Yves here. Hopefully it will not be hard for readers to correct for the commodities-oriented slant of this piece. However, it weirdly skips over the elephant in the room, that a big reason for the stall of electric vehicle uptake is cost. Yet the US refuses to allow China to sell electric vehicles at the low prices at which they are marketed elsewhere. Of course, that’s not the only impediment. Grid capacity, still not enough charging stations, and some buyers leaning more towards hybrids (which are still an improvement over conventional cars) also factor into slowing uptake.
The US coming up with security pretexts to further check Chinese car sales, here of self-driving cars, is cheeky but hardly surprising. One can see the US extending the information/communication restrictions on software to further limit market access and/or product competitiveness. Yours truly is too much of an optimist, but what if China were to respond by ginning up a no spyware vehicle and hawking it as cheap and secure?
By MetalMiner, the largest metals-related media site in the US. Originally published at OilPrice
- Contrary to expectations, the electric vehicle revolution has not significantly boosted overall metal demand, with prices for key metals like lithium, cobalt, and nickel remaining lower than anticipated.
- Several factors, including high EV costs, limited charging infrastructure, and range anxiety, have contributed to slower-than-expected EV adoption rates.
- The sluggish EV growth has broader implications for the metal industry, climate goals, and even national security, as the US considers banning Chinese software in autonomous vehicles due to cybersecurity concerns.
The Automotive MMI (Monthly Metals Index) maintained a steady sideways trend month-over-month, only moving down 2.53%. Overall steel demand remains tepid, which left little bullish sentiment for hot-dipped galvanized steel. Meanwhile, other metals prices, including copper, dropped after their speculative rallies cooled off in July. Overall, the components of the automotive index had little to show in terms of bullish price action, leaving metals prices fairly level.
The automotive market has only managed to add a little support to most metals, with demand as a whole remaining quite weak. As EV continues to fail to meet estimates, metals like copper and rare earth elements can not get the boost they need.
Metals Prices Lower than Expected Amid Weakening EV Demand
In recent years, experts projected that the “electric vehicle revolution” would increase both metal demand and metal prices, especially when it comes to rare earth elements and crucial raw materials like lithium, cobalt, and nickel. However, the U.S. metal markets continue to suffer from lower-than-expected EV demand.
Several variables prevented the expected boom in EV adoption from happening at the predicted rate. The high cost of EVs continues to hinder the market’s growth, as does the lack of a widespread infrastructure for charging them and persistent consumer anxiety regarding range. All in all, consumer acceptance of electric vehicles has not kept up with the output of automakers like Tesla, Ford and General Motors.
Metals markets are more severely affected by slowdowns in EV demand than other markets. EV batteries require large amounts of lithium, cobalt and nickel. However, global demand for these essential raw resources continues to decrease due to EV production rates failing to meet projections. In the cases of cobalt and lithium, this continues to stoke an excess supply, causing prices to stagnate and hindering investment in new mining operations.
Slower EV Growth Could Hinder Climate Targets and Metals Prices
The ramifications of lackluster EV growth go far beyond these metal components. For instance, the decline in demand also continues to negatively impact the manufacturing and processing sectors of the metal industry. For example, manufacturers of EV infrastructure and battery parts are also seeing slower growth, which affects the labor market and economic activity in areas dependent on these businesses.
Another issue revolves around delays in the expected environmental benefits of mainstream EV adoption. The fact that there are fewer EVs on the road than anticipated means greenhouse gas emission reduction efforts are falling short of targets, which puts larger climate goals at risk.
The U.S.’s weakening demand for electric vehicles is a reminder of the challenges that come with adopting new technologies. While the electric vehicle revolution is still in its early stages, its trajectory is proving to be not quite as straight as predicted. This fact has important ramifications for the metal markets, which were counting on a strong increase in demand for EVs. Going forward, stakeholders will need to recalibrate expectations and plans as they traverse this changing terrain. This will help ensure that both are in line with real market dynamics.
Will U.S. Vehicles Restrict Chinese-Made Software?
The U.S. is considering banning certain types of Chinese-made software in autonomous vehicles. This decision, driven by mounting security concerns, could reshape the landscape of the automotive and technology sectors.
In the past few years, concerns over national security and data security have become more and more prevalent. Since most autonomous cars rely on intricate software systems to operate, they are vulnerable to hacks from various bad actors.
Meanwhile, the use of Chinese software presents an even larger concern because these cars gather a lot of data, which could potentially include personal and location information. Authorities worry that foreign entities may access and utilize this data, jeopardizing user privacy and national security.
The possibility of cyberattacks and security breaches remains the primary source of anxiety. There is also the issue that Chinese software companies may be required to give the government sensitive data due to Chinese government laws. Autonomous vehicles pose a significant concern as they are not just a transportation innovation but also an essential part of the infrastructure.
Removing the possibility that Chinese software could obtain confidential information would enhance both national security and vital infrastructure. It would also emphasize the significance of protecting digital systems against external attacks and set a precedent for other high-tech enterprises.
Strengthen Cybersecurity Amid Potential Chinese Software Crackdown
Prohibiting certain types of Chinese software could also promote economic growth, as it would incentivize U.S. businesses to create their own software solutions for driverless vehicles, resulting in a rise in R&D spending. This might lead to a more competitive tech sector where American companies would lead the way in developing cutting-edge technologies.
