From ARK Invest’s latest newsletter:
During our brainstorm on Friday, ARK discussed the possibility that our already high-end EV forecast could be too low. The chart is work-in-progress that offers some perspective on this topic (see source). The purple line depicts the price elasticity of demand for all cars, both gas-powered and electric: as prices drop, auto manufacturers can target a larger share of the market. According to the navy line, as the average price has declined during the last 10 years, EVs have increased their share of the global auto market.
According to Wright’s Law and ARK’s adoption model, as the cost to produce 300-mile range EVs continues to decline, their market share will approach ~67%, or 48 million units, in 2027, as depicted in the green line. This forecast incorporates a decline in total vehicle unit sales due to autonomous vehicles. The gap between the trajectory suggested by Wright’s Law in the green and the history of market share gains in the purple suggests that EVs are likely to capture a much higher share of the market than ARK has forecasted. Instead of 48 million units, EV sales would scale 8-fold from 8-9 million units this year to roughly 67 million in 2027!
That said, several forces could derail the 67-million-unit forecast. Perhaps because of materials shortages or technology issues, EV production will not be able to scale that quickly. Perhaps a severe decline in used car prices will pose more of a competitive threat than we anticipate.