— The energy bill President Bush signed mandating tougher fuel-economy standards sent a simple message to automakers: lighten up, according to the Associated Press
The new rules certainly give makers of aluminum, carbon fiber and other lightweight materials something to smile about, analysts say, though the steel industry's piece of the auto-industry pie is likely to shrink.
Auto shoppers, meanwhile, can expect to pay a premium at dealerships when the new rules kick-in — but the impact will be mitigated somewhat by fuel savings.
The new law says the auto industry must raise its fleet-wide fuel-economy average 40 percent in the U.S., to 35 miles per gallon, by 2020. Increased mileage requirements could begin as early as 2011.
"With new standards, historically the auto industry has responded by lowering the weight, which meant less steel and more aluminum, rubber, and plastic," said Mary Deily, a professor of economics at Lehigh University in Bethlehem, Pa., who has studied the steel industry.
A 10-percent drop in weight yields roughly a 6-percent improvement in fuel economy, automakers and analysts said, according to the AP.
In order to fully achieve the energy bill's fuel-economy goals, however, automakers are looking at enhanced engine and transmission efficiency — which already can be found in gas-electric hybrid vehicles — reduced tire resistance and improved aerodynamics, says Alan Taub, executive director of research and development at GM.
"The question is how to deliver this fuel economy with the best combination of technologies to deliver the highest value to customers," Taub said.
Today, steel accounts for about 60 percent of an average vehicle's weight in the U.S., down from a generation ago when much more of the metal was used, executives and analysts said. Still, the popularity of trucks, minivans and SUVs has caused the average vehicle weight to rise by more than 25 percent, to about 4,100 pounds, over the past 20 years, helping steel providers, according to the AP.
Even so, the percentage of aluminum in cars has been on the rise for decades since the last boost in fuel economy standards. Alcoa Inc., the country's largest aluminum maker, sees an even greater opportunity ahead.
Hexcel Corp., Zoltek Cos. and other carbon fiber makers also stand to benefit from tougher fuel-economy rules. Their lightweight composite materials, which are significantly more expensive than steel, already are used in some Mercedes, BMW and Audi vehicles and in GM's new Corvette, as well as in the aerospace industry, which is looking to drive down its jet-fuel expenditures.
As aluminum and carbon fiber replace some steel, there will be a "fairly serious cost impact" for consumers, said Larry Rinek, a senior automotive consultant with Frost & Sullivan.
Alcoa spokesman Kevin Lowery said aluminum costs will drop over time as automakers get Alcoa and other metal producers involved earlier in the production process, in order to reduce waste, according to the AP.
Zoltek, Hexcel and other carbon-fiber makers already are ramping up production to meet an anticipated surge in demand. But the mainstreaming of carbon fiber as a car-building material depends on prices coming down, and that can only occur with mass-production, said Brian Yerger, an alternative energy analyst at Jesup & Lamont Securities Corp.
While Europe favors small cars, manual transmissions and diesel engines to offset high fuel prices, U.S. automakers believe they can make cars lighter, and more energy efficient, without sacrificing size.
For example, Ford Motor Co. last month said state-of-the-art engines and power-steering systems will help it meet a portion the fuel efficiency mandates, and that greater use of aluminum and high-strength steel could help shed 250 pounds to 750 pounds per vehicle.
Still, the tiny market for hybrids in the U.S. is growing at a rapid clip. In November, sales of Toyota's Prius, the most popular hybrid in the U.S., jumped 109 percent, compared with a 5-percent drop in sales of trucks and sport utility vehicles, according to the AP.
The American Iron and Steel Institute, whose members include Nucor Corp. and United States Steel Corp., said the fastest growing material being built into new vehicles is advanced high-strength steel, which was developed to help automakers meet current fuel economy standards without compromising safety. It is more expensive than traditional low-carbon steel, but lighter — and not as costly as aluminum or carbon fiber.
The transition to high-strength steel started 10 years ago and today is "cost neutral," Taub said, because automakers can use less of the material per vehicle for an overall 25-percent reduction in weight. Using a similar amount of aluminum provides up to a 45-percent weight reduction, compared with a decade ago, while magnesium and carbon fiber offer weight drops of up to 60 percent — but carry significantly higher costs.
About one-fifth of domestic steel shipments currently go to U.S. automakers, and even if that figure shrinks, steel industry profits will be buffered by the higher prices paid for the high-strength metal.
High-strength steel will remain the dominant car material for quite some time, Taub said, "but you'll see a greater proliferation of other materials."