Raw materials for automobile industry

Investing in the automotive industry – what you need to know ROLE 8 OF 20

Cost components

You can find four significant cost motorists in the production and purchase of a car:

• raw materials
• work
• R&D (research and development)

Raw materials add about 47% on cost of an automobile. Normally, a car is 47per cent steel, 8per cent iron, 8per cent plastic, 7per cent aluminum, and 3percent cup. Various other materials account for the remaining 27%.

About 22percent of an automaker’s functional prices rely on metallic. Therefore, any fluctuation in international metal prices features a primary effect on profitability. Metal billet rates emerged down considerably from 15.2 euros per metric ton in 2008 to 4.8 euros per metric ton in 2013. This significantly improved producers’ gross margins. During this period, the gross margins increased by 200 foundation points, or bps, from 15.2% to 17.2percent.

Usually, automakers only used aluminum for wheels, cylinder obstructs, and other motor components. Aluminum is twice as expensive as steel. But this trend is changing in response to stringent gas economy standards. The usa government’s Corporate typical Fuel Economy, or CAFE, laws require automobiles having a typical fuel usage of 34.1 miles per gallon, or mpg, by 2016. Cars must have an average fuel usage of 54.5 mpg by 2025.

The shift towards aluminum

Although it’s more expensive than steel, aluminum is a lot lighter. It has the same energy. Every 10% reduction in fat gets better the fuel economic climate by 5–7per cent. Currently, as a result of price limitations, only Premium section cars—like Tata Motors’ (TTM) Jaguar XF plus the Audi (AUDVF) A8—have aluminum bodies.