Abstract: The copper usage of new energy vehicles will increase in all aspects compared with traditional internal combustion engine vehicles. Copper usage in new energy vehicles: According to statistics from the International Copper Association, the average copper usage per vehicle in 2019 was 12.6 kg, an increase of 14.5% from 11 kg in 2016. The main reason for the increase in copper usage in automobiles is the continuous updating of driving technology, which requires more electronic components and wiring harnesses.
Copper usage in new energy vehicles will increase in all aspects compared with traditional internal combustion engine vehicles. A large number of wiring harnesses are required inside the motor. At present, the vast majority of manufacturers in the market choose PMSM (permanent magnet synchronous motor) for their new energy vehicles. This type of motor uses about 0.1 kg of copper per kW, and the power of new energy vehicles currently on the market is generally above 100 kW. The copper usage for the motor alone exceeds 10 kg. In addition, batteries and charging functions require a large amount of copper, so the overall copper usage will increase significantly. According to estimates by IDTechEx analysts, hybrid vehicles use about 40 kg of copper per vehicle, plug-in hybrid vehicles about 60 kg, battery electric vehicles 83 kg, and large vehicles such as pure electric buses require as much as 224–369 kg of copper.
Average copper usage of 4 mainstream motor types (unit: kg/kW) (Source: International Copper Association, IDTechEx) Motor usage in mainstream brand new energy vehicles (Source: Wikipedia) Copper accounts for more than 95% of wiring harnesses in automobiles. Due to the increase in electronic components and wiring harnesses in vehicles, the required processing dimensions continue to shrink. Compared with aluminum, copper has better ductility and is easier to process into small diameters. At the same time, new energy vehicles, considering range and power, also tend to prefer copper wires with lower resistance. These characteristics make copper difficult to replace in automobile production.
Current status of the new energy vehicle market: In 2019, global automobile production and sales completed 91.7868 million and 91.3584 million units respectively, down 5.2% and 4.5%. Global new energy vehicle sales reached 2.2 million units, an increase of 10%, with a sales share of only 2.4%. Domestic automobile production and sales in China completed 25.721 million and 25.769 million units respectively, down 7.5% and 8.2% year-on-year. New energy vehicle production and sales completed 1.242 million and 1.206 million units respectively, down 2.3% and 4.0% year-on-year. New energy vehicle sales accounted for 4.8%. China was the world's largest new energy vehicle production and sales market as of 2019. (Data sources: International Organization of Motor Vehicle Manufacturers, China Association of Automobile Manufacturers) (Data source: International Organization of Motor Vehicle Manufacturers)
The China Association of Automobile Manufacturers recently released new energy vehicle sales data for January–July 2020. In July, new energy vehicle production and sales completed 100,000 and 98,000 units respectively, up 15.6% and 19.3% year-on-year. In the cumulative January–July period, new energy vehicle production and sales completed 496,000 and 486,000 units respectively, down 31.7% and 32.8% year-on-year. Sales are expected to improve in the second half of the year, with the full-year expected sales volume remaining at 1.1 million units. This year, new energy vehicle sales in Europe have grown rapidly. Data released by a German data company shows that more than 500,000 new energy vehicles were registered in Europe from January to July, of which about 269,000 were battery electric vehicles and about 231,000 were plug-in hybrid vehicles, already close to the full-year sales of 2019 and surpassing China. Analyst Matthias Schmidt expects total annual sales in Europe to exceed 1 million units. (Data sources: China Association of Automobile Manufacturers, public information)
The decline in China's sales in the first half of the year is partly due to the impact of the epidemic, but Europe, which was also affected by the epidemic, grew rapidly, reflecting another important feature of the current new energy vehicle market. Unlike the internal combustion engine vehicle market, which is mature and fully market-oriented, the new energy vehicle market is still in its early development stage and is significantly affected by policy. China's subsidy policy has been in place for a long time and has gradually been phased out this year, while Europe is now in the midst of vigorous subsidy implementation. Countries have increased their efforts this year, so it is not surprising that sales have increased significantly and overtaken China.
Development prospects of new energy vehicles: From a macro policy perspective, most countries and regions around the world are firmly promoting the popularization of new energy vehicles. China launched the "dual credit" policy in 2017 to restrict emissions, and this September will introduce new regulations to lower the entry threshold for new energy vehicles and strengthen their promotion. Europe this year has legislated the world's strictest CO2 emission regulations: reduce to 95 g/km by 2021 (approximately 4.1 L gasoline/100 km); in 2020, 95% of new cars must meet 95 g/km (with a 1-year buffer period); by 2025, a 15% reduction compared to 2021 (i.e., down to 80.75 g/km); from 2030, the average CO2 emissions of new cars in the EU must be 37.5% lower than in 2021 (i.e., down to 59.375 g/km); the ultimate goal is to achieve zero emissions by 2050.
New energy vehicles have not been around for a long time. Previously, their production costs were still higher than those of internal combustion engine vehicles of the same class, and consumers' willingness to buy was weak, with consumption mainly stimulated by subsidy policies. However, in the next few years, global automakers will inevitably increase R&D efforts for new energy vehicles in order to meet emission regulations. The electrification targets announced by major automakers all state that they will increase the share of new energy vehicles in their product portfolios to at least 25% by 2025.
