Why an 18-fold Increase in Aluminium Cars will Create Huge Opportunity

I’m currently in the US on a research mission. A mission to discover some of the best cyber defence possibilities that exist in the world right now.

More on that in the coming days.

But when I’m away on a work missions it leads to a bit of period bashing away on the keyboard in a hotel room. And invariably in the background is good old US TV.

There’s not a lot to choose from really. Unless I want to watch endless re-runs of NCIS or the constant squabbling on The View, I’ve really only obtained about two choices.

One of these is ESPN. That’s great for downtime. And interestingly right now in the US, there’s some heated racial controversy in the NFL. Evidently one NFL coach is ‘uncomfortable’ amongst some of the black players.

I find it unbelievable that in both Australia and the US that certain of the biggest news stories is all about race.

It go to show that you are able to ‘progress’ as much as you like with equal rights, but shaking the shackles associated with history is hard to do. It is quite sad.

But racial controversy and ESPN aside, my additional viewing options is BloombergTV. So that as of today the biggest story on Bloomberg is cars.

You see a good indicator of an economy’s strength is new car sales. To put this very simply, if new car sales are on the increase, then things are looking pretty good.

It says people have jobs, cash is flowing and consumer confidence is on the rise.

And when all the car companies are reporting increases in new car sales, then you have to consider serious notice.

That’s not to say there’s not problems in the world

There’s much debate right now about where the global markets and economies tend to be heading. You’ve got Greece in turmoil over in Europe. Upon Monday the Greek marketplaces had the worst sell-off ever. In a matter of minutes after the starting bell the market tumbled 23%.

Five of the biggest banks lost 30% in the day. It would happen to be more except the daily limit is 30%…

With Greece in turmoil, we turn to Asian countries. And China is still in the midst of turmoil. The market is still tumbling, factory activity shrank more than initially expected, and growth is still looking weak.

Even new vehicle sales in China are falling. Volkswagen reported their first sales decline within a decade earlier this year. And Ford predict a drop in their Chinese language new car sales this year. China, it seems, isn’t always likely to grow.

This of course leads all of us to the US. If there’s weak point in China and European countries it could well spread to the US. If it does also it starts to drag on the US, it gives the Fed carte blanche to print more cash and keep prices on hold.

As Kris has said within Money Morning before, it could be a win-win for the Given. If the economy stutters a bit, they will print more cash and be announced the saviours of the economy. In the event that things look up for the better, then they’ll jack rates and say the economy is fit and fighting…thanks to them of course.

But looking at brand new car sales here in the united states, perhaps the economy here is already fit and fighting. Even when China and Europe’s problems creep across the Pacific and Atlantic, maybe, just maybe, the united states will push on via without the need to print cash.

How just one car can boost an entire economy

You see one of the best indicators for a strong economy is the correlation between new car sales and unemployment. If you’ve got a job, you can buy a car. If you don’t have a job, you can’t.

Source: Wall Street Daily

And because the unemployment rate lowers in the US, new car sales are climbing. IN fact the US just reported three straight several weeks with the new car sales rate above 17 zillion.

The last time this happened had been 15 years ago.

All major car makers are reporting stronger new sales numbers. General Motors [NYSE:GM] expires 6.4%. FIAT Chrysler Automobiles [NYSE:FCAU] up 6.2%. And even Toyota Motor Corp (ADR) [NYSE:TM], although not because strong, is still up Zero.6%.

But when it comes to selling cars the actual Ford Motor Company [NYSE:FORD] is one of the best. For the month of This summer alone they sold 222,731 new cars in the US. That’s a sales increase of 5%. It’s best because July 2006.

Much of this success is thanks to one model. The F-150.

Source: Ford Media

When sales of the F-150 are up, Ford is up. And when this 112 year old staple of American capitalism is up, so is the united states.

It’s hard to think, but the power of sales in the newest model of the F-150 can actually raise the entire confidence of a nation.

Sales of the F-150 have recently been a little shaky. This is down to financial jitters and production problems within Ford. But now manufacturing is back on track. And it seems as though the US might be as well.

Ford just released the F-150 sales numbers for July. And they caught everyone by surprise. The new F-150 saw a gain of 13% within retail sales. That is massive. In July they shifted 66,300 new F-150s. That’s the best July results in 9 years.

The increase in sales is a surprise. But the fact it’s the F-150 leading the charge isn’t. America loves big trucks. The bigger the better. Cadillac Escalades, Lincoln Navigator, Ford F-150, Ford Explorer, GM Sierra and more.

In the past these have all been big, cumbersome, heavy trucks and Sports utility vehicles. However there’s a change underfoot. It’s from big, bulky and high to big, bulky and lightweight. And the F-150 is leading the actual charge.

The latest F-150 is an incredible step forward in car making. Its body is made from aluminum. That makes it one the least heavy F-150s ever made. Importantly, the use of aluminium doesn’t sacrifice structural power.

The use of aluminium is part of a global trend in the car industry in order to ‘lightweight’ cars. The end game of lightweighting is to improve fuel efficiency.

The easy equation is that the lighter an automobile (or truck) needs less fuel. And with tough new emissions standards, these big trucks have to get more efficient.

However, it’s not only Ford pushing forward with lightweight technology. The Vw Group, FIAT Chrysler, and GM are lightweighting cars and improving efficiency.

That’s important to investors. Because it creates tremendous opportunities in wise investments. And in particular there are small-cap Foreign stocks that will benefit from a world with millions of lightweight vehicles built from aluminium.

With an 18-fold increase how can you ignore this opportunity?

Think about this. The US alone is on the right track to shift over Seventeen million new cars within 2015. Even with falling new car sales, China will still account for around 23 zillion new cars. And according to Statista, globally there will be around Seventy three.87 million new car sales this year.

Now looking at the F-150 for any second, each truck uses around 855 pounds (388kg) of aluminum in its construction. Right now aluminium costs about US$0.715 per pound. So each F-150 uses US$611 worth of aluminium.

In 2015 they are looking at the F-150 exceeding 700,000 units. That’s 271,600 tonnes of aluminum just for the F-150 alone. And Ford will spend around US$477 zillion on aluminium just to meet demand of the F-150.

Outside of The far east, global aluminium production within 2014 was 24 million tonnes. Including China that figure pushes up to around 50 million tonnes.

Ford’s demand for the F-150 alone is 0.54% of global aluminium production. That might not sound like a lot. But remember this is one single model of truck in an entire industry moving towards lightweighting technology.

The Wall Street Journal reports that,

‘By 2025, 18% of all vehicles in the U.S. are expected to have all-aluminium bodies, compared with less than 1% now, according to Ducker Worldwide LLC, a consulting and market-research firm.’

That’s a rise in demand some 18 occasions higher than it is today. In other words, one of the biggest market opportunities within the next five years are aluminium companies.

With 73 million new cars hitting the road each year, you can’t ignore this opportunity. It is a ready-made market that’s at the initial phase of new innovation. That is what expense dreams are made of.

Regards,

Sam