Automakers use platinum, palladium and rhodium in varying amounts in autocatalysts to filter out carbon monoxide and particulate emissions.
While only a few grams go into every car -- compared with more than 2,000 pounds (900kg) of steel -- the high prices result in a cost of roughly $200 per vehicle on average for the platinum group metals (PGMs).
With about 55 million cars sold globally last year, that equates to roughly $10 billion of PGMs, and demand is growing.
Driven by tighter emissions laws, auto industry use of platinum rose more than 8 percent last year and now accounts for some 60 percent of total demand for the metal, which is also used for jewellery.
Platinum prices have doubled in the past two years, jumping by 50 percent from the start of 2008 alone to a record $2,290 an ounce in early March, due mainly to supply shortages from major producer South Africa.
Other precious metals such as palladium and rhodium have also shot up in value.
Japanese automakers have tried to minimise the impact of soaring prices by substituting cheaper palladium for platinum and rhodium and locking in long-term supply contracts.
But with limited financial hedging available to counter rising prices, most work is going into developing methods to use less or none of the expensive materials.
NANOTECHNOLOGY TO THE RESCUE
The fruits of those efforts are due to appear soon.
Nissan Motor Co, Japan's No.3 automaker, has developed a catalyst for gasoline cars that halves the use of precious metals components by employing nanotechnology.
Using particles as small as a few billionths of a metre, nanotechnology prevents fine metal particles from clustering in catalysts, enabling engineers to use less precious metals to clean exhaust emissions.
Nissan, which plans to share the technology with European partner Renault, will start employing it early next year on all new gasoline models.
Joji Tagawa, corporate vice president in charge of the automaker's treasury department, said Nissan held back from applying a forward rate contract for platinum this year.
The reason we were a bit hesitant is that we knew that this technological breakthrough would lead to a significant reduction of platinum usage, he told Reuters.
Mazda Motor Corp, owned one-third by Ford Motor Co, has achieved a similar feat using single-nanotechnology, which will allow it to slash platinum and palladium use by up to 90 percent. Mazda has not said when the technology would be put to use.
Honda Motor Co Chief Executive Takeo Fukui said technology, though not yet perfect, also existed to replace precious metals altogether. Honda used a class of minerals called perovskites in an earlier version of the Step Wgn, a minivan sold mainly in Japan, but ditched it due to problems with durability.
It was infinitely cheaper than precious metals, but difficult from a durability standpoint, he said. But we're engaging in all kinds of trials to test technology like that.
Other promising alternatives are on the horizon.
Japan's Mitsui Mining and Smelting Co told Reuters last month it aimed to start commercial production in three years' time of a new catalyst that applies silver rather than platinum in diesel vehicles, at almost $2,000 an ounce cheaper.
Further ahead, Daihatsu Motor Co, Toyota's minivehicle unit, could develop a platinum-free fuel-cell vehicle after it said last year it had found a way to use less costly metals such as cobalt or nickel. Hydrogen fuel-cell cars in development today use an estimated 100 grams of platinum, costing thousands of dollars, to separate protons from electrons in hydrogen atoms.
The spread of hybrid cars could also reduce usage of PGMs.
Takeshi Uchiyamada, an executive vice president at Toyota and father of the Prius hybrid, said such gasoline-electric cars use less platinum than vehicles that run solely on gasoline because they give off fewer emissions to begin with. Harmful exhaust gases are emitted most during acceleration in gasoline cars, while hybrids use or get assistance from an electric motor during the process.
Toyota and Honda both expect about a tenth of their vehicles to be hybridised by the mid-2010s.
Still, Uchiyamada noted the reduction of platinum use in hybrids was somewhat offset by the use of neodymium, a rare-earth magnet mainly sourced in China, in the motor for the hybrid system, again raising the need to find a comprehensive and drastic solution to the use of scarce materials.
The issue of rare metals and rare earth materials is going to be a huge concern for the manufacturing sector, he told Reuters in a recent interview.
When you consider (the) growth in demand, the solution in the end-game has to be to go precious-metals-free. (Editing by Lincoln Feast)