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Steel, aluminum vie for lucrative electric car market

March 27, 2018  

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When electric carmaker Tesla Inc. launched its first mass market model last summer, it sent a shockwave through the aluminum industry by largely shifting to steel and away from the lighter weight metal it had used in its first two luxury models.

The switch by Elon Musk’s Tesla to the heavier-but-cheaper metal highlights how steel is fighting back against aluminum, which had widely been expected to be the bigger beneficiary of the electric vehicle revolution.

Aluminum had been seen as the key to offsetting the weight of batteries in order to extend the range of electric vehicles, crucial to increased consumer acceptance.

But as makers of battery-powered cars look to tap into bigger markets with cheaper vehicles – and embrace technological developments in batteries and components – many are increasingly looking to steel to cut costs. The price of Tesla’s mass-market orientated Model 3 is around half of the $127,000 luxury Model S.


“Before the aim was ‘Let’s get the (electric vehicles) developed’, now it’s ‘Let’s get them developed at the right price point,’” Mauro Erriquez, a partner at McKinsey & Company in Germany who specializes in the auto sector, told Reuters.

It is the latest tussle in a decades-long battle between steel and aluminum for market share among automakers, seeking to cut the weight of vehicles to help slash emissions and meet tough government pollution standards.

Steel is also winning back some market share among gasoline vehicles, such as the Audi A8. The latest model abandoned its heavy use of aluminum and shifted to a mix of steel, aluminum, magnesium and carbon fiber.

The competition between the metals has intensified amid rapidly growing demand for battery-powered cars.

Sales of electric and hybrid vehicles are due to surge to 30 per cent of the global auto market by 2030, according to metal consultants CRU, up from 4 per cent of the 86 million vehicles sold last year.

In China, the world’s largest auto market, sales of new energy vehicles are due to grow by 40 per cent this year to top 1 million vehicles, according to the China Association of Automobile Manufacturers.

Tesla declined to comment to Reuters, but in a filing with the U.S. Securities and Exchange Commission last month it said it designed the Model 3 “with a mix of materials to be lightweight and safe while also increasing cost-effectiveness for this mass-market vehicle”.

Other makers of mass market electric vehicles that have also chosen steel over aluminum include Nissan Motor Co Ltd’s Leaf, the world’s best-selling all-electric vehicle, and Volkswagen’s e-Golf.

The e-Golf has 129 kg of aluminum and the Leaf uses 171 kg while Tesla’s luxury Model S contains 661 kg of the metal, according to A2mac1 Automotive Benchmarking. A detailed breakdown was not available for the Tesla 3.

Aluminum is still expected to benefit greatly from the electric vehicle revolution, however, especially from hybrids because they have two engines.

Both the combustion engine block and transmission are typically made of aluminum while the metal is also often used for housing the battery and motor in electric vehicles, auto metals specialist AluMag in Germany told Reuters.

And, because it is expected to be years before pure electric vehicles become widely used – in part due to the lack of power charging networks – the growth of hybrids in the interim is expected to benefit aluminum.

Demand for aluminum from electric and hybrid vehicles is forecast to increase ten times to nearly 10 million tonnes by 2030, CRU Consultant Eoin Dinsmore told Reuters.

Aluminum was used in the first electric London black cab, which launched last year, spurring the reopening of a UK aluminum plant in Wales owned by Norway’s aluminum producer Norsk Hydro.

“We chose aluminum as a material as it is nearly three times lighter than steel in its raw form, and it absorbs twice as much energy in a crash,” said Chris Staunton, chief engineer of body structures for the firm that developed the taxi for the London Electric Vehicle Company.