PGM producers have high hopes for hybrid vehicles

The main source of demand for platinum group metals (PGMs) has long been to provide the catalysts that cap pollution emissions from internal combustion engine (ICE) vehicles. This is why the rise of battery electric vehicles (BEVs) has been regarded as an existential threat to the PGM industry. Such vehicles do not require PGMs at all. 

Hybrid vehicles straddle the two, combining an ICE with an electric motor and battery. And a little-known fact about hybrids is that they require more PGMs than a stand-alone ICE vehicle. 

As hybrids gain traction, and the hype around BEVs cools, hopes are rising for PGM producers. 

“Hybrids have been curiously under-examined by investors and analysts alike. […] Understanding the true energy economics of hybrid drivetrains is not just an academic exercise – it is key to understanding how PGM demand may evolve in the coming decade,” natural resource investment firm Goehring & Rozencwajg said in a commentary earlier this year.

“Why? Because hybrids require more PGMs than ICEs. Catalytic converters operate best at high temperatures. In a traditional ICE vehicle, the engine runs continuously, allowing the converter to reach and maintain those optimal temperatures.”

This is not the case in a hybrid, which has on and off engine cycles – a state of affairs that cools the catalytic converter, causing it to run less efficiently.

“Reactions of this nature need temperature, or more loading of PGMs. If you put more metal in you get a reaction at lower temperature,” Paul Dunne, CEO of Northam Platinum, told Daily Maverick in an interview. 

“In a normal ICE vehicle you start the car and it is running all the way until you stop. In a hybrid, the engine is start/stop, so the exhaust goes up and down in temperature, meaning you need sufficient loading, not just for the first cold start but all the start/stops.” 

Dunne hastened to add that it only required slightly more PGMs. 

But a little can mean a lot if hybrids take off. 

“As hybrids gain share at the expense of both EVs and ICEs, the added PGM intensity becomes an important and under-appreciated source of future demand – one that few analysts have yet chosen to highlight,” Goehring & Rozencwajg noted.

“Today, 98% of all new vehicles sold worldwide are equipped with catalytic converters. The average PGM loading per converter is currently estimated at 5 grams. We believe that figure is heading higher – and soon.”

Demand for hybrids is on the increase

Hybrids are certainly gaining ground. US new car sales in 2024 maintained their rise from the pandemic trough, with surging demand for hybrid vehicles a significant driver of the trend.

It’s a trend that has continued to pick up pace. 

“About 22% of light-duty vehicles sold in the first quarter of the year in the United States were hybrid, battery electric, or plug-in hybrid vehicles, up from about 18% in the first quarter of 2024,” said a report by the US Energy Information Agency. 

“Among those categories, hybrid electric vehicles have continued to gain market share while battery electric vehicles and plug-in hybrid vehicles have remained relatively flat, according to estimates from Wards Intelligence,” it said. 

Hybrids, with their dual system, have a greater range than EVs and are also efficient on fuel. 

It’s not like EVs have suddenly stalled in the slow lane – sales are on track for another record year. But hybrids are taking a growing share of the market, and that is music to the ears of PGM producers. 

“I think people are missing the point that hybrids are good for PGMs,” Johan Theron, head of investor relations at Impala Platinum (Implats), told Daily Maverick. 

He also noted that hybrids are not perceived to be that green, because they also use fossil fuels. 

“As a technology you are taking the best of petrol and the best of battery and combining it and you are getting a good outcome,” Theron said. 

But the pace of technological change is accelerating, and a new hybrid coming out of China called the “range extender” does not require as many PGMs as an ICE vehicle because a generator allows the engine to run more constantly. It’s a space that will be keenly watched.

Read more: Recycling woes, Chinese jewellery platinum pivot hold hope for PGM prices

PGM prices scaled record highs over three years ago before they were brought back to earth by a range of factors, including a sour global economy and the rise of EVs. But since May this year they have been rebounding, driven in part by tightening supplies and rising Chinese demand. Platinum’s price is now up more than 50% in the year-to-date to $1,400-plus an ounce, palladium a more modest 25% as of 3 September. 

It’s not quite a bull market yet. Implats CEO Nico Muller pointedly said during the company’s recent results presentation that he saw a “price-supportive environment for the next 12 to 18 months” but not the market fundamentals to take platinum to $2,000 an ounce. 

Cautious optimism

Still, there is currently cautious optimism in the PGM sector. Northam’s Dunne, at the miner’s results presentation, showed a slide he has used in the past showing how primary platinum and palladium supplies are seen going into a steep decline in coming years – a consequence of a lack of investment and new mine construction. And tightening regulations in Europe and China will require more PGM loadings in catalytic converters. 

Hybrids, which require palladium, are only part of this story. But the PGM sector, which is a critical catalyst in the South African economy, hopes that hybrids will play an increasing role on this stage. DM

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This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.