How Aluminum Could Revolutionize the Auto Industry
The next time you finish off a can of soda, take a moment to notice the composition of the packaging. Most likely, you have been drinking from an aluminum can — if not a plastic bottle, that is — as you have been for much of your life. Would you have ever imagined the same material that makes up that can would someday become one of the leading components in auto manufacturing? It may seem unlikely, but it’s true. In fact, the lightweight metal is turning the entire auto industry on its head thanks to some engineering prowess and demand for more efficient vehicles.
The main force behind aluminum’s surge in manufacturing is how light it is compared to other metals, notably steel. Over at Ford’s (NYSE:F) engineering headquarters, technicians were able to make the company’s best-selling F-150 pickup 700 pounds lighter than before simply by using a 95 percent aluminum body in lieu of steel. According to Forbes, the change was made to increase fuel economy in the face of changing consumer demands but also to keep the truck’s capability intact.
The 2015 F-150′s chief engineer, Pete Reyes, told Forbes his team used some simple tactics to make sure the aluminum-based truck lived up to its predecessors. “Aluminum being a third as dense as steel, you can have three times the thickness before you have the same weight as steel. So in a lot of cases, we tailored it to the strength we needed,” he said.
Reyes explained that aluminum can be calibrated to contend with steel’s strength, but the major drawback is that it is more expensive. Three times more expensive, according to The Wall Street Journal. Not only are automakers faced with a new material needed for manufacturing that ends up weighing more on their bottom line, but new production machinery and training for employees also requires bigger upfront investments.
On the other side of the coin, aluminum manufacturers have been ramping up production, investing heavily in new plants and hiring armies of new employees. Big aluminum corporations like Alcoa (NYSE:AA) are expecting to see demand skyrocket over the coming years and are preparing now for the big rush. Lotus Engineering’s proActive Magazine says Alcoa officials expect total global aluminum use to increase to 24.8 million tons by 2025, up from 11.5 million tons in 2011.
So what does that mean for the steel industry if manufacturing is seeing a dramatic shift toward different materials? Much of the world’s steel demand has been at the behest of the Chinese, whose economy has seen incredible growth behind industrialization and commercialization efforts over the past couple of decades. As growth in China slows, demand is still expected to grow in American markets despite the aluminum industry’s emergence. The Financial Times reports that U.S. steel demand is slated for growth of 4 percent, to a total of 99.4 million tons, mostly thanks to increased construction activity.
One other industry that could see the effects of widespread aluminum adoption in the auto industry over time is big oil. As The Wall Street Journal reports, even a 10 percent reduction in a vehicle’s body weight can lead to a 7 percent improvement in fuel economy. Tack that on to government regulations focused on curbing fossil fuels and the increasing marketability of hybrid and electric vehicles, and companies like ExxonMobil (NYSE:XOM), Shell (NYSE:RDS.A), and BP (NYSE:BP) may have a crisis on their hands down the road with a shrinking market.
Aluminum, as with everything else, does come with drawbacks. As previously mentioned, it is considerably more expensive than steel. That does, however, come with some caveats. For example, JPMorgan (NYSE:JPM) and Goldman Sachs (NYSE:GS) were recently sued on accusations of racketeering and conspiracy, as they allegedly hoarded aluminum to artificially drive up the price. Once the dust settles on that lawsuit, a clearer picture of aluminum’s pricing should become easier to attain.
Another drawback to aluminum adoption in auto manufacturing is increased costs when it comes to repairs. According to Daily Tech, the popularity of aluminum vehicles will cause body shops to invest hundreds of thousands of dollars in additional machinery and employee training. In the end, it could end up benefiting repair bays at dealerships and leaving independent mechanics out in the cold.
“Not every shop in America will be equipped to repair the new F-150,” said Dan Risley, president of the Automotive Service Association, per Daily Tech. “It’s cost prohibitive because there aren’t a lot of vehicles on the road with aluminum, so the return on investment could take a few years. When you throw aluminum into the mix, everything changes.”
What that leaves us is with an industry on the cusp of a major manufacturing change. Trends seem to indicate a shift away from large, inefficient steel vehicles and toward smaller, lightweight aluminum body frames. Coupled with ever-improving hybrid and EV technology, as well as a general public adopting more advanced thinking toward sustainability, carmakers may be facing the next step in their evolution.
Unless auto companies want to come up on the short end of the stick, they better be open to changing consumer demands. If aluminum is one way to adapt, then an investment toward its adoption should be at the top of the agenda.
What the auto industry is going through is just one example of how new technology is catalyzing change for U.S. manufacturing. Advancements in 3-D printing technology, energy production, and even in supply chain management have converged to form a tailwind that will carry the industry through the next few decades.