Slowdown in electric vehicle transition boosts Platinum group metal optimism

A slowdown in demand for electric vehicles has injected optimism into the platinum group metal (PGM) markets.

Platinum and palladium are integral inputs in the production of catalytic converters for both gasoline and diesel-powered engines. They are also used in chemical and petroleum processing, electronics, and specialized medical and industrial equipment. Platinum is popular in jewelry, and both platinum and palladium garner physical investment demand. 

Forty to 50 percent of platinum demand comes from the automotive industry. Palladium is even more dependent, with vehicle manufacturing accounting for 80 to 90 percent of its total demand. Overall, the auto industry accounts for around 60 percent of PGM offtake.

Metals Focus analysts say there was an evident mood shift at the PGMs Industry Day in Johannesburg, South Africa, last week.

“The tone has moved from last year’s crisis-driven cost-cutting to measured optimism. Rising hybrid adoption has potentially given the sector a new lease of life, defying earlier expectations of faster battery electric vehicle (BEV) penetration.”

Platinum and palladium both got caught up in the precious metals rally last year. Platinum surged by 92 percent in 2025, and palladium gained 65 percent. However, an expected decline in gasoline-powered vehicle production has hung over the industry like a dark cloud in recent years.

Five years ago, analysts began to anticipate a significant transition from internal combustion engines (ICE) to battery electric vehicles (BEVs). By late 2023, global light-duty vehicle (LDV) production was forecast at around 95 million units for 2026, with BEVs expected to achieve roughly 22 percent penetration.

As it turns out, the transition to electric vehicles has occurred more slowly. By the end of last year, LDV production was only down slightly from projected levels two years earlier. Meanwhile, hybrid electric vehicle production has expanded more than expected.

Hybrids require similar catalyst loadings as traditional internal combustion engine vehicles. In some operating conditions, hybrids use more PGMs than purely gas-powered vehicles.

According to Metals Focus, “Hybrids were initially viewed as a transitional technology, but recent data point to a more sustained contribution to vehicle production. This year, global hybrid output is expected to reach 26.3m units, up 12 percent y/y.”

That said, electric vehicles are forecast to make up about 18 percent of global auto sales this year, while hybrids are expected to account for 28 percent of production, up from earlier projections of just 4 percent.

“Consequently, the share of catalyzed vehicles remains higher than previously forecast.”

Metals Focus analysts said these developments underscore a “complex operating environment” for the automotive sector.

“This period has been shaped by supply chain disruptions linked to COVID-19, semiconductor shortages, evolving trade dynamics, and regulatory shifts following political changes. Together, these factors have led to a less clear electrification pathway and greater regional variation in the powertrain mix.”

Regulatory shifts easing federal greenhouse emission standards and the end to many electric vehicle tax subsidies have significantly slowed the electrification of U.S. vehicles. Metals Focus analysts said, “This policy shift will increase the share of hybrid and pure ICE powertrains produced this year. From a PGM perspective, this is supportive.”

Metals Focus forecasts North American PGM demand will remain flat in 2026 at 2.3 million ounces following two years of contraction.

There are also signs of a moderation in the electrification trend in China, the world's largest auto producer.

“The introduction of China VIb emissions standards in 2023, alongside a partial reduction in New Energy Vehicle (NEV) incentives, has coincided with a more measured pace of BEV growth. In this context, hybrid vehicles have gained market share and are expected to account for 27 percent of production.”

There have even been some policy changes in Europe undercutting electric vehicle demand, including the removal of EV purchase incentives in several markets, most notably Germany.

Meanwhile, the EU revised its 2035 emissions framework late last year. The original proposal to fully phase out ICE vehicles was replaced with a 90 percent fleet-wide CO₂ reduction target. This may also boost hybrid production.

Metals Focus analysts project these revisions to the powertrain transition forecast equate to almost 780,000 ounces of PGM demand in 2026, assuming around 180,000 ounces of PGMs per 1 million units produced.

Given these developments, Metals Focus has a more optimistic forecast for PGM demand this year.

“Overall, the transition in automotive powertrains is progressing more slowly and with greater regional divergence than previously assumed. BEV adoption continues, but at a reduced pace in some markets. Hybrid vehicles have taken on a larger interim role, supporting the PGM sector. As a result, global automotive PGM demand is forecast at 11.8Moz for 2026, a modest 1 percent y/y decline.”