Cathie Wood says value of traditional automakers could fall more than 60% in next 5 years

Jul. 18, 2022 12:00 PM ETARK Innovation ETF (ARKK), ARKQF, GM, TM, HMC, VWAGYBy: Jason Capul, SA News Editor251 Comments

Driverless car interior with futuristic dashboard for autonomous control system

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Cathie Wood and her ARK Invest firm believe that the auto industry will expand over the next few years, at least as measured in the number of vehicles sold. However, she thinks automakers themselves will become less valuable, as the industry shifts to electric vehicles and self-driving options.

In addition, ARK Invest predicted that traditional automakers could see a drop in value of more than 60% over the next five years if autonomous taxi services become popular, potentially cutting into total auto sales.

In making its projection, ARK referenced that in 2021, the number of light vehicles sold worldwide totaled 78M and that the enterprise value of automakers sat at approximately $3.5T.

Per IHS Markit data, unit auto sales are set to increase at a 4.7% compound annual growth rate and hit a new high at 98M units in 2026.

ARK’s note said: “ARK’s Non-Autonomous EV Base Case agrees with the consensus view that unit sales will increase by 20 million during the next five years but that the enterprise value of global automakers is likely to drop roughly 20% to ~$2.8 trillion.”

The report added that if Wood and her team’s research is correct that autonomous taxi services take off, then vehicle unit sales are likely to drop 8% to 72 million. Moreover, enterprise value of traditional automakers would be cut by more than 60% to $1.3T.

ARK’s note stated: “We believe the auto industry is undergoing two profound shifts that are breaking the link between unit sales and enterprise value: a shift from the internal combustion engine to electric vehicles and, albeit early, a shift from human driven to autonomous vehicles.”

Related ARK ETFs along with notable automakers and their year-to-date price action: ARKK Innovation ETF (NYSEARCA:ARKK) -61.1%, ARK Autonomous Technology & Robotics ETF (BATS:ARKQ) -34.4%, Ford Motor Company (F) -44%, Toyota Motor Corporation (TM) -15.2%, Volkswagen (OTCPK:VWAGY) -36.9%, General Motors (GM) -45.6%, and Honda Motor Co. (HMC) -13.2%.

For additional information, see ARK’s complete investor note.

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