(Bloomberg) -- Novelis Inc., the largest supplier of flat-rolled aluminum products to the auto industry, expects aluminum usage by carmakers in China to beat estimated annual global growth rates as demand surges for luxury car brands.
"The market is very large potentially," Shashi Maudgal, president of Novelis Asia, said in a phone interview. "We believe that it will grow rapidly, exceeding the 25 percent compound average growth rate over the next several years."
Volkswagen AG's Audi unit, the world's second-largest luxury-car brand, reported sales in China, the world's biggest automotive market, advanced 20 percent in September, while Daimler AG's Mercedes-Benz posted a 10 percent gain.
Novelis yesterday broke ground on its first aluminum auto sheet plant in China, moving closer to customers including the Chinese ventures of Mercedes-Benz and Audi. "Those reports indicate clearly the premium sector of the automotive industry in China is growing faster than the low-end market," James Liu, managing director of Novelis China, said in the interview.
Novelis is the U.S. unit of India's Hindalco Industries Ltd. Bayerische Motoren Werke AG, the world's biggest maker of luxury cars, reported a 14 percent gain in third-quarter profit, driven by demand from China where deliveries jumped 59 percent in September. In comparison, China's passenger vehicle sales fell 0.3 percent in September from a year ago, according to China Association of Automobile Manufacturers.
Aluminum can reduce weight by as much as 40 percent in key automotive components, compared with 11 percent for high- strength steel, according to Novelis, citing a research report by University of Aachen.
Regulations to cut carbon emissions and improve fuel efficiency may prompt carmakers to cut the weight of vehicles by using more aluminum. China has set a goal of cutting carbon-dioxide emissions by as much as 45 percent from the 2005 level by 2020, joining the European Union and the U.S. in efforts to conserve energy.
China announced in July that new passenger cars must have fuel efficiency of 5.9 liters of gasoline per 100 kilometers (62 miles) in 2015 and 5 liters per 100km by 2020.
The 120,000-ton-a-year plant in the Chinese eastern city of Changzhou, about 180 kilometers from Shanghai, may start operation in late 2014 using aluminum coil, a semi-finished product, imported from Novelis' plant in South Korea, Maudgal said. "We will be expanding into other categories" such as beverage cans or construction, Maudgal said. "That would require another massive investment for a rolling facility in China." Novelis is currently shipping products from Europe to its customers in China, he said.