Climbing Used Car Prices Indicate 'Deflationary Technologies' Could Be Adopted Quicker Than Expected, Says Ark Analyst

Ark Invest analyst Sam Korus said on Monday that all-time high prices of used cars could push consumers toward adopting new technologies more quickly than expected.

What Happened: The latest numbers from automobile auction company Manheim point to used car prices hitting an all-time high even as used car sales dropped 13% year over year.

Tesla Inc TSLA bull and the popular money managing firm’s CEO Cathie Wood has in recent past said used car prices data indicate sales have peaked and that prices would come down as deflation plays a bigger role in the coming days.

“A broader trend that could be forming is that price inflation shifts consumers toward the adoption of deflationary technologies more quickly than otherwise would be the case,” Korus wrote in a note.

Korus said that legacy automakers are pointing toward chip shortage as the reason for declining car sales but they could be in for a surprise with faster adoption of electric vehicles ensuring demand for gas-powered vehicles doesn't bounce back as quickly as expected.

See Also: Chip Shortage In Focus With US Automakers Like Tesla, Ford, GM But Cathie Wood Says Used-Car Data Points In Different Direction

Why It Matters: Both used and new car prices have been on the rise since last year when demand sprung back quicker than expected. The prices are now at levels not seen in many years and lower inventory is currently fueling that surge. 

The lower inventory situation has been further aggravated with the ongoing semiconductor shortages, which have seen the likes of General Motors Co GM, Ford Motor Co F and Tesla struggle to get enough chips that go into making vehicles.

According to the Manheim Index, which tracks the used car prices, on a month-over-month basis, all major market segments saw increases in September, with vans and sports utility vehicles increasing the most.

Used car prices are up at 27.1%, according to the Manheim Index.

Price Action: GM shares closed 0.82% lower at $58.09 a share on Monday.

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