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Alcoa to Benefit as Europe’s Automobile Sales Move in Top Gear


Jul. 31 2015, Updated 8:05 a.m. ET

Europe’s passenger car sales

In the previous part, we noted that China’s vehicle sales dropped in June on a year-over-year (or YoY) basis. In this part of the series, we’ll analyze the current state of Europe’s automobile industry.

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Growth rate dips

The above chart shows the YoY change in passenger car registrations in the EU (European Union). The data are released by the ACEA (European Automobile Manufacturers Association). In June, registrations grew 14.6%, the highest growth rate since December 2009. Apparently June marks the 22nd consecutive month where vehicle registrations have increased in the EU.

The ACEA has also revised upward its annual sales growth estimates for 2015 to 5%. Earlier, the ACEA had estimated sales to grow by 2% this year.

Higher aluminum content

Aluminum content in vehicles has increased steadily over the last few years. European (VGK) auto manufacturers have been among the earliest adopters of aluminum body vehicles. Europe’s vehicle sales are closely analyzed by aluminum investors. Delphi Automotive (DLPH) is a major supplier to automobile companies.

Alcoa (AA) offers a lightweighting solution to automobile companies. Auto companies have shown an inclination toward aluminum body vehicles, which helps them in lightweighting the vehicle and increasing its fuel economy.

Alcoa and Reliance Steel & Aluminum (RS) together make up ~9.2% of the SPDR S&P Metals and Mining ETF (XME). Meanwhile, steel companies are also doing their part to protect their traditional bastion. You can read more about this in our series Are Steel Companies Ready for the Aluminum Challenge? Alcoa earns almost half of its revenues from North America.

In the next part, we’ll explore indicators of US aluminum demand.


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