Over the past five years, global annual automobile production has remained at around 90 million units. If the market share of new energy vehicles can be increased, it will bring new copper demand on the order of one million tons. In March this year, the International Copper Association, together with IDTechEx, released a forecast on the development of the automotive industry, suggesting that new energy vehicles may usher in explosive growth over the next 20 years. IDTechEx expects new energy vehicles to increase from 2.8% of total annual production in 2025 to 8%, and after reaching 19% in 2030, they will develop faster as technology and the market mature, until they account for 72% of the automobile market in 2040.
Global automotive industry forecast (unit: thousand units) (Source: International Copper Association, IDTechEx) The colored portions represent new energy vehicle production by country/region, and the black portions represent global internal combustion engine vehicle production.
The International Copper Association expects the share of new energy vehicles to rise to 19% by 2029. To meet the energy storage needs of mobile vehicles and fixed stations, the passenger car segment alone will bring more than 800,000 tons of new demand, and total new demand will exceed 1.1 million tons. It is clear that the potential of the new energy vehicle market is huge.
(Estimation method: According to data from the International Organization of Motor Vehicle Manufacturers, global vehicle production in 2019 was 91.78 million units, of which passenger cars accounted for 67.15 million units, or 73.2%. According to the International Copper Association's forecast, global vehicle production will continue to rise until peaking in 2031, and global production in 2029 will approach 100 million units. Passenger cars will be about 73.2 million units. If the proportion of new energy vehicles can increase to the projected 19%, total output will reach approximately 13.908 million units. In 2019, pure electric vehicles accounted for 83% of total new energy vehicle sales in China, and 65% in Europe. If this proportion reaches 70% in 2029, the weighted copper usage per new energy passenger car will be 76.1 kg, and the total copper usage for the entire passenger car segment will be about 1.058 million tonnes, with additional copper usage of 869,000 tonnes. For the remaining 26.8%—light commercial vehicles, heavy trucks, and buses—if all are calculated according to passenger car standards, there would still be 387,000 tonnes of copper demand, an additional 318,000 tonnes. In total, copper demand would be 1.445 million tonnes, with additional demand of 1.187 million tonnes.
All data used in the above estimates are relatively conservative. The main copper consumption points in new energy vehicles lie in batteries, wiring, and electric motors. Commercial vehicles far exceed passenger vehicles in both size and power, especially heavy trucks and buses, so the actual copper usage in this segment is severely underestimated. The 70% share of pure electric vehicles is also relatively low. Looking at current trends, the proportion of pure electric vehicles is gradually rising; the International Copper Association expects this figure to be 85%. In addition, all vehicle types are uniformly calculated at a 19% new energy penetration rate. However, from a policy standpoint, the electrification rate of commercial vehicles should be higher than that of passenger vehicles. For example, some domestic cities, such as Shenzhen, have already achieved full electrification of their bus fleets. Moreover, under the influence of emission restriction policies, large vehicles in Europe would need to achieve average CO2 emissions of 95 g/km, equivalent to a fuel consumption of 4 L/100 km, so their electrification rate will certainly be much higher than that of small vehicles. Overall, the values calculated above are on the low side. The International Copper Association predicts that total copper demand from the new energy vehicle industry will reach 2.3 million tonnes in 2029, with trucks and box vans accounting for the largest share, which also reflects that the electrification rate of commercial vehicles should be higher than that of passenger vehicles.) 2019-2029 Annual Copper Demand Forecast for Mobile and Stationary Electric Energy Storage (Source: International Copper Association, IDTechEx) The new energy vehicle industry as a whole is still in the development stage, and current estimates of vehicle copper usage are based only on existing technologies. Ten years is a relatively long R&D period, and the actual situation may well change later. For example, the pursuit of longer range will push copper usage up, while improved processing technologies that produce thinner copper foil will reduce copper demand. In addition, CATL has already begun developing battery swap technology, which allows batteries to be replaced directly at swap stations rather than charging via charging piles. If this model becomes widespread, it will undoubtedly add a large number of spare batteries on top of the one-battery-per-vehicle basis, also requiring large amounts of copper. No matter how technology changes, as new energy vehicles continue to spread and their substitution of traditional internal combustion engine vehicles keeps rising, copper's role is currently hard to replace, so overall copper demand is bound to grow.
Summary: Domestic full-year sales are expected to remain unchanged at 1.1 million units. Sales are expected to pick up in the second half of the year. Overseas growth was relatively large in the first half, and expectations for the second half are also high. The second half will continue to bring a small amount of copper demand, providing weak support to copper prices. At present, global annual production of new energy vehicles is only about 2.2 million units; total copper demand is still relatively small, so the impact on the market is limited. However, behind new energy vehicles is the entire automobile market. As countries around the world set ever higher environmental requirements, the popularization of new energy vehicles has quietly begun. If new energy vehicle manufacturing processes do not undergo major changes, then as market share continues to increase, huge demand on the order of millions of tonnes will be generated. If new energy vehicles account for 19% of the automobile market in 2029, the annual copper usage from new energy vehicles alone will gradually increase from 27,000 tonnes of new demand in 2019 to at least 1.1 million tonnes of copper demand.