In this article I will share with you some more details about the impact of electric and hybrid cars to the rhodium demand, which will also be important for investors in the PGMs (platinum, palladium).
I received an email today from a reader who was worried what will happen to the rhodium demand and investments in the metal, if electric or hybrid cars production increase. In his opinion because more than 80% of the rhodium market demand is from catalytic converters, and in the long run fuel engines are doomed we have to pay attention to the electric cars development.
That’s why I will post here my reply to him as it’s a part of an analysis that I didn’t share with you in my previous writings. I will start with my own opinion that fuel engines are not doomed even in the long-run and that is because of the supply and existence of rare earth metals.
Now, let’s start with a little introduction. Hybrid cars are required to have catalytic converters because they have fuel engines along with electric engines. Hybrids do have catalytic converters and are not a threat to the rhodium demand.
Electric cars don’t need catalytic converter but here are my three main points why electric cars will never be of a much importance to the rhodium demand:
1. Rare Earth Metals in electric cars. There are not enough rare metals in the world to produce much electric cars. About 95% of all rare earth metals come from China, which lowered its export quote to world in attempt to save its resources for the decades ahead and for its own production. For example, electric cars use rare earth metals in their electric motors and car batteries like neodymium which is in deficit even at this increase of electric cars and other tech stuff.
Currently, every Toyota Prius uses 2.2 lbs (1 kg) of neodymium in each motor, while the hybrid batteries each pack 22-33 lbs. (10-15 kg) of lanthanium (another earth metal in short supply). In summary, even if we find more rare earth metals, they will be much more expensive which will make these cars much more noncompetitive to normal. Even now, electric cars are more expensive than gas because such rare metals.