SHANGHAI (Bloomberg) -- China's drive to build electric cars is likely to set up a greater-than-forecast surge in demand for aluminum, according to Novelis Inc., the world's biggest supplier of the material to automakers.
China, the world's biggest carbon emitter, is mandating that at least 30 percent of new government vehicles be powered by alternative energy by 2016 in the government's latest move to combat pollution and reduce energy dependence.
The use of aluminum in auto bodies by China, Japan and South Korea, Asia's major carmaking countries, is around 50,000 metric tons and expected to grow at about 30 percent a year for at least the next decade, Shashi Maudgal, president of Novelis Asia, said in an interview in Changzhou.
"China has a very aggressive target for using electric vehicles," Maudgal said on Monday. "If this project takes off, this 30 percent increase will be much more."
U.S.-based Novelis is opening its 120,000-ton-a-year auto body sheet plant today in the Chinese eastern city of Changzhou, about 180 kilometers from Shanghai. The plant has either supply contracts or is in advanced supply talks with automakers including Chery Jaguar Land Rover Automotive Company Ltd. and SAIC Motor Corp. Ltd.
Chinese leaders led by Premier Li Keqiang are intensifying a "war" on pollution after smog levels hit hazardous levels in the nation's capital last winter.
The government has identified electric vehicles as a strategic industry where it can gain global leadership, reduce energy dependence and cut emissions as it pledges to remove polluting cars from the road. "China may surprise us by growing faster than anyone else," Maudgal said. ''China probably has upside.''
The new factory, using aluminum coil, a semi-finished product, from Novelis' plant in South Korea will also supply Asian markets, Europe and U.S., Maudgal said. About 15 percent of Novelis' Asian output will come from China, as it also runs a 1 million-ton-a-year plant in South Korea, he said.
"If you ask why is aluminum use in car bodies taking off now, it is because environmental concerns have become extremely important now, and it will become more important in the future," Maudgal said. Shipments of automotive aluminum may climb to as much as 25 percent of total sales by 2020 from the current 9 percent of 3 million metric tons, as new emissions rules restrict the use of steel, Novelis Vice Chairman Debnarayan Bhattacharya said in August.
China in 2009 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. Meanwhile, the country is set to overtake the U.S. to become the top market for luxury vehicles by 2016, according to McKinsey & Co.