Electric vehicle (EV) manufacturers are experiencing a surge in interest fueled by rising gasoline prices. However, the sector faces significant operational hurdles due to increasing demand and supply constraints related to critical base metals, most notably copper.
Consumer Demand and Market Momentum
The market for electric vehicles is gaining momentum, partially driven by the current economic climate. According to AAA, the US average price for gasoline has risen to $4.47 a gallon, representing an increase of roughly 40% compared to figures from one year prior, a trend partially attributed to the ongoing conflict in the Middle East.
Consumer surveys indicate that rising fuel costs are influencing buying decisions. A recent report by HERE Technologies and SBD Automotive found that more than half of US drivers feel more willing to consider EVs now than they did last year. Furthermore, 57% of drivers cited elevated gas prices as a key influence on their interest in electric mobility. Mid-year data from Cox Automotive showed that 56% of shoppers reported that higher gasoline prices made them more inclined to consider hybrid or plug-in hybrid models.
The Copper Constraint
Despite the growing popularity of EVs, the industry faces a heavy dependency on copper. This base metal, traditionally associated with items like the US penny, is vital for the manufacturing process. As carmakers attempt to scale up EV production, they must secure massive quantities of copper, whose price has increased by as much as 20% this year amid concerns that the US may impose tariffs on the metal.
While copper deposits are abundant globally, the process of locating and extracting the raw ore is costly. This has led to a situation where spiking market demand has begun to exceed current supply capabilities. Doug Daly, a portfolio manager at CoreCommodity Management, commented on the precarious balance of the metal market, stating:
The story with copper is really one of supply and demand being out of balance, and the fact that there’s just such a long road between the start line and the finish line for a copper project and that we’re not really seeing people even off to the races. Everyone knew this was coming. It’s kind of like watching a train wreck in slow motion.
This resource pressure forces automakers to consider raising prices. Data from Kelley Blue Book showed that in August, US buyers paid an average of $54,813 for new electric cars, a premium 9.4% higher than the overall auto market average. This price difference was magnified by the expiration of federal tax credits previously offered under the Biden administration, leading major American companies to reassess their strategies. For instance, Ford announced in December that it would write down $19.5 billion after abandoning plans for larger EVs, choosing instead to focus on gas-powered and hybrid vehicles.
Future Demand and Technical Adjustments
Globally, EV sales continue to accelerate, with drivers in Europe and China looking to reduce their dependence on gasoline. Analysts have noted that geopolitical conflicts in the Middle East have reignited interest in used EVs within the United States.
The long-term outlook for copper remains robust. According to Eleonor Kramarz, global head of critical minerals and energy transition consulting at S&P Global Energy, electric mobility is projected to be the single most important source of copper demand growth over the next decade, contributing 32% of all incremental demand. She added that by 2035, the combined demand from EVs and hybrids could reach nearly 6 million metric tons of copper, more than double current requirements.
Kramarz further explained that EVs require 2.9 times more copper than traditional gasoline-powered vehicles. She noted that the metal is fundamental because it is necessary for a car to store and distribute electricity from the battery to the motors, due to its excellent conductivity, thermal performance, and small physical footprint compared to alternative materials.
While automakers are investigating ways to reduce the copper required per vehicle—such as using aluminum conductors in some systems or adopting higher-voltage architectures to reduce cable cross-sections—Kramarz advised that these technological improvements are anticipated to be “incremental rather than transformative.”
