Key materials: The transition to EVs and renewables will test global commodity supply
- June 1, 2023: Vol. 10, Number 6

Key materials: The transition to EVs and renewables will test global commodity supply

by Frank Holmes

The Biden administration proposed aggressive new tailpipe emissions standards that, if enforced, would leave carmakers with no other choice than to produce electric vehicles almost exclusively by 2032.

Under the proposal, among the toughest in the world, carbon dioxide emissions from new cars and light trucks would need to be reduced an ambitious 56 percent in less than 10 years. It’s believed that to meet this goal, two out of every three passenger vehicles manufactured in the United States would need to be electric models.

That’s a tall order. Today, EVs represent around 8 percent of total U.S. auto sales. By the end of the decade, they’re forecast to account for a little over half of all sales. That’s up from an earlier forecast of 44 percent due to last year’s passage of the Inflation Reduction Act, but it’s still well below the 66 percent to 67 percent the administration’s proposal mandates.

As I’ve said many times before, government policy is a precursor to change, and if this proposal sticks, we may see some dramatic changes to our nation’s roads, power grids and charging stations in the coming years.

Many consumers and elected officials will very likely oppose the upcoming changes, but investors — particularly metals and mining investors — could be looking at once-in-a-generation investment opportunities.

Compared to traditional internal combustion engine vehicles, EVs require a vastly greater number and greater amounts of key materials. Based on the latest figures from the International Energy Agency, a typical electric vehicle (including its batteries) contains 207 kilograms of minerals, or six times the amount in a conventional car. There’s roughly two and a half times as much copper, and more than twice as much manganese. EVs also require lithium, nickel, cobalt, graphite and rare earths — minerals that are not typically found in traditional vehicles.

Acquiring sufficient amounts of these materials to electrify America’s fleet of light cars and trucks will prove to be the greatest test of our commitment to the energy transition. It may pose an even greater challenge than the need to build out the U.S. power grid, manufacture enough batteries and install enough charging stations.

Supply-demand imbalances are a headache for manufacturers and can drive up prices for consumers, but for investors, they can be highly profitable. I recommend investors consider getting exposure to mining companies that produce the metals and minerals (copper, lithium, nickel and cobalt in particular) that will increase in demand as EVs steadily replace conventional vehicles.

And then there’s silver. Although the white metal isn’t used in the production of EVs, it can be found in solar photovoltaic cells, which we’ll also be seeing more of in the coming years due to the energy transition.

During 2022, solar power accounted for half of all new electricity-generating capacity in the United States, marking the fourth straight year solar beat other power sources in added capacity, according to a report by Wood Mackenzie. The firm estimates that by 2033, cumulative U.S. solar installations will stand at 700 gigawatts, five times more than the 141 gigawatts of solar capacity today.

Like EVs, new solar installations will require vast amounts of metals and minerals, silver in particular. In fact, a study published late last year predicts that, by the year 2050, about 85 percent to 98 percent of current global silver reserves will be consumed by the solar panel industry, creating a “significant silver demand risk.”

Again, today’s investors could be in a position to capitalize on tomorrow’s supply-demand imbalances by getting exposure to physical silver and silver miners.


This report was excerpted from an article written by Frank Holmes, CEO and CIO of U.S. Global Investors. The full version of this story appeared on the U.S. Global Investors’ website. Read it here.

Forgot your username or password?