Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will the Electric Car Revolution Sink Platinum and Palladium?

Commodities / Platinum Aug 20, 2017 - 12:26 PM GMT

By: Arkadiusz_Sieron

Commodities

Everyone has probably heard about the upcoming electric car revolution whose vanguard is Tesla Motors led by Elon Musk. The electric car is actually nothing new – the first vehicles were produced as long ago as in the 1880s. However, the mass production of cheaper gasoline vehicles triggered by Henry Ford put electric cars into limbo for decades. But this can change quickly thanks to the rapidly falling costs.


As one can see in the chart below, the price of a battery pack declined from $1000 per kWh in 2010 to $227 in 2016. The price of a Tesla battery pack is believed to be even lower now, at about $190. When battery pack prices fall below $100 per kWh, which is likely to happen around 2025, the sales of electric vehicles may soar, as such learning curves imply that electric cars will be cheaper to buy than traditional vehicles in most countries.

Chart 1: The average EV battery pack price ($ per kWh) since 2010.

Until then, the range and charging anxiety should be also overcome through a comprehensive charging network – once that happens, mass adoption should quickly follow. And investors should remember that although up-front costs are still higher, the per-mile fueling cost and maintenance costs are lower (most repairs are caused by the internal combustion engine), which should additionally support the shift toward electric cars.

Indeed, electric cars will account for 14 percent of global car sales by 2025, according to the UBS, while the Bloomberg argues that electric vehicles will reach 54 percent of new car sales by 2040. Stanford University economist Tony Seba is even more optimistic about electric vehicles: he believes that all cars will be electric (or hybrid electric) by 2025. Anyway, the age of electricity has begun: although electric vehicles account now for only a few percent of the automotive market (but in Norway electric or hybrid cars represented half of new registrations in the country so far in 2017) and there are still many problems, such as lithium-ion production capacity and the costs of batteries, plunging battery prices would accelerate the shift into electric cars.

The conclusion is clear: the relative performance of gasoline and diesel cars is much less important than the ongoing trend towards electric vehicles, as market shares both of diesel and gasoline vehicles are set to decline in the future. The gasoline vehicles will suffer less, but they will be harmed too. Hence, the dominant demand source for both platinum and palladium is likely to enter a secular bear market. Thus, don’t hold your breath waiting for a rebound in platinum, as it was historically undervalued relatively to palladium. During paradigm changes historical relationships break up. It is more probable that palladium will follow platinum after a while than vice versa, as the automotive demand for the former metal will also decrease, but later and by a smaller percentage. Assuming that the Bloomberg’s forecast is realized, the global market share of diesel vehicles will plunge by about 75 percent until 2040 (from about 20 percent to 5 percent), while the global market share of gasoline share will sink only about 50 percent, from about 80 percent to 40 percent.

One could say that since the automotive sector accounts for about 80 percent of demand for palladium and for about 40 percent of demand for platinum, the former metal may actually be hit harder in the long-run. However, it would be the case under a scenario of flat total automotive sales. But with the 33-percent expected increase in new light duty vehicle sales overall by 2030, platinum is likely to suffer more. One thing is clear: although there may be some short-term volatility, neither platinum nor palladium look as attractive as a long-term investment as does gold.

While the platinum-group metals (we mean here platinum, palladium, but also rhodium) are likely to be the biggest losers (according to the UBS, the demand for them would decline by 53 percent in the world with only electric cars), other metals will benefit from the revolution. Clearly, lithium demand will soar, as most electric vehicles use lithium ion batteries (however, investors should remember that lithium is relatively abundant, while scientists are already working on solid-state batteries which do not have to rely on lithium). The same applies to cobalt and manganese. The production of each of these metals is expected to rise more than 100-fold from 2015 to 2023, while the demand for graphite, nickel and aluminum are forecasted to soar about 65 times in that period. The market in rare earth elements, neodymium in particular, could also rise.

The gold market and silver market should not be significantly impacted by the upcoming changes in the automotive sector, unless silver-zinc technology becomes the standard for electric car batteries. However, electric car revolution could affect the silver demand indirectly, through making solar energy more competitive (charging an electric vehicles could optimize the use of solar electricity). This is important because solar panels use silver for the electrical conductivity.

There is one important caveat to our analysis: predicting technological revolutions is prone to error. The pace of transition to the electric cars may be quicker than expected, but may be also slower due to the lithium-ion batteries’ energy density limitations or range reasons. And the negative impact on the platinum-group metals may be less severe, as the electric revolution will not displace traditional powertrains, which uses platinum or palladium autocatalysts in the medium and heavy truck markets. Another issue is that only electric battery vehicles are the threat for precious metals, while hybrid cars still need them (and at the end of 2016 the latter accounted for about 40 percent of all electric cars). Finally, we cannot exclude that the fuel cell technology, which uses a lot of precious metals, will not develop sufficiently to support the demand for platinum or/and palladium. Hence, although the long-term implications of the electric car revolution for the precious metals market seem to be huge, the near and medium-term the impact may be limited.

Thank you.

If you enjoyed the above analysis and would you like to know more about the gold ETFs and their impact on gold price, we invite you to read the April Market Overview report. If you're interested in the detailed price analysis and price projections with targets, we invite you to sign up for our Gold & Silver Trading Alerts . If you're not ready to subscribe at this time, we invite you to sign up for our gold newsletter and stay up-to-date with our latest free articles. It's free and you can unsubscribe anytime.

Arkadiusz Sieron
Sunshine Profits‘ Market Overview Editor

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Arkadiusz Sieron Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in