Cathie Wood is known for her convictions as an investor. And she's one of Tesla's biggest bulls, believing the future of personal transportation is all-electric.
Wednesday, Wood's firm, ARK Invest, released its 2023 Big Ideas report, the latest in a series of such annual reports. It covers a variety of big trends that guide ARK's investing including cryptocurrency, precision healthcare and electric vehicles.
EVs had a big year in 2022 with global unit sales growing about 62% year over year. Sales of gasoline powered cars and hybrid-electric vehicles declined by about 7%, according to ARK.
The shift to electric isn't new. Gasoline and hybrid sales have declined in four of the past five years, which is creating a dilemma for traditional auto makers: They are serving a shrinking market, a reason most car makers have pivoted toward EVs.
ARK believes the entire industry will accelerate vehicle electrification efforts and projects the industry will spend more than $1 trillion, cumulatively, on EV development over the coming 10 years. The money would go for platform development, plants and battery capacity.
It's a huge number, but checks out. The world's top auto makers spend roughly $120 billion annually on plants and equipment. And auto makers already spend roughly 50% of their capital budgets on EVs. When adding in capital spending by battery makers, its easy to see how spending numbers can approach $100 billion a year.
That investing should yield benefits such as cheaper EVs that charge quicker. ARK has thoughts about all that.
Regarding charging, ARK predicts a driver will get about 200 miles of range in 4 minutes by 2027, down from about 200 miles of range in 15 minutes today. That 15-minute figure is based on the newest EVs and fastest direct current chargers.
In 2020, ARK projected that EVs would cost less than traditional cars by 2022. It didn't happen last year but it could happen in 2023. A Tesla (ticker: TSLA) Model 3 can be purchased for $44,000 before any government incentives. The average price of a new vehicle in the U.S. at the end of 2022 was about $50,000.
Putting it all together, ARK sees global EV production hitting 60 million units annually by 2027. That would be roughly 70% of total light vehicle production and is much faster adoption than almost everyone predicts.
California, one of the states with the highest EV adoption rates, forecasts 43% of the cars sold in the state will be zero emission by then. (That figure includes plug-in hybrid vehicles.) California believes EVs and plug-in hybrids will be 70% of light vehicle sales in the state by 2030.
ARK has backed off some of its earlier EV projections. In 2020, ARK projected 37 million EVs sold globally in 2024. Roughly 8 million all-electric cars were sold in 2022. The new numbers from ARK's imply 2024 EV sales will be roughly half its 2020 prediction.
Still, hitting 16 million or 17 million EVs sold around the world in a couple of years would be a huge win for the industry, Tesla and ARK.
ARK's tightly held beliefs have led to volatile performance. The ARK Innovation ETF (ARKK) rose 35% in 2019 and 153% in 2020. It dropped 23% in 2021 and 67% in 2022.
The Innovation ETF is up 28% year to date. The S&P 500 and Nasdaq Composite are up about 6% and 10%, respectively.
Tesla is the largest holding in the ARK Innovation ETF and has been a top holding for years. Tesla stock hurt in 2022, dropping 65%. Tesla stock has helped in 2023. It is up 42% year to date.
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