Led by Tesla (NASDAQ: TSLA) and with contributions from NIO Inc. (NYSE: NIO), among others, this is starting to feel like the year of electric vehicle equities. Truth is, electric vehicles and adoption are longer-ranging themes and those concepts are poised to benefit some ETFs, including the ARK Autonomous Technology & Robotics ETF (NYSEARCA: ARKQ).
With ARKQ’s current configuration, the fund tilts toward autonomous vehicles and robotics and automation opportunities. The fund one of the largest weights among all ETFs to Tesla, one that many investors’ views that Tesla is more a technology company than an automotive firm.
Importantly, data confirm the exponential growth trajectory of the electric vehicle market.
“Four years ago, the Energy Industry Administration (EIA) and other forecasting agencies estimated that EV sales would total a few hundred thousand units in the early 2020s,” said ARK Invest in a recent research note. “After EV sales hit 1.45 million units in 2018 and an estimated 2 million in 2019, the same agencies now forecast roughly 6.5 million in 2024.”
An Awesome ARKQ Outlook
Currently, electric vehicles represent a small percentage of new automobiles sold around the world and cars on the road, but that percentage is expected to increase in a big way over the next several years.
Global automotive industry observers believe electric vehicles will reach comparable price points to traditional internal combustion engine vehicles sometime in the next several years, making it more compelling for drivers to make the switch to electric vehicles.
“Despite an estimated 3.1 million drop in total auto sales worldwide, EV sales are expected to grow significantly during the next five years. EV sales growth could be lumpy as factories build to scale but should be robust over time as EV adoption gains traction,” according to ARK.
As dictated by Wright’s Law, falling battery prices could facilitate a wave of EV adoption over the next several years.
“According to Wright’s Law, for every cumulative doubling of units produced, battery cell costs will fall by 18%,” notes ARK.”These cost declines are critical to reaching price parity with gas-powered vehicles, as the largest cost component of an EV is its battery.”
With electric vehicles expected to reach price parity with internal combustion engine rivals in 2022, the 37 million unit sales by 2024 for electric vehicles isn’t a far-flung forecast.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.