The Transition To Electric Vehicles And Renewables Will Test Global Commodity Supply

This week, the Biden administration proposed aggressive new tailpipe emissions standards that, if enforced, would leave carmakers with no other choice than to produce electric vehicles (EVs) 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% in less than 10 years. It’s believed that to meet this goal, two out of every three passenger vehicles manufactured in the U.S. would need to be electric models.

That’s a tall order. Today, EVs represent around 8% of total auto sales in the U.S. 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% due to last year’s passage of the Inflation Reduction Act (IRA), but it’s still well below the 66%-67% that 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.

Electric Vehicles' Share of Total Passenger Vehicle Sales Expected to Top 50% by 2023

Profiting Off The Supply-Demand Imbalance

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 (ICE) vehicles, EVs require a vastly greater number and greater amounts of key materials. Based on the latest figures from the International Energy Agency (IEA), a typical electric vehicle—including its battery—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 which aren’t typically found in traditional vehicles.

Minerals Used in Electric Vehicles (EVs) Compared to Conventional Cars