The founder of ARK Investment Management, Cathie Wood, expressed skepticism about the auto debt market, explaining how a fall in the residual value of gas-powered autos could lead to serious losses.
What Happened in October, as Wood said that the consumer preference shift toward electric vehicles, used car prices and the residual value of gas-powered cars is likely to plummet, causing serious losses in the $1 trillion auto debt market. How do I invest in Tesla Stock?
Auto company stocks have had negative returns in line with the general market because of the current global macroeconomic environment and volatility.
The Ford Motor Company F and General Motors Company GM shares have lost 40% since the beginning of the year.
Elon Musk was responding to Wood's tweet, indicating that he fully agrees with the notion. Musk's Tesla Inc TSLA is the top holding in ARK's flagship ARK Innovation ETF ARKK.
In September, the Manheim Used Vehicle Value Index, cited by Wood, showed that used-vehicle prices fell 3% compared to August. The index fell to 204.5 and is now down 0.1% from a year ago, according to a company statement.
The average daily sales conversion rate decreased to 49.2%, below normal for the time of year, according to the report.
In September of 2019 the sales conversion rate averaged 52.1%. The lower conversion rate indicated that the month saw more buyers with more bargaining power for the time of year, it said.
In September, only three of eight major market segments saw an increase in seasonally adjusted prices.
The largest increase in compact cars was at 5.9%, followed by vans and pickups, both of which increased by 0.8%. The remaining five segments' prices were well below the industry, with mid-size cars only minimally lower, it said.
Gasoline Demand: Wood has been vocal about the fact that gasoline demand has taken a hit despite a higher number of cars on the road.
In the US, gasoline demand has dropped below the level hit during the depths of the coronaviruses in 2020 to levels last seen in 1997, even though the number of cars on the road is much higher than it was 25 years ago, she tweeted on Sept. 20.
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