The rapid growth of electric vehicles (EVs), led by China, has driven increased demand for copper in recent years. However, industry analysts now predict that innovation in EV technology, aimed at improving efficiency and reducing costs, could limit the future demand for the metal.
Traditionally, copper has been considered a crucial component in the transition to green energy, particularly due to its use in electric vehicle wiring. On average, EVs can consume up to 80 kilogrammes (176 pounds) of copper, four times the amount used in a conventional combustion engine vehicle. Goldman Sachs reported that EVs accounted for two-thirds of global copper demand growth last year. However, advancements in EV and battery manufacturing have enabled weight reduction and cost-saving measures, resulting in a decrease in the amount of copper required per vehicle, according to both Goldman Sachs and consultancy CRU Group. CRU Group revised its estimate for copper usage in an average EV to 51-56 kilogrammes between this year and 2030, down from its previous forecast of 65-66 kilogrammes.
Goldman Sachs also projected that copper usage in an average EV would decrease to 65 kilogrammes per vehicle by 2030, compared to an estimate of 73 kilogrammes in the previous year. These changes are driven by various engineering advancements, such as the adoption of more compact batteries that eliminate the need for wired modules, the use of thinner copper foil in battery cells, and the transition to higher voltage systems that require less wiring. For instance, Tesla has announced plans to switch to a 48-volt system for the secondary battery in future EVs, significantly reducing the need for the chemical element.
CEO Elon Musk stated that this change could potentially decrease copper usage to just one-quarter of current levels. Goldman Sachs considers battery innovation and the adoption of higher voltage systems as the primary factors that could threaten copper’s leverage in the EV market. The firm now expects copper demand for EVs to reach 1 million metric tons this year and 2.8 million metric tons by 2030, lower than its previous projection of 3.2 million metric tons.
While the reduced copper usage in each EV unit may impact overall demand, the increasing penetration rate of EVs globally is expected to compensate for it. CRU predicts that EVs and plug-in hybrids will account for 42% of all vehicles sold worldwide by 2030, up from its previous forecast of one-third. Analysts believe that some stakeholders may have underestimated the potential of EV manufacturers to introduce technologies that limit the use of the chemical element in their vehicles. The price of copper on the London Metal Exchange reached a record high of US$10,845 per metric ton in March 2022, partly due to the bullish demand story surrounding EVs. However, since then, the price has declined by nearly a quarter.
As EV innovation continues to evolve, the impact on copper demand will be closely monitored. While the efficiency gains achieved through technological advancements may reduce the need for copper, the overall growth of the EV market remains a significant factor in shaping the future demand for metal.
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