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).
Image source: Getty Images
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).
