Novelis taps into e-vehicle potential

As China clamps down on pollution, companies such as aluminum producer Novelis Inc see a business opportunity.

"The driving force behind our strategy in China is the nation's increasingly strict policy against pollution," said Pierre Labat, vice-president of global automotive at the Atlanta, Georgia-based company in the United States.

Novelis is expanding its investment in the world's second biggest economy, particularly in the electric vehicle sector.

The group, which has $10 billion in annual revenue and 24 operating facilities in 10 countries, chose Changzhou, Jiangsu province, in 2012 to open its first manufacturing facility in China, because of logistics convenience and government incentives.

With an initial $100 million investment, the plant now boasts an annual production capacity of 120,000 tons of heat-treated aluminum sheet. The factory serves a rapidly growing demand for rolled aluminum used in lighter, more fuel-efficient vehicles.

To help address pollution and reduce emissions, China continues to issue strict regulations and has proposed a radical amendment to increase the manufacture and sale of e-vehicles.

Auto industry authorities will push manufacturers to meet aggressive sales targets for plug-in and hybrid vehicles of 7 percent of all sales in 2020 and 19 percent by 2025.

"If we look at our total automotive sales in the world, China is about 10 percent, fairly small," said Labat. "But it's our fastest-growing market that yields the highest percentage of growth－six fold explosive growth since we went there five years ago."

In March, Novelis expanded its portfolio of clients into the e-vehicle sector by adding NIO, an e-vehicle startup in Shanghai.

Its electric SUV ES8 models will adopt Novelis' aluminum alloys to create a wide range of structural vehicle components and parts.

The e-vehicle startup has received funding from Baidu Inc, Tencent Holdings Ltd, Temasek Holdings Ltd, Sequoia Capital, Lenovo Group Ltd and other institutional investors.

It also released its full-size seven-seater ES8 at the Shanghai Auto Show in April.

The ES8 has an all-aluminum body to reduce weight and optimize performance.

William Li, the founder and chairman of NIO, called the partnership with Novelis "mutually beneficial".

"It will bring confidence and new capacities to the booming global EV market," he said. "We will work together closely and push forward the application of lightweight materials in the next generation of electric vehicles."

The NIO partnership marks Novelis' first major commitment in the premium e-vehicle market in China.