New U.S. CAFE standards push automobile lightweighting


atlanta-georgia-during-rush-hourNew Corporate Average Fuel Economy (CAFE) standards released by U.S. government for 2025 are creating opportunities for new materials companies that focus on car lightweightingCAFE standards for 2025 were going to be 54.5 miles per gallon forcing many car companies to look at reducing the weight of their vehicles. According to an August 2011 report from Frost & Sullivan, a 10% reduction in vehicle weight offers fuel savings of 5%-7% (in mpg). While there are other ways to improve the fuel economy of cars (improving aerodynamics and reducing rolling resistance), most efforts are going towards finding lightweight materials to use in automobiles without compromising safety and adding additional cost. The struggle of steel versus aluminum is important, but is not the whole story

According to the Steel Market Development Institute, the percentage of steel in the average vehicles is approximately 60%. One of the major questions for investors will be: can the steel industry create new steel alloys that are lighter than the aluminum alloys which are quickly gaining traction?

Earlier this year, Ford Motor Co. announced that they were going to be using aluminum alloys in future versions of the popular F-150 pickup. Their aim is to cut the weight of the vehicle by some 700 pounds, or 15%, in an effort to get better fuel efficiency than the current 23 mpg on the highway. Also earlier this year, Tesla Motors, Inc. announced that they are going to make their Model S with body panels and chassis of aluminum.

While there are plenty of pure-play aluminum companies out there that will benefit from this accelerating trend of switching to aluminum alloys, the company that will probably benefit most is Alcoa, Inc. by virtue of having deeply established relationships in the automobile space. Alcoa’s chief sustainability officer told Forbes Magazine that they are working on research projects with every major car company, and had optimistic growth projections for aluminium, stating that “the average car currently has 340 pounds of aluminum; by 2025 that will grow to 550 pounds. The biggest growth will be in aluminum sheet. For every pound of aluminum you can take out 21 pounds of steel and 20 pounds of carbon over the life of the car.”