Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will the Death of Diesel Cars Ruin Platinum?

Commodities / Platinum Aug 12, 2017 - 03:22 PM GMT

By: Arkadiusz_Sieron

Commodities

The gloomy future of the diesel vehicles is commonly known. However, what does it really mean? And how could the demise of diesel technology impact the precious metals market?

The 1970s oil crisis and accelerating inflation made diesel-powered cars popular, especially in Europe where gasoline prices were always higher than in the U.S. The new technology was considered as more efficient and less polluting, as diesel cars produce less carbon dioxide than gasoline cars (thanks to better mileage). Hence, policy makers started to support diesel and the market share of diesel cars went from 14 percent in 1990 to 50 percent in 2016, as the chart below shows.


Chart 1: Market share of diesel in new passenger cars in Western Europe from 1990 to 2016 (as %).

However, there was a catch. Diesel cars produce more nitrogen oxides, the main cause of smog. Although it was not a secret, it has recently turned out that diesel engines pollute much more than anyone thought. The new study published by Nature, which followed the Volkswagen scandal, showed that diesel vehicles produce 50 percent more nitrogen oxide emissions than during laboratory certification testing. These excess emissions are associated with about 38,000 premature deaths globally associated with heart attacks, lung cancer, and strokes, among other things. However, the overall number of people who died prematurely due to Europe’s high share of diesel is in the hundreds of thousands.

Hence, given the rising ecological and health awareness, accompanied by the more stringent regulatory stance, diesel cars are likely to fall into oblivion. Indeed, as one can see in the chart above, the market share of these vehicles in Western Europe declined from 55.7 percent in 2011 to 49.5 percent in 2016. We expect further decreases in the years ahead, as more and more producers and authorities forsake this technology. For example, Volvo declared in May that it would not develop any more new-generation diesel engines due to rising compliance costs, while the current generation would be produced until about 2023. Meanwhile, the mayors of Paris, Madrid, Athens and Mexico City have recently announced plans to take diesel vehicles off their roads by 2025. Actually, France went even further, as Macron’s government revealed its will to end sales of gasoline and diesel vehicles by 2040. And the Indian government also announced that every car in the country will be electric by 2030.

Actually, the demise of diesel vehicles may approach much earlier. According to a study by AlixPartners, diesels will have just 9 percent of the European market by 2030 due to a shift into electric cars. Last year, 14.6 million passenger cars were registered in Europe, half of that were diesel cars. In 2017, the Europe’s auto market is expected to start to flatten – the growth is projected at about 3 percent, much slower than in recent years. Fixing that growth rate, the European sales would decline to just about 2 million passenger cars, or by about 70 percent, by 2030.

The implications for the precious metals are very serious. First, platinum, which is mainly used as diesel exhaust emissions control catalyst, is likely to continue its underperformance relative to other precious metals. Given that the automotive sector accounts for about 40 percent of the overall demand for platinum, the need for the metal will decline by about 20 percent until then (we assumed that the absolute car sales would grow 33 percent and we did not include the truck segment, which accounts for about 40 percent of automotive demand, as diesel should maintain its position in that segment for much longer).

Hence, investors should not count on platinum prices rebounding and jumping above the price of gold again. Actually, the price of platinum may reach parity with palladium soon, which is mainly used in gasoline vehicles, or even decline below the price of its cousin.

Some analysts argue that with these prices close and with platinum being the more effective catalyst we might see a return of demand for platinum from the automotive industry. It’s possible, but not very likely – there may be a halt to any research to replace platinum with palladium as the predominant diesel exhaust emissions control catalyst at best. The truth is that automakers are frantically looking for non-precious platinum and palladium substitutes to cut costs.

So although it might be true that platinum is cheap, there are good fundamental reasons why it is cheap. There is structural change ongoing in the automotive sector, which is likely to cause diesel cars losing market share. It may be not evident at this stage, but investors are always forward-looking. Unless platinum-group metals find new applications, their long-term investment attractiveness will decline.

Thank you.

If you enjoyed the above analysis and would you like to know more about the gold ETFs and their impact on gold price, we invite you to read the April Market Overview report. If you're interested in the detailed price analysis and price projections with targets, we invite you to sign up for our Gold & Silver Trading Alerts . If you're not ready to subscribe at this time, we invite you to sign up for our gold newsletter and stay up-to-date with our latest free articles. It's free and you can unsubscribe anytime.

Arkadiusz Sieron
Sunshine Profits‘ Market Overview Editor

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Arkadiusz Sieron Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in