Invest1 publisher3 min readPublished
Ford wrote down $19.5bn of electric plans before gasoline reached $4.47 a gallon
Copper has climbed as much as 20% this year and an EV uses 2.9 times more of it than a gas car, so the buyer interest that $4.47 gasoline created is landing on an industry that already cut its capacity.
The Investor · Invest desk
What happened
- AAA puts the US average pump price at $4.47 a gallon, up roughly 40% from a year ago, with the report attributing the rise to the US war with Iran.
- Copper has climbed as much as 20% this year amid concerns that the US will impose tariffs on imports of the metal.
- Ford said in December it would take a $19.5 billion writedown after scrapping plans to build larger electric vehicles and refocusing on gas-powered and hybrid cars.
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Why it matters
- constraint Demand has already outpaced available copper supply, so a production ramp buys its metal into a tight market and each additional unit of volume is sourced at a worse input price than the last.
- decision With the federal credit gone, each carmaker now chooses between absorbing the metal cost and raising a sticker that already sits above the market average.
- exposure Copper's move prices a tariff Washington has not imposed. EV input costs are at the mercy of a policy decision no automaker controls.
- contradiction Hybrid shopping and revived used EV interest capture the fuel saving without reaching an assembly line, so the makers that cut electric capacity collect little of the demand the pump created.
The average new vehicle in the US sold for about $50,100 in August, backed out of Kelley Blue Book's $54,813 electric average and the 9.4% premium it puts on that figure [8][1]. The gap is roughly $4,710 a car. The report does not give a copper weight per vehicle, so the 2.9 times copper intensity that Eleonor Kramarz of S&P Global Energy attributes to EVs cannot be priced off it [15].
Gasoline was about $3.19 a gallon a year ago, backed out of AAA's $4.47 average and the roughly 40% increase [1][2]. The pump signal is about $1.28 a gallon. That is what 57% of drivers surveyed by HERE Technologies and SBD Automotive were responding to when they said gas prices influenced their interest in EVs [2].
That demand reaches a manufacturer unevenly. Cox Automotive's mid-year review found 56% of shoppers more likely to consider a hybrid or a plug-in hybrid [3], the products US carmakers kept building while they pulled back on electric production [4]. Copper follows them there: Kramarz's 2035 estimate of close to 6 million metric tons counts EVs and hybrids together [14].
Supply will not answer inside a model cycle. Copper deposits are abundant, but finding them and extracting the ore is expensive, and demand has outpaced available supply [6]. "Everyone knew this was coming. It's kind of like watching a train wreck in slow motion," Doug Daley, portfolio manager at Core Commodity Management, told The Daily Upside [7].
Ford's $19.5 billion writedown in December followed its decision to scrap plans for larger electric vehicles and refocus on gas-powered and hybrid cars [10]. That sum equals the sticker price on about 356,000 new EVs at August's average transaction [4]. Global sales kept accelerating through the retreat, with buyers in China and Europe moving away from the pump [11].
The long copper case is the persuasive one. Kramarz has electric mobility supplying 32% of incremental copper demand over the coming decade [13]. If 6 million tonnes from EVs and hybrids by 2035 is more than double today's level, current contribution sits under 3 million tonnes and the increment above 3 million [14][3]. For the coming model year, what limits volume is the $4,710 premium against a federal tax credit that has expired [9]. I could be wrong in either direction. Should Washington impose the copper tariffs that this year's 20% move has been pricing [5], metal moves from the bill of materials into the price list, and the production pullback looks like foresight. If aluminum conductors and higher-voltage architectures cut copper per car faster than volume adds cars [16], the 2035 tonnage overstates what carmakers pay. A US automaker committing fresh capital to electric capacity while copper holds its gains would be saying copper is not the constraint.
What to watch
- Kelley Blue Book's monthly new EV average against the all-vehicle average: a widening gap means copper is being passed to buyers, a narrowing one means carmakers are eating it.
- Whether the stated interest converts into new EV registrations or stops at hybrids and used cars.
- Copper's price if the tariff threat fades: the year's gain unwinding would take the input pressure off any ramp-up.