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By Eric Onstad
LONDON (Reuters)

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.

 

A worker stands on the shop floor at Hydro Components UK Ltd. in Bedwas
A worker stands on the shop floor at Hydro Components UK Ltd. in Bedwas, Wales, Britain March 20, 2018. Picture taken March 20, 2018. REUTERS/Rebecca Naden

 

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 ¬£70,000 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,'” says Mauro Erriquez, a partner at McKinsey & Company in Germany who specializes in the auto sector.

 

A worker stands on the shop floor at Hydro Components UK Ltd. in Bedwas
A worker stands on the shop floor at Hydro Components UK Ltd. in Bedwas, Wales, Britain March 20, 2018. Picture taken March 20, 2018. REUTERS/Rebecca Naden

 

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.

 

A worker stands on the shop floor at Hydro Components UK Ltd. in Bedwas
A worker stands on the shop floor at Hydro Components UK Ltd. in Bedwas, Wales, Britain March 20, 2018. Picture taken March 20, 2018. REUTERS/Rebecca Naden

 

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 percent of the global auto market by 2030, according to metal consultants CRU, up from 4 percent 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 percent this year to top 1 million vehicles, according to the China Association of Automobile Manufacturers.

 

Aluminium components for Jaguar cars made by Hydro Components UK Ltd. are seen at their factory in Bedwas
Aluminium components for Jaguar cars made by Hydro Components UK Ltd. are seen at their factory in Bedwas, Wales, Britain March 20, 2018. Picture taken March 20, 2018. REUTERS/Rebecca Naden

 

Tesla declined to comment, 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.

 

Plant manager Mike Allen sits in a frame for a London Taxi with components made by Hydro Components UK Ltd., in Bedwas
Plant manager Mike Allen sits in a frame for a London Taxi with components made by Hydro Components UK Ltd., in Bedwas, Wales, Britain March 20, 2018. Picture taken March 20, 2018. REUTERS/Rebecca Naden

 

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.

(For a graphic of Metals used in vehicles click)

 

STEP CHANGE

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, according to auto metals specialist AluMag in Germany.

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.

 

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