Is this prediction great news for ASX lithium shares?

The Australian share market has been flooded with lithium shares in recent years and it isn’t hard to see why.

With lithium found in abundance across the country and the white metal commanding mouth-watering prices, there’s a big incentive to dig it out of the ground.

The good news for many of these ASX lithium shares is that one leading analyst is tipping electric vehicle (EV) sales to grow exponentially in the coming years.

And given how the majority of lithium ends up being used in the EV market, this can only be good news for shares such as Allkem Ltd (ASX: AKE) and Pilbara Minerals Ltd (ASX: PLS).

What is being said about the EV market?

According to a note out of Cathie Wood’s ARK Invest, its analysts expect the electric vehicle market to grow quicker than expected.

Director of Research, Autonomous Technology & Robotics, Sam Korus, commented:

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 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.

If this prediction is accurate, there sure will need to be a lot of lithium produced to build 25 million more EV batteries that consensus expectations.

This bodes well for Allkem and Pilbara Minerals, but also for lithium developers that are nearing the commencement of production such as Core Lithium Ltd (ASX: CXO) and Liontown Resources Limited (ASX: LTR).

The post Is this prediction great news for ASX lithium shares? appeared first on The Motley Fool Australia.

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More reading

• Is this the new frontier for ASX lithium shares?
• Pilbara Minerals share price racks up ninth all-time high for September
• Up 50% in a month, does the Pilbara Minerals share price ‘reflect too much optimism’?
• Here are the top 10 ASX 200 shares today
• Why is the Allkem share price bolting out the gate on Monday?

Motley Fool contributor James Mickleboro has positions in Allkem Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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