Ford F-150 truck
Ford (F) has taken the lead in vehicle lightweighting with its new aluminum body F-150 truck. The new truck, which hit the markets earlier this year, saw a good response from buyers. Currently, Ford is producing the aluminum body truck only in its Dearborn facility. Its plant in Kansas City will change to aluminum this quarter.
Impact on Alcoa
Alcoa (AA) and Novelis have contracts to supply aluminum for the F-150. As Ford moves the Kansas City facility to aluminum, Alcoa stands to gain. Currently, Alcoa forms 3.30% of the Materials Select Sector ETF (XLB).
The response generated by the F-150 truck will be closely watched by other automakers. The better-than-expected F-150 sales could lead to other automakers also turning to aluminum body vehicles.
Joe Hinrichs, president of Ford’s American operations, recently remarked that Ford will limit aluminum body vehicles to trucks only. He added that Ford is not considering aluminum body car production at this time.
Truck drivers have an additional incentive to buy aluminum body trucks. Because aluminum body trucks are lightweight, they can carry more cargo than steel body trucks and offer improved fuel economy.
Car buyers, on the other hand, only have the advantage of higher fuel economy, in case they opt for an aluminum body vehicle. The previous chart shows the recent drop in crude oil prices. The inclination of customers to purchase aluminum body cars is debatable under the current market scenario.
In the next part, we’ll discuss how the demand for aerospace companies is shaping up. Aerospace is a crucial part of Alcoa’s portfolio. Constellium NV (CSTM) and Precision Castparts (PCP) are other major suppliers to aerospace companies.