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Finding Signal In Noisy Auto Data

April 10, 2024
5 min read
Finding Signal In Noisy Auto Data
By: Sam Korus

Since late 2023, media headlines have seized on data showing that electric vehicle (EV) sales growth decelerated in 2022 and 2023, from +113% in 2021 to +59% and +28% on a year-over-year basis, respectively. Our research contextualizes this deceleration in growth and suggests that traditional automakers cutting back on EV investment are at risk of missing the transition altogether.

Sources: ARK Investment Management LLC, 2024. This ARK analysis is based on a range of underlying data from external sources, including EVVolumes.com,1 which may be provided upon request. Forecasts are inherently limited and cannot be relied upon. For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. Past performance is not indicative of future results.

Seemingly more important than growth in measuring the health of the EV market, market share is sending signals that belie the media headlines. Importantly, as shown below, the sales of gas-powered vehicles peaked in 2017, displaced first by hybrids and plugins, then by fully electric vehicles. Between 2021 and 2023, electric vehicle sales roughly doubled from 4.8 million units to ~10 million, increasing their share of the global vehicle market from roughly 6% to 12%. 

Note: In the Bloomberg chart shown above, the numbers for 2024, 2025, and 2026 are estimates. Source: Kahn 2024, based on data from Bloomberg NEF.2 Forecasts are inherently limited and cannot be relied upon. For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. Past performance is not indicative of future results.

Media pundits—and many investors—fail to appreciate the nuances of adoption curves involved in the process of disruptive innovation. Perhaps counterintuitively, growth rates typically decline as the market scales into a new technology, as shown below.

Sources: ARK Investment Management LLC, 2024. This ARK analysis is based on a range of underlying data from external sources, which may be provided upon request. For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. Past performance is not indicative of future results.

In other words, decelerating growth does not suggest that new products, including EVs, are losing mass market appeal. Quite the contrary, at only 13% share of the global market, EVs seem to be entering, not ending, a traditional adoption curve, as shown below.

*Note: BEV market share is calculated relative to all “light vehicles”—vehicles with a maximum Gross Vehicle Weight Rating (GVWR) of < 8,500 lbs. Sources: ARK Investment Management LLC, 2024. This ARK analysis is based on a range of underlying data from external sources, which may be provided upon request. Forecasts are inherently limited and cannot be relied upon. For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. Past performance is not indicative of future results.

Perhaps exacerbating the analytical challenge, the auto market is not a monolith. 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. Clearly, growth will flatline as EVs approach 100% of the market. 

The key question is: can the industry continue to produce increasingly affordable EVs profitably, taking market share from gas-powered vehicles? We believe that the answer is yes for those companies investing aggressively now, as we explain in another article to be published soon.

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