47th Faro Meeting Highlights
14 April 2017 by Goran Djukanovic
On April 6-7, Imola, Italy hosted the 47th Faro Meeting, a conference devoted to latest developments in the automotive industry and metals markets.
During the first day of the two-day conference, speakers from renowned world companies, including Ducker Worldwide, LMC Automotive and Novelis Inc, expressed their views on current and future trends in the automotive industry, with a particular focus on light vehicles. Below are some key highlights of the presentations that referred to aluminium use in the automotive industry.
Roland Hartmann – Global Key Account Director Automotive, Novelis Inc,
Following a short introduction of Novelis during his presentation, A Strategic View on the Use of Aluminium in Automotive BIW – Future Direction for Aluminium Automotive Solutions, Hartmann stated among else that global automotive demand will grow 14% CAGR during the next 10 years, with North America and Asia leading the way. At the same time, demand for aluminium flat rolled products (FRP) will triple from 1 million tones in 2016 to 3 million tones in 2025.
He also introduced Advanz TM., a series of new aluminium automotive alloys developed at Novelis.
According to Novelis, the future direction for aluminium automotive solutions, is in high form and high strength monolithic and multilayer alloys, tailored multi-material solutions, cost efficient joining solutions and closed loop systems with high recycled content products. “Lightweight materials are needed to fuel automotive revolution, towards driverless and electric cars in future’’, Hartmann concluded.
Pete Kelly, Managing Director at LMC Automotive
Kelly presented on Global Light Vehicles – Forecasts, confidence and risk, and stated among else that global light vehicles sales are seeing an upward momentum and are poised for an 8th year of consecutive annual growth.
The pre-2017 expansions in North America, Europe and Asia are beginning to dissipate this year, while signs of recovery in Brazil and Russia are also expected to begin emerging. Meanwhile, China experienced a 5% boost in sales in late 2015 and 2016 thanks to government supported tax cuts (on small engine vehicles). Growth in China beyond 2018 will be driven by mid-tier cities, not by mega-cities such as Shanghai and Beijing, LMC Automotive predicts.
Global light vehicles production volume growth will be stable and consistent with demand growth, going up from 93 million in 2016 to around 103 million in 2020. American production is at a record high level, with Europe not far behind and Asia-Pacific still growing.
Kelly stated that North American demand is expected to plateau at a high level, with stability throughout the forecast horizon.
Mr Kelly also said that ”the Trump administration may implement measures that will result in decreasing production growth in Mexico and increases in the US. Lack of investments will also lead to lower production in Canada”. He added that trade barriers would impose price increases on vehicles, which would consequently result in lower demand.
“Adjustments to tax and trade policies are more complex than healthcare. Failure to “Repeal and Replace” Obamacare could be a pattern for future policy enactment’’, concluded Kelly.
Scott Ulnick, Chairman and Managing Principal at Ducker Worldwide, the world’s leading provider of information for global automotive industry trends, presented, Automotive Lightweight Materials – Prospective from Europe and North America.
Mr Scott stated in his presentation:
“On January 12, 2017, Administrator Gina McCarthy signed her determination to maintain the current GHG emissions standards for model year (MY) 2022-2025 vehicles. Her final determination found that automakers are well positioned to meet the standards at lower costs than previously estimated.
On March 15, 2017 Administrator Scott Pruitt and Department of Transportation Secretary Elaine Chao announced that the EPA intends to reconsider the final determination, issued on January 12, 2017, that recommended no change to the greenhouse gas standards for light duty vehicles for model years 2022-2025. EPA has now announced it will reconsider that determination in coordination with NHTSA.
As a result, fuel emission standards applied for 2022 and after may be revised and reduced. Ducker Worldwide’s assumption is that regardless of what happens to the EPA and emissions, the drive for energy independence will motivate the U.S. and the Trump administration to keep moving forward for improved fuel economy well into the next decade”
Ducker Worldwide expects that body structures and closures in the form of structural castings and flat rolled sheet, as well as extrusions for CMS, will be the major areas of growth. Furthermore, the materials mix of the future will see tremendous increases in aluminium, advanced grades of steel and new growth opportunities for carbon fiber composites.
To obtain a 7% gross weight savings, nearly 20% of the 2015 material mix will need to be replaced by lighter and stronger materials.
In 2015, North American aluminium content began to move above the forty-year trend line of uninterrupted growth as the impact of the 2012 fuel economy mandates began to be felt on aluminium content in light vehicles, Scott stated.
Ducker Worldwide expects aluminium will continue its growth to over 500 pounds per vehicle (227 kg) by 2025 in North America and over 410 pounds (186 kg) in Europe. Body structures and closures in the form of structural castings and flat rolled sheet, as well as extrusions for CMS will be the major areas of growth.
Finally, the author of this article presented:
Mexico – what are risks for future investments and plans for production expansions and exports by automakers and component suppliers?
The presentation considered some key implications on the Mexican and US automotive industries and economies if the import tax (20-35 %) is implemented, as announced by President Trump’s administration, at the same time as the North American Free Trade Agreement (NAFTA), introduced in 1994, is scrapped. During the past 22 years, NAFTA enabled deep connectivity between the US and Mexican automotive industries, among others, while the implementation of the announced import tariff by the US would hurt not just the automotive industry, but also the economies of both countries. At the same time vehicle exports to the US would be reduced, increasing the average vehicle price by between $2500 and $3000.
There are significant ongoing investments in new car production capacities both in Mexico and the US. Not only will the increased production of cars contribute to increased usage of aluminium, but it will also increase the content of aluminium used per car, while investments in transport infrastructure and new digitalized vehicles will lift demand as well.
However, higher aluminium use could be threatened by the implementation of import tariffs by the US administration, which could lead to reduced auto production and sales. Additionally, the eventual reversal of CAFE standards may also add to somewhat lower use of aluminium in vehicles than previously expected.
A 35% import tariff on vehicles from Mexico to USA, or even 20% as announced, would harm the automotive industry in Mexico and is no guarantee it would create more jobs in the US in the long term.
There is no doubt that something has to be done, so the US protects its automotive industry from rising production and exports from Mexico. However, the US administration should consider implementation of lower import tax, in the range 5-10%, which would enable Mexican automotive industry to survive and US to have more benefits from the automotive business, and imports, than was the case until now. A the same time it would leave an open option for a further increase of the import tax in the future, which would discourage automobile producers from huge investments in Mexico.