If your idea of fun is watching two metallic tribes slug it out, one option is to go see the new "Transformers" movie. The other is to look at what is going on with vehicles.

Aluminum is contending with its heavier counterpart, steel. This year will see the launch of Ford Motor's F +0.58% new F-150 truck, weighing in around 700 pounds lighter than the 2009 model largely due to replacing some of its steel with aluminum.

Lighter vehicles get better fuel economy. With oil stuck above $100 a barrel and regulations on pollution tightening in all major auto markets, aluminum looks poised to take a bigger share of vehicle bodies at steel's expense. Alcoa, AA +0.88% which reports results Tuesday, has seen its stock jump by more than 80% since the start of October—with no parallel increase in consensus earnings estimates—due in part to excitement about aluminum's expanding opportunities.

But while aluminum certainly will take market share in vehicles, it would be premature to think steelmakers will let their position simply rust away.

Steel makes up roughly 70% of the weight of the average U.S. light vehicle (aluminum is 10% or less). Adjusted for relative density, aluminum can compete with certain types of steel in terms of strength.

As Matt Murphy of UBS UBSN.VX -0.95% points out in a recent report, though, steel has several advantages. One is sheer incumbency. Car makers have established relationships with the steel industry, which has extensive production capacity and distribution networks. Repair shops also have a lot of experience working with steel-heavy vehicles.

Another is cost. Auto-grade steel costs about a third to half the price of auto-grade aluminum. So reducing weight must be balanced with economics. While using more aluminum in trucks and luxury vehicles, where prices and margins are higher, is relatively easy, it may prove more of a struggle in smaller cars.

Moreover, steel itself can be improved upon to help head off aluminum's challenge. For example, according to UBS, tensile strength in automotive steels has improved, at the high end, by a factor of about 10 times over the past 40 years. And new high-strength steels being developed are expected to weigh 60% as much as conventional steel, according to IHS. IHS +0.80%

The risk for investors getting enthusiastic about aluminum's prospects is that they ignore the wider environment. Paul Adkins of AZ China compares the situation to Internet startups: "Once the dream turns into reality, margins will be tighter than hoped, market share will be fought over fiercely and share prices will plateau or drop back," he says.

And if the automotive industry is the battleground, China remains the referee. The country's expansion of both aluminum and steel capacity to excess is the primary force pushing down margins in both industries.

Alcoa's prefinancial crisis, double-digit margin of earnings before interest and taxes has averaged less than 5% in the past three years, according to S&P Capital IQ. Steelmakers have had similar declines. This is the force propelling both industries outside China to reinvent themselves by offering higher-margin specialty metals to big customers such as car makers. Even as they square off with each other, both remain on the defensive.