel. The transition from a steel-dominant vehicle to the multi-material version has to a large extent been driven by the need for reducing the curb weight of the average automobile in order to comply with increasingly stringent emissions and fuel efficiency regulations, particularly in North America and Europe. For example, the U.S. government has targeted a near doubling of the average automobile fleet fuel efficiency from 27.5 miles per gallon in 2012 to 54.4 miles per gallon in 2025. [1] As technological changes to traditional internal combustion engines are unlikely to translate into the doubling of fuel efficiency between 2012 and 2025, lowering the average curb weight of the automobile is the most realistic means of achieving improvements in automobile fuel efficiency. This presents an attractive growth opportunity for aluminum producers.

In its ‘Aluminum Content in North American Light Vehicles 2016 To 2028’ study, consulting firm Ducker Worldwide expects the aluminum content in the average North American light vehicle to rise from 397 pounds per vehicle (PPV) to 565 PPV by 2028. [2] This corresponds to an increase in the share of aluminum in the average North American automobile from around 10.4% by weight in 2015 (as per a previous Ducker study) to roughly 16% in 2028. [2] Since aluminum is a lighter material than steel, the share of aluminum by volume would be even higher.

Thus, aluminum is expected to increase in importance as a material in automotive applications going forward. This is expected to be one of the main drivers of the demand for aluminum in North America, which would benefit aluminum producers such as Alcoa. The following chart illustrates our expectations of the growth in the company’s aluminum shipments.

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Have more questions about Alcoa? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Alcoa

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Notes:
  1. Steelmakers Must Step On Gas To Keep Car Work, Financial Times [↩]
  2. Unprecedented Growth Expected For Automotive Aluminum As Multi-Material Vehicles Ascend, New Survey Of Automakers Says, Ducker Worldwide [↩] [↩]