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There is a growing trend for electric vehicles, especially among the new generation of sustainability-focused consumers. OEMs are announcing more all-electric models, and governments are setting increasingly ambitious EV targets. Together, these efforts are making a difference and shifting consumers’ preferences. In this Insight, we will explore two scenarios for the EV market and their impact on aluminium.
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The current economic environment is not an easy one for the automotive industry. Since 2021, a shortage of semi-conductor chips has stalled auto production, and this continues to be a problem this year. CRU expects semi-conductor shortages will ease in 2023, but supply chains will continue to be disrupted this year. Apart from chip shortages, the war in Ukraine brought with it a new challenge – wiring harness shortages. This caused further upheaval in auto production. Lead times for regular ICE cars are extending to one year, even though demand is low, given high inflation.
Despite these challenges, OEMs are planning for an electric future and releasing new EV models. Ford has also announced an investment of $3.7 bn at its Michigan, Ohio and Missouri plants. Certain US states have also granted $5.1 bn since 2002 in subsidies to Tesla, GM and Ford, to build EV battery plants. Hyundai motor group also announced an investment of $5.5 bn to build an EV battery plant in Georgia.
The UK government has also scrapped the £1,500 plug-in car grant in June 2022 and is shifting focus to improving charging infrastructure.
The route that aluminium demand in this sector will take majorly depends on electric vehicle sales, and hereby we propose the following scenarios (as detailed in the CRU Sustainability Insight):
Base Case – This is our base case forecast for the powertrain mix in light duty vehicle (LDV) markets.
Current Targets Scenario – What would EV penetration rates look like if all current global government targets were hit?
No Tailpipe Emissions Scenario – This scenario examines the numbers behind the debates surrounding net zero targets. Here we ask what the light vehicle market would look like if only vehicles with no tailpipe emissions (direct automotive emissions from combustion of gasoline and diesel) were on the road in 2050?
The most optimistic No Tailpipe Emissions Scenario suggests that global aluminium demand from LDVs will reach ~29 Mt by 2045 (~2 Mt higher than the current targets scenario and 3 Mt higher than base case). This difference will be driven by BEV sales, which are assumed to make up 100% of LDV sales by 2045 in the No Tailpipe Emissions Scenario. How realistic this is, will depend on how fast people shift to electric cars, and how serious governments and OEMs are to achieve their targets.
Under the current targets scenario, which is more realistic, we can expect aluminium demand from LDVs to grow from 17 Mt in 2022 to 27 Mt by 2045 (1.9% CAGR). As the chart shows, 2021 to 2026 are the key years when EV demand is expected to pick up. This is because these are the years leading up to 2030 when many ICE bans are due to come into effect.
Electric vehicle sales have started to pick up following the Covid-19 slump in world ex. China in 2020. In the CRU base case, the mid to late 2020s represent an “inflection point” for battery electric vehicle (BEV) sales, after which we expect them to gain widespread adoption and significantly eat into internal combustion engine (ICE) market share.
We forecast a rapid increase in NEV (BEV, PHEV) penetration rates from a low base; under 10% of sales in 2021. By 2025, automotive OEMs should have the resources, experience, and capacity to begin widespread EV production. This will help drive NEV penetration rates higher, rising to 30% of LDV sales by 2030.
In the automotive sector, aluminium continues to be seen as a premium material. Crash boxes rely on its high energy absorption; heat transfers rely on its conductivity; and its lightweight properties make it vital for many body-in-white parts.
Battery housing is an area where there is tough competition between steel and aluminium, as both materials make good housing. The light-weighting potential of aluminium makes it desirable, but it is the more expensive choice, which is why we often find it only in premium EVs.
Overall, electric vehicles will be a key driver of aluminium demand during the energy transition of global economies. We are already seeing a shift towards renewable energies, and more aluminium producers pledging to become net zero by 2050. The demand for low carbon technologies is high, and producers are stepping up to meet this demand. As part of these efforts, the pace of EV adoption is accelerating and aluminium demand is being positively impacted.
Electric vehicles will continue to significantly impact the aluminium industry in many ways. In case you missed it, read our EV insight series: CRU cracks the EV aluminium battery casing code; Will demand for secondary castings collapse as we transition to electric vehicles? ; The impact of light weighting EVs on aluminium sheet demand.
To learn more about these stories, keep a look out for our upcoming publications. If you would like to discuss this Insight further, please contact kajal.kumar@crugroup.com or get in touch with the CRU Aluminium team.
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