(Bloomberg) -- The automobile of the future isn’t just about batteries and self-driving computers. For ArcelorMittal, the world’s largest steelmaker, that evolution could determine whether the metal retains a century-long role as the primary material in most new cars and trucks.
For years, steel has been losing share to aluminum, alloys and plastics. While steel parts are stronger and cheaper, they’re heavier. Automakers wanted lighter vehicles that pollute less. In 2014, ArcelorMittal was stunned when customer Ford Motor Co. said it would remove about 700 pounds (320 kilograms) of steel from its F-150 pickup trucks by using more aluminum, mostly in the outer body.
But steel could get a boost as the world adds more electric vehicles from the likes of Tesla Inc. and Nissan Motor Co. With no internal-combustion engine to worry about, ArcelorMittal says designers may favor strength, durability and cost in the materials they use. And steelmakers have improved their products, developing lighter alternatives to win back business.
“Safety will be front and center for many years to come,” said Gregory Ludkovsky, the 67-year-old scientist and engineer who heads ArcelorMittal’s research and development center in Montataire, France. “The most precious cargo is people. But the battery is also a precious cargo and requires specific protection. You need steel to protect both. I believe that electric vehicles create a very serious problem for the aluminum industry.”
Steel remains a dominant component for most vehicles, with about 900 kilograms in the average car. While aluminum accounts for just 180 kilos, that share has been growing. By 2020, more frames will be made of the lightweight metal, boosting its average to about 211 kilos, according to Drucker Worldwide, an auto-industry researcher based in Troy, Michigan.
Decisions about materials matter because vehicle and parts manufacturers are the most profitable customers for Luxembourg-based ArcelorMittal, which dominates supply in the U.S. and Europe and sold $11.6 billion of metal to the industry in 2016. Even as aluminum cut into the company’s market share over the past decade, the auto business provided support as demand and prices tumbled for steel used by the construction industry.
That’s why ArcelorMittal spends most of its $134 million annual product-development budget on auto research. The company also has embedded 35 engineers with their biggest auto customers to avoid surprises like the Ford F-150 defection and to develop stronger steels that can compete directly with aluminum.
It’s already paid some dividends. The company says it can make steel car frames and panels that weight about 311 kilos, 21 percent lighter than in 2010. While those components still weigh about 20 percent more than aluminum, it’s cut the gap in half. Audi AG, whose Audi A8 was the first mass-market car to use primarily aluminum in its frame and body in 1994, next year will boost the amount of steel used in the sedan’s frames to more than 40 percent from 8 percent.
As innovations in steel products helps win back some buyers, the growing market for electric vehicles presents a new opportunity. Each one relies on a huge battery weighing hundreds of kilos and running along the bottom of the car, which puts a premium on strong, low-cost materials. Electric vehicles are only about 2 percent of car sales now, but may be more than half globally by 2040, according to analysts at Bloomberg New Energy Finance.
Aluminum producers say car makers are unlikely to reverse the trend toward lighter vehicles, even when they expand output of electric cars. The metal will remain in favor as a way of coping with the weight of new features like computers and electronics that can limit the traveling range of batteries, said Ganesh Paneer, chair of the Aluminum Association Inc.’s Aluminum Transportation Group.
While steel producers have narrowed their weight gap, the aluminum industry also is innovating products specifically for automakers, Paneer said, and cars of the future will contain both metals. This year, ArcelorMittal will unveil its first products specifically for electric vehicles, with alloys and designs that make steel stronger and harder to puncture than before.
The economics of making the cars also may work in steel’s favor. Over the past decade, aluminum won market share in higher-end vehicles because it was easier for automakers to preserve their profit margins while using a more expensive material. That’s more difficult for lower-end models, where cost matters more.
“If you can use a less expensive body part, such as steel, this could offset some of the cost pressures we’re seeing in items like batteries,” said Seth Rosenfeld, an analyst at Jefferies International in London. “Steel’s structural cost advantage should keep the material in a very competitive position going forward.”
For example, Tesla had been using more aluminum in its earlier models priced from $80,000 to $100,000 each. But last year, the company used steel frames for the first time when it introduced the $35,000 Model 3.
Still, ArcelorMittal engineers want to get back into high-end vehicles by pitching their upgraded steel products and designs to automakers like Tesla, which is planning to start selling a roadster by 2020 that would be the fastest production car ever made.
“It’s the most challenging time for materials,” said Ludkovsky, the steelmakers research chief. “We need to take as much weight as we can to help combustion vehicles. There is an relentless pursuit of this. In parallel, we need to define the future requirements of electric vehicles.”
©2018 Bloomberg L.P.
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