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LAWRIE WILLIAMS: A dismal future for pgms

Recently watching a promotional video from Volkswagen about its proposed all-electric Transporter/Kombi/Microbus replacement – the VW ID Buzz – it was brought home to me how far the electric motor vehicle replacement has developed.  While VW’s ID range is only conceptual at the moment it is due for production before the end of the decade and with the small saloon car version apparently having a range of up to 350 miles, and costing about the same as a VW Golf,  and the ID Buzz around 250 miles, plus rapid wireless charging capability (well 30 minutes up to an 80% charge), these would seem to have already overcome many of the perceived drawbacks of current limited range all-electric vehicles.

And VW is not the most advanced electric vehicle builder.  Elon Musk’s Tesla is perhaps streets ahead with its high performance electric vehicles (EVs) and has already spawned a direct competitor in the Faraday Future FF91 where the prototype also has a huge range of over 350 miles and Tesla-matching performance.  It is due to be in production by 2018, but appears to be having difficulty securing the finance to build the proposed plant in which the car would be manufactured.  But the very fact that a prototype vehicle has been produced with some amazing features suggests that the high performance electric powered vehicle is not far away and standard run of the mill EVs not far behind.

VW is also not the only major German automobile manufacturer which is well along the road to building decent range production electric vehicles.  BMW, Audi and Mercedes are also reported to be investing huge sums, while the big Japanese, French and American car builders may not be far behind. Chinese manufacturers for the world’s biggest light vehicle market, are probably already ahead of the curve.   Most major Western and Eastern manufacturers  have electric vehicle production models already available, but few have a range of over 100 miles due to available battery technology, but as the VW concept vehicles, Tesla and Future Faraday are already demonstrating, battery technology is increasing by leaps and bounds and as volume increases costs will come down.  The Chinese in particular are well on the way to producing mass market electric cars with a number already on the market.  They are also building electric vans and light trucks.  Many of their  passenger vehicles are boasting plus 100 mile ranges and technology is improving all the time as is rapid charging technology.

This rapid development of electric vehicles with decent range and rapid charging is an enormous threat to platinum and palladium consumption over the next decade and beyond.  And undoubtedly with all the billions of dollars being poured into electric vehicle research ranges will increase further, costs will fall and the internal combustion engine will gradually be phased out in favour of non-polluting transportation technologies.

Around 40% of global demand for platinum is from the autocatalyst market, but in terms of petrol (gasoline) engines that has almost all been replaced by less costly palladium based catalysts so platinum is mostly used for diesel engine emission control.  With its dominsnce of the petrol engine market, around 75% of palladium production is used in autocatalysts.  So rapid growth in electric vehicle production is going to have a huge impact on demand for platinum group metals (pgms) unless other major uses are developed.  (To an extent we see the decline in autocatalyst usage as somewhat akin to the decline of photographic demand for silver with the rise in digital technology without which the silver price would probably be hugely higher today.)

The electric vehicle market currently only represents perhaps 1% of global vehicle sales, but it is growing exponentially. While current projections only see electric vehicles accounting for around 35% of the market by 2040, we think that the advances in battery technology and the ever-increasing pressures for clean energy will bring this level forward by at least a decade.  There is also a 'war' against diesel emissions developing and this threatens platinum usage more than palladium. 

Some analyses put the real take-off point for electric powered vehicles as by 2025 when it is estimated that electric power train costs become competitive with internal combustion engine costs.  But again we think this will be achieved sooner, and there’s a good chance that from when this parity actually occurs, electric vehicle costs could fall below those of conventionally powered vehicles thus accelerating electric vehicle growth further.

Current projections from organisations like the World Platinum Investment Council see pgm production shortfalls ahead in the near future.  Thus it may yet be a couple of years before what we see as enormous growth in electric vehicle capacity adversely impacting prices.   So long term we do not view pgm prices positively.

17 Jan 2017

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London – recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com

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