The pace of electric vehicle (EV) adoption has not accelerated as anticipated two years ago, with drivers opting for hybrid models instead of fully electric vehicles. This is good news for platinum miners, who have not had much to smile about during the prolonged down cycle that left platinum prices depressed and unresponsive despite supply deficits.
It is not such good news for the planet. Climate Action Tracker, a scientific project that independently assesses government climate initiatives, indicates that EVs must account for 75%-95% of global passenger vehicle sales by 2030 to meet international climate targets aimed at capping global warming at 1.5˚C and mitigating numerous negative effects of climate change.
The latest EV adoption trends are not in line with meeting this target. It is not that sales are not increasing, it is just not increasing as fast as was expected. Much like the gradual reduction of coal usage for energy generation, the world seems to have accepted that the transition to cleaner cars will move slower than the ambitious scenarios previously projected.
EVs accounted for about 18% of all cars sold in 2023, up from 14% in 2022 and only 2% in 2018. But while global sales of electric and plug-in hybrid vehicles rose a healthy 31% in 2023, that was down from 60% in 2022.
While the pace of EV sales is slowing down globally, the demand for hybrid vehicles is picking up.
According to the International Energy Agency, in 2023 the sales of plug-in hybrid electric cars outpaced those of pure battery electric cars. Plug-in hybrid electric car sales in the first quarter increased about 75% year on year in China from a low base, compared with just 15% for battery electric car sales.
This shift provides a reprieve for platinum group metal (PGM) miners. The largest single market for PGMs is in the manufacture of catalytic converters that are used in internal combustion engine (ICE) vehicles, which account for about 60% of total PGM demand.
While PGMs do have a role to play in various applications in the energy transition, there were fears that sectors that offer new opportunities for platinum demand, such as green hydrogen production and the manufacture of electric fuel cells, were not progressing fast enough to absorb the loss in demand from the automotive industry.
Platinum is used as a catalyst in fuel cell electric vehicles, which use about double the amount of platinum that ICE vehicles need.
Due to the slowdown in the adoption of EVs, PGM miners are more likely to benefit from a gradual transition that could still cause demand to plateau from 2025, but not decline. This is assuming the expected decline in the conventional automotive demand for platinum to manufacture catalytic converters for ICE vehicles is countered by growth in the new replacement automotive demand for platinum for fuel-cell EVs.
The World Platinum Investment Council already sees the slowdown in electrification shifting sentiment towards higher-for-longer automotive platinum demand, which will, in turn, help improve the price outlook for PGMs.
Hopefully, this will translate into a reversal of the job losses experienced in the past two years in SA PGM mining, and create space and time for the sector to redouble its efforts towards investing in research & development for new PGM applications.
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