The deceleration of the electric vehicle (EV) segment by legacy carmakers GM and Ford is a misstep that will ultimately benefit Elon Musk and Tesla, as stated by Cathie Wood, the CEO of ARK Invest, an investment management fund.
Wood founded ARK Invest in 2014 after her idea to float exchange-traded funds (ETFs) for disruptive innovation was shot down by her then employer. Over the subsequent years, the private investment management fund has introduced several ETFs focusing on genomics, autonomous technology and robotics, space exploration, fintech, and overall innovation.
Before the pandemic, ARK Invest's ETFs yielded returns of 120 percent and managed over $17 billion in assets. The company also planned to float a Bitcoin-based ETF but has not received approval from the US Securities and Exchange Commission. Given the disruptive nature of her own business, it is no surprise surprise that Wood is bullish about Elon Musk and his ventures.
The slowdown in the EV market
After Elon Musk changed the perception of EVs in the automobile industry, Wood anticipated that established car manufacturers like GM and Ford would swiftly enter this business segment.
General Motors which had ambitious plans to roll out 400,000 EVs over two years ending mid-2024 has now scaled back its target while postponing the production of pickups Chevrolet Silverado and GMC Sierra by a year, the Wall Street Journal had reported in October 2023.
In December 2023, Ford announced that it would halve the output of its F-150 Lightning pickup while also lowering targets for its EV battery factory. Both companies have cited slowdown in the EV market and mounting losses in the EV segment while making these decisions, Fortune reported.
A decision that favors Musk
According to JD Power, as many as 869,000 EVs were sold in the US in the first 10 months of 2023.
Although this figure represents a more than 50 percent increase compared to the previous year, it falls short of the numbers reported two years ago. Executives at legacy carmaker companies have said that they were expecting this downturn and are scaling down production till the industry regains profitability.
Wood, however, believes that the decision is a mistake and profits will roll in only when the companies ramp up their production. The investment fund CEO argued that legacy carmakers were forfeiting valuable learning experiences by scaling back their efforts, and cost reductions would materialize only if they maintained their production levels.
According to Wood, this hesitation will ultimately play into the hands of Elon Musk and Tesla, allowing them to secure a larger share of the EV market due to their extensive portfolio of offerings. Not only Musk but anyone eager to enter the EV market stands to benefit from GM and Ford's decision, she added.
Originally published on Interesting Engineering : Original article