Hybrid cars offer a lifeline to platinum group metals threatened by EVs

The rise of electric vehicles was expected to significantly decrease demand for PGMs, which are crucial for catalytic converters in gasoline-powered vehicles. However, a slowdown in EV sales growth and a surge in hybrid car sales are providing a lifeline to the PGM industry.

PGMs Find New Hope

The future of platinum group metals (PGMs) looked bleak just a few years ago when electric vehicle sales were soaring. PGMs, primarily platinum and palladium, are essential components of catalytic converters in gasoline-powered vehicles, a technology not required in EVs. This led to concerns about a steep decline in PGM demand.

However, the landscape has shifted. Growth in EV sales has slowed down considerably, reaching only 11% year-on-year in the first half of 2024. Conversely, sales of hybrid cars, which still require catalytic converters, have jumped by 44% during the same period.

This unexpected development offers a glimmer of hope for the PGM industry. Analysts believe the rise of hybrids could last until 2030 or even longer, potentially delaying the decline in PGM demand.

Factors Driving the Hybrid Surge

Several factors are contributing to the unexpected popularity of hybrid cars:

Slowdown in EV Sales Growth: The initial boom in EV sales has plateaued, with significantly lower growth rates compared to previous years.

Plug-in Hybrid (PHEV) Popularity: Sales of PHEVs, which combine electric and gasoline engines, are experiencing significant growth, especially in China. PHEVs require slightly more PGMs than traditional gasoline vehicles.

Consumer Preferences: Surveys suggest a growing number of consumers are opting for PHEVs over pure EVs due to concerns about limited driving range and the lack of charging infrastructure for EVs.

Automaker Strategies: Many car manufacturers are prioritising hybrids due to their higher profit margins compared to EVs. Some companies have even scaled back their EV production plans.

Positive Outlook for PGMs

The shift towards hybrids is expected to benefit PGM demand in a few ways:

Increased Catalyst Needs: Every additional million hybrid cars sold creates a demand for roughly 150,000 ounces of PGMs.

Extended PGM Usefulness: The hybrid market's potential longevity offers a buffer for the PGM industry, extending the use of these metals for several additional years.
Higher Margins for Automakers: Auto companies see better margins with hybrids compared to EVs.

Impact on Battery Materials

While the hybrid trend might dampen demand for key battery materials like cobalt and nickel used in pure EVs, it offers a much-needed boost to the PGM industry. This unexpected development could provide some stability for PGM prices and support the longevity of the sector.

Looking Forward

The future of PGMs remains uncertain in the long run. However, the rise of hybrid cars offers a temporary reprieve for the industry. The long-term viability of PGMs will depend on factors like the pace of EV development, battery technology advancements, and consumer preferences.