Cathie Wood, Founder of ARK Investment Management, reiterated her skepticism on auto debt saying a shift to electric vehicles could worsen the already declining used car prices.
“Disruptive innovation/Deflation: The year-over-year decline in used car prices could be worse than -23% if the shift to electric vehicles is as rapid as we expect. Auto debt is likely to convulse,” she tweeted.
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On Oct. 7, the ARK Founder explained how a fall in the residual value of gas-powered autos could lead to serious losses in the auto debt market. “Given the accelerated consumer preference shift toward electric vehicles, used car prices and the residual value of all gas-powered autos are likely to plummet, causing serious losses in the $1 trillion auto debt market," she had said.
Interestingly, Elon Musk replied to Wood’s tweet, indicating he fully agrees with the notion. Musk’s Tesla Inc TSLA is the second largest holding in ARK’s flagship ARK Innovation ETF ARKK.
Given the rising interest rate environment, auto stocks which are rate sensitive, have taken a hit this year along with the rest of the market. Shares of Ford Motor Company F and General Motors Company GM have declined over 44% since the beginning of the year.
Photo courtesy: Ark Invest
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