It has nothing to do with software, brand loyalty, or Elon Musk’s most recent post on X, but something strange is taking place in Detroit, Fremont, and Normal, Illinois. Since 2024, the price of copper, the dull orange metal hidden inside every car coming off the assembly line, has almost doubled. It is trading at levels that no one in the auto industry really anticipated, at slightly over $13,200 per metric ton on the London Metal Exchange. Speaking with those involved in the supply chain also gives the impression that the worst of the pressure hasn’t yet materialized.
When you look at the math, it’s brutal. Between 20 and 25 kilograms of copper are used in a typical internal combustion vehicle, distributed among wiring harnesses, alternators, starters, and small motors. Three to four times as much is required for an electric car. Just the battery thermal system requires a lot of copper. Motor windings, inverters, charging components, and high-voltage harnesses all add up. Before you even touch lithium or nickel, the difference in raw input costs per unit between an ICE vehicle and an EV is $13 per kilogram. The gap becomes a margin-eater at $20, which some analysts believe is feasible by late 2027.
This discussion has undoubtedly focused on Tesla, and for good reason. The company has spent years negotiating long-term offtake agreements that rivals just don’t have, “thrifting” copper out of its designs, and switching to aluminum when it could. However, even Tesla is unable to create copper from a battery pack. The picture is less clear for Lucid and Rivian. Both continue to spend money. Buyers are already recoiling at this price point because neither has the scale or pricing power to absorb persistent input inflation without passing it on to consumers.
The legacy players deal with a different version of the same issue. More times than executives would like to acknowledge, Ford’s F-150 Lightning program has been shelved, restarted, and re-engineered. The copper-hungry battery architecture that powers GM’s Ultium platform was created when copper was trading at about $4 per pound rather than $6. The Detroit names may have more cash on hand than the EV pure-plays, but they also have dealer networks, union contracts, and hybrid transitions that consume capital differently from Silicon Valley.
Who is actually applying the squeeze is the peculiar aspect of this tale. It’s not the automotive sector. It’s the boom in AI data centers. The hyperscalers, such as Microsoft, Google, and Amazon, are consuming copper at a rate that was unheard of five years ago. For every megawatt, a contemporary AI-optimized facility requires between 27 and 33 tons of copper. When you multiply that by gigawatt-scale campuses and add the grid upgrades required to supply them, you’ve essentially drawn a sizable new buyer into an already congested market. Nvidia’s supply chain and automakers are vying for the same pound of copper, but Nvidia has more resources.
There aren’t many historical parallels. Steel was never structurally short, but the price spikes in the mid-2000s were the last commodity-driven auto shakeout. Perhaps copper. It takes 10 to 15 years, sometimes longer, for new mines to start producing. Our grades are declining. Permitting is becoming more stringent. BHP, Rio Tinto, and Antofagasta, among other major producers, have made a public commitment to “capital discipline,” which simply means they are not racing to build new supply even at these prices. As this develops, it’s difficult not to believe that the imbalance will continue until the end of the decade.
The investor query becomes excruciatingly detailed. Which automakers have long-term copper contracts in place? Which have the technical adaptability to replace materials? Which can withstand a two-year margin compression? Tesla appears to be in a fair position. The vertical integration of the Chinese EV behemoths, especially BYD, is something that most Western brands can only envy. Polestar, Rivian, Lucid, and the smaller startups appear to be the most vulnerable. The legacy OEMs are in the middle, slowed by legacy cost structures but shielded by diversification.
Reading industry reports gives me the impression that the copper story is going to become one of those unseen forces that completely transforms a sector before the mainstream market fully pricing it in. Annual reports used to mention the red metal in a footnote. It’s becoming a headline.
