“Aluminum Cars Take Heat from ArcelorMittal’s CEO” – Wall Street Journal, 17 June 2014

Europe, China, and the US have all cracked down on fuel economy standards; President Obama has introduced new regulations to improve the average fuel economy by 54.5 miles per gallon by 2025. Automobile companies, like Ford, are responding to the new regulations by creating a new line of F-150 pickups made out of all-aluminum bodies, and many other US car manufacturers are following suit. However, Luxembourg-based ArcelorMittal, the world’s largest steel company, is an aluminum naysayer, contending that aluminum isn’t actually lighter than new designs of steel.

Due to US and European automotive companies’ move to aluminum, ArcelorMittal is now looking to expand and invest in developing economies, like China, Brazil, Mexico, India, and the Middle East, where steel is still heavily used.

According to Ducker Worldwide, 18% of vehicles will be produced entirely from aluminum by 2025, which will surely help the automotive industry to meet Obama’s proposed fuel economy standards. Though more expensive, aluminum is argued to be a lighter metal, which will thusly help to improve fuel efficiency; in the US, manufacturers’ fuel economies must increase by five percent each year until the 2025 mark. However, as ArcelorMittal presents, the flip side to manufacturing the same cars with all-aluminum bodies is to manufacture smaller cars out of steel, which was save the car industry the added expense of aluminum.

ArcelorMittal’s focus right now is on China, where it just opened VAMA, its first steel-manufacturing plant and a multi-million dollar undertaking with Hunan Iron & Steel Co. Through VAMA, the Chinese automotive industry will have access to 1.5 million tons of steel per year, an industry that has grown by 16% since 2013.

According to ArcelorMittal, the statistic that aluminum is 30% to 40% lighter than steel is only accurate if you’re equating aluminum to steel made in 2005. Steel produced in 2014 is harder and lighter than previous versions; current forms of steel have been refined using a distinctive heating and cool process. However, the Ducker Worldwide study still projects that a majority of automobiles will be manufactured out of aluminum parts by 2025.

Developed and Written by Dr. Subodh Das and Tara Mahadevan

June 17, 2014

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“Fuel-Efficiency Rules Are Already Raising Costs in Detroit” – Wall Street Journal, 22 January 2014

Even though GM and Chrysler have paid off their auto-bailout loans, they are still under the thumb of Uncle Sam; elements of Obama’s Climate Action Plan do not only extend towards power plants, but automakers as well. According to the Climate Action Plan, car companies’ products have to average 54.5 miles per gallon by 2025. This, however, requires huge design changes that are going to be a big blow to profit margins.

America’s best-selling vehicle, the Ford F150, is getting a complete redesign. from the inside out. It will be the first truck and large-volume vehicle to have an all-aluminum body, which will lower its weight and increase its fuel efficiency. Obama’s Climate Action Plan requires full-size trucks to have a better fuel efficiency, up to 30 mpg from the current 20 mpg.

Switching to aluminum, though better for the environment, is an expensive move. As we reported last month, converting to aluminum means higher material costs and new manufacturing machinery. While the price tag is high, Ford can’t fight the new regulations, and is instead doing all it can to effectively market the innovation behind its newly redesigned products, the F150 and Mustang—the latter redesign offers a never-before-seen turbocharged four-cylinder engine. Each sale of the redesigned F150 contributes an additional $10,000 to Ford’s bottom line.

GM, on the other hand, is creating a whole new midsize truck to meet Obama’s requirements, which they believe will be less costly. Chrysler, instead, is spending more on nine-speed transmissions and diesel engines.

Obama had hoped that the market for electric cars would increase; as a bid in that direction, an element of the Climate Action Plan allows automakers to acquire mpg credits for manufacturing zero-emission vehicles. However, the demand for electric vehicles is still low, proving that that kind of car is still a niche product. Pricing for electric cars start at $40,000 and only increase from there.

While it is always painful to have a winner and loser, the “materials selection war” (steel vs. aluminum) is a long-term societal consideration and climate change mitigation, where aluminum is the ultimate winner. These trends will force America to increase the recycling of post-consumer aluminum products—as opposed to landfill and scrap export—and to also increase the design and manufacturing of recycle-friendly alloys.

There is simply not enough expensive and energy-intensive primary aluminum capacity available to meet higher aluminum demand of 100 million, and growing, cars per year.

See also:
Will All-Aluminum Cars Drive Metals Industry?
A Clean Car Boom
GM Planning Strict Diet for New Pickup Trucks

Developed and Written by Dr. Subodh Das and Tara Mahadevan

February 12, 2014

Phinix LLC

Copyright 2013. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

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