Context. In recent years, high spatial resolution techniques have given valuable insights into the complex atmospheres of AGB stars and their wind-forming regions. They make it possible to trace the dynamics of molecular layers and shock waves, to estimate dust condensation distances, and to obtain information on the chemical composition and size of dust grains close to the star. These are essential constraints for understanding the mass loss mechanism, which presumably involves a combination of atmospheric levitation by pulsation-induced shock waves and radiation pressure on dust, forming in the cool upper layers of the atmospheres. Aims. Spectro-interferometric observations indicate that Al 2 O 3 condenses at distances of about 2 stellar radii or less, prior to the formation of silicates. Al 2 O 3 grains are therefore prime candidates for producing the scattered light observed in the close vicinity of several M-type AGB stars, and they may be seed particles for the condensation of silicates at lower temperatures. The purpose of this paper is to study the necessary conditions for the formation of Al 2 O 3 and the potential effects on mass loss, using detailed atmosphere and wind models. Methods. We have constructed a new generation of Dynamic Atmosphere and Radiation-driven Wind models based on Implicit Numerics (DARWIN), including a time-dependent treatment of grain growth and evaporation for both Al 2 O 3 and Fe-free silicates (Mg 2 SiO 4 ). The equations describing these dust species are solved in the framework of a frequency-dependent radiationhydrodynamical model for the atmosphere and wind structure, taking pulsation-induced shock waves and periodic luminosity variations into account. Results. Condensation of Al 2 O 3 at the close distances and in the high concentrations implied by observations requires high transparency of the grains in the visual and near-IR region to avoid destruction by radiative heating. We derive an upper limit for the imaginary part of the refractive index k around 10 −3 at these wavelengths. For solar abundances, radiation pressure due to Al 2 O 3 is too low to drive a wind. Nevertheless, this dust species may have indirect effects on mass loss. The formation of composite grains with an Al 2 O 3 core and a silicate mantle can give grain growth a head start, increasing both mass loss rates and wind velocities. Furthermore, our experimental core-mantle grain models lead to variations of visual and near-IR colors during a pulsation cycle which are in excellent agreement with observations. Conclusions. Al 2 O 3 grains are promising candidates for explaining the presence of gravitationally bound dust shells close to M-type AGB stars, as implied by both scattered light observations and mid-IR spectro-interferometry. The required level of transparency at near-IR wavelengths is compatible with impurities due to a few percent of transition metals (e.g., Cr), consistent with cosmic abundances. Grains consisting of an Al 2 O 3 core and an Fe-free silicate mantle with total grain radi...