The purpose of this report is to present the findings from CM’s comprehensive assessment of aluminium usage in China's auto industry, which includes passenger vehicles, commercial vehicles (buses and trucks), special-duty vehicles, 2-wheel and 3-wheel bikes. Over the period to 2030, China's automotive sector is likely to undergo a substantial transformation, shifting from Internal Combustion Engines toward New Energy Vehicles. As a material of choice amongst China's auto producers to reduce kerbside weight, aluminium is well positioned to take advantage of the transformation. Despite the outlook for ICE vehicle numbers remaining flat, weight-savings are likely to increase intensity of use and drive higher volumes. We forecast aluminium usage in China's automotive sector to increase from an estimated 3.8 Mt in 2018 to 9.1 Mt in 2030, representing a CAGR of 8.9%.
China's Automobile Production
China's total automobile production reached an estimated 31.4 million units in 2017, up 4.7% from 30 million in 2016. In 2018, however, China witnessed the first fall in 28 years in auto production, as a result of the country's general economic slowdown. Total production was 29.8 million units, broken down into 23.2 million passenger vehicles. 4.0 million trucks, 0.4 million buses and 2.2 million special-duty vehicles.
Bucking the trend was China's NEV (New Energy Vehicles) market, which produced 1.1 million units in 2018 and is forecast to reach 11.6 million units in 2030, representing a CAGR of 21.4%. Notably, BEV (Battery Electric Vehicle) production is forecast to grow at a CAGR 23% over the same period, from its 2018 level of 0.77 million units to 9.2 million in 2030. This forecast growth is likely to drive strong aluminium growth, given projections for intensity of use in the sector.
China also produced a total of 15.8 million traditional Internal Combustion Engine motorbikes and 31.8 million electric bikes (E-bike) in 2018. With the domestic market considered saturated,, especially for traditional ICE motorbikes, future growth will likely target exports.
We forecast E-bike production to grow at CAGR 2%. while ICE motorbike production is forecast to fall at a CAGR 2%. By 2030, production of ICE motorbikes is forecast to fall to 12.4 million and e-bikes increase to 40.3 million.
Aluminium Consumption
With China's automobile industry gradually shifting its focus to light-weighting, as it strives to meet tightening legislation, we are forecasting an increase in demand, and therefore use, of aluminium.
According to CM's survey, a total of 3.9 million tonne of aluminium was consumed in the industry in 2017, up 8% compared with 2016. In 2018, total consumption fell slightly, by 1%, as a result of stagnant sales of passenger vehicles. However, we are bullish on the outlook of aluminium usage in the automobile industry and forecast total aluminium consumption in the auto industry to reach 10.7Mt by 2030, representing a CAGR of 8.9%.
Passenger cars are the key market sector for aluminium, consuming an estimated 2.9Mt in 2017, and representing 74% of the total. Due to China's recent slowdown in economic activity, total passenger car production in 2018 fell 6.6%, resulting in a 3.6% fall in aluminium usage in passenger cars.
However, new-energy passenger vehicle production increased significantly in 2018, up 75%, mainly owing to robust demand for BEVs. As a result, aluminium consumption in China's NEVs jumped 96%, from 75kt in 2017 to 146kt in 2018. Supported by the government's mandated energy-saving policies and emission reduction targets, we remain bullish on the outlook for China’s NEV industry and forecast the proportion of aluminium use in this sector to grow from its current 3.8% of total aluminium consumption to 29.4% in 2030.
In terms of unit consumption, in 2018, the new-energy bus sector consumed the most aluminium, at an estimated 210kg of aluminium per bus. followed by hybrid passenger vehicles at 179.6kgpv. BEV passenger vehicles and ICE passenger vehicles consumes 128.4kg and 118.7kg of aluminium respectively, still a long way short of the levels in developed regions such as USA, EU and Japan.
The gap in intensity of use between China and several first-world countries, we believe, will reduce, as Chinese producers face the real prospect of tightening legislation leading to an unavoidable need for light weighting. Notably, we forecast the unit aluminium consumption of BEVs to reach 283.5kgpv by 2030.
Apart from light-weighting, another growing advantage of aluminium is its favourable recycling credentials relative to its peers. It's low-cost and simple to recycle, evident by the increasing use of secondary aluminium in China's automobile industry. Secondary aluminium is mostly used in casting applications such as the manufacturing of engines, housings and wheels.
As China's automobile producers become more sophisticated and cost focused, and recycled metal becomes more widely accepted, we forecast total consumption of secondary aluminium to increase significantly. However, the share of secondary aluminium in China's total consumption is forecast to fall, as a result of stronger growth in the BEV sector, which does not reguire engine
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