Novelis planning a systematic transition from beverage-can to automotive aluminium

Novelis says that margins in the beverage can industry, which was their core area of focus, has started to fall rapidly and as a result they are planning a systematic focus-shift to automobile aluminium.

“(Our new business) model suggests that by FY20 (fiscal 2020), 25% of our shipments would be automotive. The beginning of this evolution is evidenced by record third-quarter shipments, which will only continue to accelerate from this point forward,” said Philip Martens, president and chief executive officer of Novelis.

Steve Fisher, chief financial officer, Novelis says, “There are clearly signs that the market demand (for beverage cans) is continuing to go down, and it’s a little bit quicker than we thought. This is having some trade-offs between pricing and capacity.”

Novelis plans to make a transition of their business profile from beverage cans to auto-grade aluminium over the next 5 years to tap the increased demand for the lighter metal in the auto industry. The switch will be in accordance to the three major stages expected in the automobile industry in terms of increased aluminium use.

Ford’s F-150 2015 is the obvious pioneer in the use of aluminium and the reception of the vehicle in the market along with the use of aluminium in other Ford models will mark the first stage of demand step up. The second is expected to hit in the next few months where other automakers will increase their use of aluminium while the third step would ideally be when aluminium is used in pick-up trucks and other commercial vehicles.

Although the American and European companies have started to use aluminium in automobiles, the Asian countries is still conservative about using the expensive metal in their cars as a result analysts believe that Novelis’ planned shift might not improve their profits much in the short run although in the long run however, this move is hoped to be beneficial.