Forget about anything you may have read about the waning hype around electric vehicles. According to ARK Invest founder Cathie Wood, EVs are only just starting to take off.
In her firm’s annual “Big Ideas” report published on Wednesday, the asset manager predicts the new battery-powered cars sold last year could soar by a third every year to reach 74 million in 2030 — all of which will at least be technically capable of driving autonomously. By comparison only about 10 million EVs were delivered to customers last year.
“As battery costs continue to decline, EV prices should fall, potentially driving exponential growth in unit sales,” the report argues.
At an average selling price of $20,000 each, that represents a grand total of more than $1.4 trillion in annual revenue potential for EV carmakers, who she anticipates will pocket a tenth of that as profit before interest and tax.
The flip side is this will all but wipe out demand for internal combustion engine cars as total global new vehicle sales only hit 100 million in 2030, barely more than what was sold in the peak year of 2017. This may cause a “death spiral for incumbent auto manufacturers”, ARK Invest warns.
EV makers struggling to reach Tesla’s scale
Wood is known for her love of moonshot technologies tipped to render existing ones obsolete in five to 10 years, and to better predict trends deliberately employs research analysts from specialist fields rather than from conventional Wall Street backgrounds.
She first earned a reputation as a star investor for her prescient bullish bets on Tesla, which Wood argues should hit $2,000 in 2027, largely because Musk will have by then solved autonomous driving, what he calls Tesla’s “ChatGPT moment”.
Nonetheless her firm acknowledged that many EV manufacturers are struggling to scale profitably. So far only Tesla and BYD have proven they can ramp operations fast enough to achieve the kind of cost advantages their competitors can only dream of.
“Many are pulling back from the market […] because the already-profitable market leaders are cutting prices aggressively,” ARK Invest wrote, citing General Motors, Volkswagen and Ford delaying some of their EV capacity expansion plans.
Volvo Cars abandons Polestar in its hour of need
One competitor that has struggled to scale is Sweden’s Polestar. The company should be ideally placed to benefit from the EV revolution in China and Europe, as it combines clean Scandinavian design and a premium brand positioning with a low-cost manufacturing base outsourced to partners to minimize cash burn.
In practice however, Polestar has been unable to scale fast enough to finance itself internally, growing vehicle sales by just 6% in 2023.
Now, large Polestar shareholder Volvo Cars said on Thursday it will cease any and all further funding and revealed plans to reduce its 48% stake in the company, in part through a “distribution” of stock to its own investors including its Chinese parent company, Geely.
“Our focus is on developing Volvo Cars and concentrating our resources on our own ambitious journey,” the Swedish premium carmaker said.
Seeking to reassure his investors all was not lost, Polestar CEO Thomas Ingenlath praised what he called the “continued cooperation with Volvo Cars” in other areas of the business, such as manufacturing. He also welcomed Geely’s interest to potentially step into the breach, before claiming talks to plug a $1.3 billion financing gap were “well advanced”.
So given the recent gloomy news in the EV industry, why is Wood’s ARK Invest so bullish? The asset manager bases its call on a conviction that the cost for batteries will tumble 28% every time their production output (measured not in units but kilowatt hours) doubles.
Come 2040, ARK Invest anticipates applications for battery technology will experience their own “Cambrian explosion”—a reference to the most intense burst of rapid-fire evolution Earth has ever seen. This should enable flying taxis to transform urban landscapes by that point.