#334: The Increase In Electric Vehicles Sales Is Likely To Be Exponential, Not Linear, & More

In 2017, after the number of electric vehicles (EVs) sold globally had hit ~500,000 for 2016, various agencies forecasted that, during the next five years, sales would scale to 2 million units, well below the 17 million that ARK projected in our Big Ideas 2017 report.¹

Today we are assessing the accuracy of those forecasts. Based on the first eight months, EV Volumes is projecting that EV sales this year will hit ~7.5 million units, which, while well below the 17 million ARK projected, suggests that Wright’s Law captured the magnitude and speed of adoption much more effectively than the consensus forecast. Despite the COVID crisis and supply chain bottlenecks that hampered production and sales for two years, companies like Tesla, Xpeng, and Nio enjoyed exponential growth rates that few auto analysts expected.

Delving into our EV forecast for the next five years, once again we can see the difference between the linear growth rates powering most forecasts and the exponential growth derived from Wright’s Law. According to Wright’s Law, every cumulative doubling in the number of units produced results in a consistent percentage decline in costs that increases the affordability and uptake of new products like EVs. Driven from Wright’s Law increasing EV affordability, we believe the diffusion curve below has captured the trajectory of EV sales quite effectively during the past 10 years.

Applying that adoption curve to the next five years, we are projecting that, in the absence of autonomous taxi platforms, EV sales will increase more than six-fold to 45 million units, or more than double the 20 million consensus expectation. The difference between 20 million and 45 million units can be characterized by linear and exponential growth curves, respectively, as shown below. Exponential growth curves also are described as S-curves.

If autonomous technology takes hold as we expect, then the EV S-curve adoption cycle should feed an autonomous S-curve adoption cycle, turbocharging EV sales nearly eight-fold during the next five years, from ~7.5 million in 2022 to ~59 million in 2027, as shown below. In other words, barring another infectious disease crisis, concomitant supply chain bottlenecks, or any other disaster, our 59 million projection for 2027 would be nearly triple the 20 million consensus forecast, as shown below.

[1] Source: https://valueplan.files.wordpress.com/2017/06/big-ideas-2017.pdf

Last week in San Francisco, I took a ride in one of Cruise’s fully autonomous vehicles, with no human behind the wheel or in the passenger seat. The ride was smooth, though slow, with only one unexpected braking event when the car responded to motorcyclists weaving through traffic. Currently available only during nighttime hours in limited areas of San Francisco, the service should become more convenient “soon” once Cruise expands its hours and service area.

Management recently announced plans to expand Cruise service to Austin and Phoenix by the end of the year. Perhaps enabling this expansion is a shift away from high-definition (HD) maps, which are extremely detailed 3D visualizations created by systems of lasers called LiDAR used as the “base truth” against which to compare real-time road conditions. Cruise CEO Kyle Vogt now believes that maps are becoming a “nice to have versus a need to have.” This conclusion gives some validity to Tesla’s approach, which has never relied on HD mapping. HD maps likely add additional complexity and costs, so Cruise’s migration away from this technique may be one of the reasons that it is able to expand into Austin and Phoenix, where it has no footprint, within the next 90 days.

Given Cruise’s relatively cautious public relations strategy to date, its open commitment to two new cities is meaningful. Key to Cruise’s success will be its ability to scale its robotaxi service such that vehicle utilization rates increase, allowing for prices to fall significantly below those of human driven ride-hailing companies. Today Cruise is pricing its service slightly below Uber’s. ARK believes lower prices per mile will be key to driving demand for robotaxi services.

Intellia Therapeutics (NTLA) and Regeneron Pharmaceuticals (REGN) made history at last year’s Peripheral Nerve Society Conference when they presented the world’s first data on CRISPR Cas9-based in-vivo gene editing therapy in patients with Transthyretin Amyloidosis (ATTR) polyneuropathy. ATTR is a disease in which amyloid proteins build up and, if untreated, can cause the failure of multiple organs, typically the heart––cardiomyopathy––and the nerves––polyneuropathy. Notably, the researchers demonstrated that editing the TTR gene could deliver a one-time treatment that reduces sustained serum TTR, eliminating the need for chronic therapy.

This week, the same researchers shared new data from their ongoing Phase I study of ATTR for cardiomyopathy (CM) to determine whether the TTR reductions seen in polyneuropathy could be replicated in cardiomyopathy. They treated ATTR-CM patients across two dose cohorts, 0.7 mg/kg and 1.0 mg/kg, both of whom showed sustained serum TTR reductions, 93% and 92%, respectively, on day 28.

Additionally, Intellia Therapeutics (NTLA) presented data on its Phase1/2 trial for hereditary angioedema (HAE), a rare disease that causes fluid accumulation outside the blood vessels that can cause the swelling of tissues, limbs, genitals, faces, and, most concerning, airways and intestinal tracts. A single dose of NTLA-2002 led to a 65% average reduction in plasma kallikrein at 25 mg, and 92% at 75 mg, in week eight. Patients in the low-dose cohort had a 91% reduction in HAE attacks, which we believe is best-in-class.

Although the sample sizes were small, the sustained reduction in serum TTR, plasma kallikrein, and HAE attacks suggests that these one-time therapies could cure ATTR-CM and HAE patients.

Early Thursday morning, developers and the community cheered as two pandas flashed on the screen, signifying the activation of Ethereum’s Proof-of-Stake chain. Livestreamed on YouTube, the celebration erupted ~13 minutes later when validators justified the first transaction––including blocks of the new chain––and officially marked the Merge a success.

Hotly debated since the network’s launch in 2015, the successful transition to Proof-of-Stake is a monumental accomplishment for Ethereum. Various community leaders from around the world joined the livestreamed event to reflect on years of valuable work and express excitement for the future. Top among the noted achievements were the elimination of Ethereum’s dependence on power-intensive GPUs and a reduction in ether’s inflation rate. Many of those celebrating acknowledged that the Merge is just the first step toward Ethereum’s scalability and usability.

Community leaders also focused on Ethereum’s decentralization and the preservation of its censorship-resistance in its Proof-of-Stake form, an urgent issue after the Tornado Cash-related sanctions in early August. Currently accounting for a combined 54% of staked ether, Lido, Coinbase, and Kraken theoretically could censor transactions on the network. Focused on Ethereum’s network health, Superphiz urged listeners either to stake at home independently or to use a decentralized, permissionless solution like Rocket Pool. In our view, decentralization at the base layer is more important than the convenience and wider DeFi support that come with staking through the leading, more centralized providers.

Concerns about network centralization took on more urgency on Thursday following SEC chairman Gary Gensler’s suggestion that Ethereum’s new mode––and entities like Coinbase who offer staking-as-a-service––are the equivalent of lending services subject to securities laws.