Published March 16, 2016 - Written by John Kett
When it comes to automobiles, it’s all about what you’re made of. Auto manufacturers are turning to lightweight materials in order to meet strict Corporate Average Fuel Economy (CAFE) standards, and aluminum appears to be the metal du jour. IAA’s John Kett provides his take on what this material could eventually mean for the automotive auction industry.
Aluminum’s presence in automobile manufacturing goes back more than a century to the Berlin International Motor Show in 1899, where the public first saw a sports car with an aluminum body. We entered an entirely new millennium before automakers made a significant commitment to integrating the material into their offerings, largely in response to consumer interest in more fuel-efficient vehicles and government requirements for them.
Aluminum’s presence in light vehicles climbed at a fairly steady pace between 1975 and 2014 (above). Ford grabbed the limelight with its redesigned F-150 and sold more than 350,000 units in the first half of 2015.
But it’s far from alone, as most manufacturers have expanded aluminum use in current or near-future models, which has pushed the net amount of the metal present in the average vehicle to an all-time high of 394 pounds. A survey of all major automakers revealed that by 2025:
All vehicle manufacturers will have an aluminum body program
Vehicles will contain an average of 547 pounds of aluminum
Global aluminum content among light vehicles will approach 35 billion pounds
Average gross weight savings from aluminum use will be 175 pounds per vehicle
The Insurance Institute for Highway Safety (IIHS) said in its testing, the repair process for the 2015 Ford F-150 took longer and was 26% more expensive than the steel-based 2014 model: Ford responded with its own study, saying repair costs “average $869 less than last year’s F-150 model, according to Assured Performance, an independent body shop certification company that works with leading automakers.”
It is clear, however, that repairs to aluminum parts require special tools and a technician trained to operate them. Even the shop itself requires customization, with an area dedicated to aluminum separated in a manner that prevents the dust of other metals from contaminating the process and increasing the likelihood of corrosion. Ultimately, the final repair bill will most likely reflect the costs incurred by shop owners for training, new tools and a redesigned workspace.
The big question in the salvage arena is how will the move toward aluminum affect total-loss declaration? Because the trend is relatively recent, there isn’t enough data available that deals specifically with the new metal composition to reach a definitive conclusion. We can make observations of a more general nature, though. It stands to reason that if fixing an aluminum-based vehicle is more expensive in the short term — as the IIHS claims — it will reach the total-loss threshold more quickly than one with a more traditional composition. If that comes to pass, insurance companies interested in disposing of aluminum based total-loss vehicles through the auction industry could find encouraging news in the current metal markets – despite the overall devaluation trend we saw in 2015.
Recent history shows the price for scrap aluminum sitting well above that of scrap steel, creating an environment in which buyers have an incentive to seek out vehicles with a higher percentage of aluminum. That demand could lead to higher sale prices for these units, although as always it depends on myriad factors, including the overall supply of aluminum-based vehicles among auction inventory.
Clear-cut answers are difficult to come by when transformative events are involved, particularly when the paradigm is still evolving. History gives us an idea of what we can expect, but it’s hardly a sure thing. That’s why tracking global events and industry developments is such an important part of what we do at IAA. This is one we’ll certainly keep under the microscope, and we’ll share our insights as more hard numbers become available.
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