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Silver and the EV revolution
Slowly but surely, the world is bidding farewell to the internal combustion engine (ICE) era and embracing cleaner, eco-friendly electric vehicles (EVs). In a few decades, the silent hum of electric motors will completely replace the rumble of gasoline engines. But beneath the gleaming exteriors of these sleek EVs is a secret ingredient many aren’t aware of – silver.
Yes, the precious metal you might associate with jewelry or flatware plays a pivotal role in the EV revolution. While silver is neither a strategic nor a critical metal, its unique properties make it indispensable in the production of many components – from battery packs to electronic systems – that power these next-generation vehicles.
Below, we take a deeper look into how silver is driving the EV revolution and why this precious metal is more vital to the automotive industry's evolution than many realize.
Silver Content in ICE Cars vs. EVs
Silver's role in the automotive industry has been significant for decades, but the advent of EVs is set to reshape and amplify its importance. So, how is the precious metal used in ICE vehicles compared to EVs, and which of the two requires more silver?
Silver Usage in Traditional Ice Cars
For a long time, traditional ICE vehicles have used silver in electrical components such as wiring harnesses, fuse boxes, and various electrical contacts. Its exceptional conductivity and resistance to corrosion make it an ideal choice for these applications.
Additionally, silver-based coatings are used in catalytic converters, which are essential for reducing harmful emissions from ICE vehicles.
While platinum and palladium are more commonly associated with catalytic converters, silver plays a supportive role by enhancing the performance of these precious metals. It helps in the oxidation of pollutants, contributing to the effectiveness of catalytic converters.
Silver is also found in various other components like sensors, switches, defroster systems for car windows, and decorative trim elements. It is also used to coat reflective surfaces in headlights and mirrors, enhancing visibility and safety.
On average, a typical ICE car contains approximately 15-28 grams of silver. While this might seem modest, the cumulative demand for silver from the millions of ICE vehicles produced annually is substantial.
Silver Demand in EVs
Due to their reliance on advanced electrical and electronic systems, EVs have a significantly higher demand for silver. These vehicles require substantial amounts of silver for wiring, circuit boards, and various other components that power their complex electrical systems.
Moreover, the battery management systems, which ensure efficient and safe operation of the battery pack, incorporate silver in sensors, connectors, and printed circuit boards. Silver is used in these systems for its ability to handle high currents and its reliability in harsh operating conditions.
Another critical component that drives silver demand in EVs is the inverter, which converts the direct current from the battery into alternating current to power the electric motors. Silver is a key material used in the production of these inverters, as well as in the motor control units that regulate the performance of the electric motors.
Many EVs also come with complex infotainment systems that include everything from web viewers to advanced OS integration and vehicle management features. These infotainment systems will further drive the need for silver as they require the metal for circuit boards, touch screens, antennas, and electromagnetic shielding.
While estimates vary, it is generally accepted that a typical EV contains between 25 and 50 grams of silver, significantly more than a traditional ICE car. As EVs continue to evolve and incorporate more cutting-edge technologies, the demand for silver is likely to continue rising.
Silver Demand Surge with EV Adoption
The shift from ICE vehicles to EVs will not only transform the automotive industry but also significantly impact the demand for silver. As EV adoption accelerates, the automotive sector's appetite for silver is expected to surge, creating a supply-demand imbalance and reshaping market dynamics.
Historical Trends in Silver Demand From the Automotive Sector
Historically, the automotive sector's demand for silver has been relatively steady, driven primarily by its use in electrical components, catalytic converters, and other applications in ICE vehicles.
Over the past few decades, advancements in automotive technology and stricter emission regulations have gradually increased the amount of silver used per vehicle. Despite this growth, the overall demand from the automotive sector remained a small portion of the global silver market, largely overshadowed by demand from electronics, jewelry, and industrial applications.
However, the last decade has seen a noticeable uptick in silver consumption from the automotive sector, coinciding with the initial waves of EV adoption. Early electric and hybrid vehicles introduced more advanced electronic systems and components that relied heavily on silver, marking the beginning of a significant shift in the sector's silver demand profile.
Projected Increase in Silver Demand Due to EV Adoption
While 2023 wasn't all that ideal for chipmakers, leading to a slump in the production of EVs, 2024 is set to see movements on the silver market as the EV revolution continues to gain momentum.
The projected increase in silver demand from the automotive sector is driven by two key factors: the rapid growth in global EV sales and the higher silver intensity per EV compared to traditional ICE cars.
As concerns over climate change and the need for sustainable transportation solutions intensify, the adoption of EVs is expected to accelerate rapidly. Industry forecasts suggest that global EV sales could account for over 50% of new vehicle sales within the next 10 years.
At the same time, the amount of silver required per EV is significantly higher than that of traditional ICE cars. This increased demand is driven by the extensive use of silver in various EV components, such as battery management systems, inverters, and motor control units.
As EV technology continues to advance, the silver content per vehicle may increase further, driven by the need for more efficient and reliable components. For instance, with many EVs poised to have AI-enhanced capabilities, we’re also going to see a further increase in silver demand for the purpose of GPU server hosting, which will inevitably be the lifeline of every aspiring AI startup without 6-figure sums for new Nvidia cards or server racks.
Impact on Silver Market Dynamics
The rapid growth in EV adoption, coupled with the higher silver intensity of these vehicles, is expected to create a substantial surge in silver demand from the automotive sector. This increased demand could potentially strain the existing supply of silver, leading to a potential supply-demand imbalance.
As with any commodity, the interplay between supply and demand plays a crucial role in determining prices. If the demand for silver from the automotive sector outpaces supply, it could lead to upward pressure on silver prices. This, in turn, could have far-reaching implications for various industries that rely on silver, including electronics, solar panels, and even jewelry.
While the EV revolution presents numerous environmental and technological benefits, it also highlights the critical importance of strategic metal sourcing and sustainable mining practices. As the automotive industry undergoes this transformative shift, it will undoubtedly influence silver market dynamics, potentially reshaping the global supply chain and driving innovation in silver production and recycling efforts.
Opportunities for Investors and Stakeholders
The growing importance of silver in the EV revolution presents opportunities for investors and stakeholders across various sectors. As the demand for silver grows, investments in silver mining, recycling technologies, and innovative material solutions are expected to yield substantial returns.
Additionally, companies involved in the EV supply chain, from battery manufacturers to electronics producers, stand to benefit from the increased demand for silver. Investment products like silver exchange-traded funds (ETFs) and futures contracts might also attract heightened interest from investors seeking exposure to this precious metal's potential upside.
Wrapping Up
As the world embraces sustainable mobility through EVs, the demand for silver from the automotive sector will skyrocket, potentially straining existing supplies and disrupting market dynamics. This could even cause silver prices to outperform gold over the next few years.
Looking ahead, it's clear that silver's role in the EV revolution will only continue to grow as the adoption of electric vehicles accelerates globally. This trend will likely spur further investment in silver mining, recycling technologies, and potential material substitutes, ensuring a stable and sustainable supply of this precious metal.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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