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Higher Vehicle Sales to Boost Alcoa’s Automobile Initiatives

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Higher vehicle sales

The automobile sector is among the largest consumers of aluminum. Aluminum has found new uses in automobiles. Aluminum is increasingly used for wheels, engines, hoods, and heat exchangers. The average aluminum content in vehicles has steadily increased and has reached around 343 pounds. Alcoa (AA) is a pioneer in supplying sheet products to the automobile industry.

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Vehicle sales increase

The above chart shows the trend in US vehicle sales. April vehicle sales increased 3% on a year-over-year basis to reach a seasonally adjusted annual rate (or SAAR) of 16.46 million units. However, sales declined compared to a SAAR of 17.05 million units in March.

The availability of cheap financing coupled with high income levels bodes well for vehicle sales. Analysts expect US vehicle sales to top a SAAR of 17 million this year, the highest in a decade. Higher vehicle sales also benefit auto component manufacturers like Advance Auto Parts (AAP).

Ford F-150

Ford (F) is expected to ramp up the production of its aluminum body F-150 truck. Higher sales of this pickup truck would benefit Alcoa. Alcoa has expanded its capacity to serve the growing demand for auto sheet products.

Ford currently forms 2.65% of the Consumer Discretionary Select Sector SPDR ETF (XLY).

Toyota Motor Corporation (TM) has also increased aluminum content in some of its vehicles. Rising aluminum content in vehicles is positive for the global aluminum industry. This would help offset lower aluminum demand from the packaging sector.

The nonresidential construction sector is another major consumer of aluminum products. In the next part, we’ll look at the latest trends in US nonresidential construction spending.

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