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Aluminum Pushed Steel out of Beer Cans and Now It’s Pushing It out of the Ford F-150

The year was 1934. After lots of coaxing, the American Can Co. finally persuaded Krueger Brewing to try selling its beer in steel cans. It worked, and by the end of 1935 23 different brewers were selling their beer in steel cans, which were easier to sell because they were lighter and more compact than bottles and quicker to fill.

Source: Alcoa Investor Presentation.

Aluminum is taking over for steel in carsbecause it's lighter in weight, yet just as strong. Lighter cars get better fuel economy. In fact, every 10% reduction in weight improves a vehicle's fuel economy by 7%. And the auto industry has few options other than replacing steel with aluminum to help meet U.S. CAFE standards, set to double from 2011 to 2025. Because of this we will likely see other automakers join Ford and accelerate the switch from steel to aluminum.

It's more than just losing weight

Aluminum might be light in weight, but it isn't a lightweight when it comes to comparing it with steel. In fact, it has several additional competitive advantages over steel. Aluminum is actually safer, as an aluminum-intensive vehicle can reduce stopping distances by up to seven feet when going from 45 mph to zero. Furthermore, unlike steel, aluminum body panels are naturally resistant to corrosion, making them much more durable and longer lasting. Finally, becausealuminum reduces a vehicle's weight it makes the car more energy efficient and therefore more environmentally friendly by reducing carbon dioxide emissions. These features are why Ford sees aluminum as the best choice for its newest F-150, as the following slide notes.

Ford isn't the first automaker to use extensive amounts of aluminum. However, because aluminum costs up to three times as much as steel, it has largely been reserved for the luxury segment in vehicles such as the Audi A8, Jaguar XJR, and Tesla Model S. Ford's shift to aluminum is a big deal because the F-150 is so popular, with last year's model selling 700,000 units. If the new model can maintain that sales pace, other automakers will likely follow Ford's lead and use more aluminum. If that happens, the market for body sheet aluminum alone could go from $300 million per year to over $7.5 billion annually as aluminum steals sales from steel.

Driving the point home

The auto industry faces a daunting task in meeting toughened vehicle fuel economy standards over the next decade. This leaves the industry with few choices but to replace as much steel with aluminum as it possible. This puts the aluminum industry and companies like Alcoa in the driver's seat as steel is pushed out of another American icon.

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The article Aluminum Pushed Steel out of Beer Cans and Now It's Pushing It out of the Ford F-150 originally appeared on Fool.com.

Matt DiLallo has the following options: long January 2016 $10 calls on Ford. The Motley Fool recommends Ford, Molson Coors Brewing Company, and Tesla Motors. The Motley Fool owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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