Additionally, the ban could fortify ties with other nations that have similar reservations about Chinese technology. In such an event, the U.S. and its partners could unite against possible cyber threats by exchanging in best practices and working together on security measures. Beyond the auto industry, this collaboration may impact more general defense and technological plans.
Lots to unpack here.
First off, there is no evidence of a worldwide drop in demand for EV’s (the US is a special case due to intense marketing/misinformation by established auto brands). There is an issue – and its with supply. In Europe in particular, there are issues with the supply chains for the most popular brands, most notably VW. There is also consumer reluctance to go for the new Chinese brands, especially as there are many rumours (justified or not) of poor quality. There have been many stories in the motor press of cars (specifically BYD’s) being stacked up in European ports due to very poor overall domestic demand for all cars in China. But they have not been discounting the cars, probably because they know that too much discounting will destroy their profit margin. A lot of consumers are probably also waiting for some much hyped new EV’s from established brands, such as Dacia. So there is definitely a 2024 ‘issue’ with EV’s, but its almost entirely on the supply side, not demand side.
The IEA give probably the most accurate ‘big picture’ assessment of supply and demand, but they haven’t updated their figures since the first quarter, so its impossible to know for sure. But the available evidence does not provide any indications yet of a specific demand issue for EV’s.
As for commodities. The issue with lithium is well known. There is a supply glut, mostly due to artisanal mining in Africa.
From Reuters:
As for cobalt and nickel – there have likewise been very big increases in supply, but the big issue is most likely that they aren’t being used so much now for EV batteries. Most of the major battery manufacturers are focusing on lithium-iron-phosphate batteries for EV’s and fixed storage. As so often with commodities, there are constant shortages and gluts due to suppliers having to make longer time scale predictions than purchasers. Changes in battery technology have left those who invested in cobalt and nickel high and dry. It could well be that a renewed interest in sodium could do the same for lithium.
Chinese EV sales are growing at over 30% per year, and close to two thirds of all EV sales globally happen in China. In July, EV sales (BEVs and PHEVs) were 51% of all light vehicle sales in China. Yes, sales in the US and Europe may be moribund (although Europe will get an uptick with the new EU regulations in 2025), but global sales are not. The writer of this article needs to get out more.
The real reason for the lack of impact on metals prices is that there is both a lagged increase in supply (it takes time to boost output/startup a new mine) that is now hitting the market, and the battery makers have got more and more efficient at using the source materials and in using new materials. At the low end, battery makers are using Sodium Ion batteries (e.g. the BYD Seagull). In China, battery prices are falling while demand is increasing – a classic case of increased manufacturing efficiency and materials science sidestepping shortages.
It is amazing how so many commentators seem to be blind to the elephant in the room, the Chinese market and the expansion of Chinese EV makers across Asia, Latin America, Russia and the MENA. That’s the real story, while the US and Europe become EV backwaters if they are not careful.
Part of the reason for EV uptake in China is the difficulty and considerable expense of getting a license plate for an ICE vehicle. EVs don’t have to go through the auction process.
France just increased the eco tax on new vehicles to astronomical proportions. To replace my 2013 diesel 4×4 (need it out in the muddy countryside) with a new one would incur a €60,000.00 tax. Anything over 194g/km CO2 gets hit with this insane tax. Obviously looking at keeping my current vehicle for much longer than I thought I would. And it will pollute more than the new model so what’s the gain? I’d buy an EV but there’s really nothing in a 4×4 under 70k!
‘while the US and Europe become EV backwaters if they are not careful.’
Maybe not just with EV technology. I am seeing the makings of a ‘not invented here’ campaign as in the US and EU restricting technology that is not native to them. Regardless, I found the following section very meaty-
‘In the past few years, concerns over national security and data security have become more and more prevalent. Since most autonomous cars rely on intricate software systems to operate, they are vulnerable to hacks from various bad actors.’
What they actually mean is that the US security services want direct access to that data themselves for the purposes of spying such as listening to the voices in those cars, seeing were they go and if necessary immobilizing them. If they are running foreign software then they can’t very well do that.
Exactly, that’s why they hate Huawei network routers. US routers are available spies on every network they are attached to.
Well said Roger.
Here is video explaining how Chinese car companies are going to get around sanctions.
https://m.youtube.com/watch?v=4D21v7uUxAw
“range anxiety”
Can I vent about how much I detest this phrase? It takes it for granted that we have some kind of mental issue rather than simply being aware of the plain fact that there are not enough charging stations and they take too long to charge. I don’t have “anxiety” I am just aware that your product does not fit my requirements.
Everything is some kind of mental issue nowdays, except stuff given letters by the alphabet people.
“Yours truly is too much of an optimist, but what if China were to respond by ginning up a no spyware vehicle and hawking it as cheap and secure?”
It seems like a cost saving step as well for the manufacturer.
And it’s also an environmentally friendly step with fewer parts contributing to the manufacture of things.such as requiring energy hog data centers, fresh water use (manufacture of all those chips), and the associated additional moning for resources.
Then it might be worthy of the name EV revolution. Until then, I just consider it part of the Surveillance and Rentier Revolutions and nothing at all to be excited about.