Look Closer: Cathie Wood's Ark Analyst Explains Why EVs Seem To Be 'Entering, Not Ending, A Traditional Adoption Curve'

Even as Wall Street bakes in a slowdown in electric vehicle adoption, Cathie Wood‘s Ark Investment Management asserted on Wednesday that the appeal for this vehicle category remains strong.

Contrary Signal: Despite widely reported deceleration in sales growth from 113% in 2021 to 59% in 2022 and 28% in 2023, Sam Korus, Director of Research Autonomous Technology & Robotics at Ark, stated that this trend does not ring alarm bells for EVs.

Market share data, according to Korus, offers a more insightful perspective on the health of the EV market than growth metrics. He noted that sales of gas-powered vehicles peaked in 2017, subsequently displaced by hybrids, plugins, and fully electric vehicles. Between 2021 and 2023, EV sales nearly doubled from 4.8 million units to around 10 million units, increasing their share of the global vehicle market from about 6% to 12%.

Korus said media pundits and many investors “fail to appreciate the nuances of adoption curves involved in the process of disruptive innovation.” 

“Growth rates typically decline as the market scales into a new technology,” he added.

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Laggards Could Miss Bus: Decelerating growth, according to the analyst, does not mean new products, including EVs, are losing mass market appeal. With a global market share of only 13%, “EVs seem to be entering, not ending, a traditional adoption curve,” he said.

Outlining the challenges in analyzing the state of the EV market, Korus said the auto market is not a “monolith,” but one in which different vehicle segments and price points come into play as time passes. “Each time an EV launches into a new segment with a lower price point, another adoption curve begins, ultimately each segment curve aggregates to the total adoption chart shown above,” the analyst said.

“Clearly, growth will flatline as EVs approach 100% of the market.”

The key question is whether the industry can continue to produce increasingly affordable EVs profitability and in the process take market share from gas-powered vehicles, Korus said. “We believe that the answer is yes for those companies investing aggressively now,” he said, adding that “traditional automakers cutting back on EV investment are at risk of missing the transition altogether.”

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The KraneShares Electric Vehicles and Future Mobility Index ETF KARS ended Wednesday’s session down 2.68% at $22.18, according to Benzinga Pro data.

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