Prices of new electric vehicles could plummet for at least the next decade, bottoming out as low as $3,000 with less than 100 parts and making gas-powered cars obsolete, Morgan Stanley analysts predicted. This news prompted jokes on social media, where people posted pictures of golf carts and toy pink convertibles, insisting that such low-cost EVs are already here.
There are already some super-cheap electric cars for sale in China. U.S. General Motors — “Tesla‘s nemesis, Bloomberg Quint reported — sells one for $4,500. In France, Citroën sells a $6,600 EV city car called the Ami, Business Insider reported.
In the U.S., the cheapest EV for sale is the Mini Electric, a car that retails for around $30,000. Some Wall Street analysts think a new battery-powered vehicle may eventually cost one-tenth that.
“We would not be at all surprised to see the prices of many EVs eventually fall to below $5k/unit,” a team of analysts at Morgan Stanley led by Adam Jonas said in a recent Monday note to investors, after talking with carmakers, suppliers, and EV experts.
History seems to be repeating itself. Tesla’s first vehicle, the 2008 Roadster sports car, started at around $100,000. Today, Tesla’s lowest-priced Model 3 sedan costs $37,490, less than the average price paid for a new car in the U.S. And in 1907, the average cost of a car was about $80,000 in today’s dollars. By 1925, a standard Model T Runabout cost around $3,790 in 2021 dollars, less than 5 percent of the 1907 price, analysts said.
“The equivalent revolution in high volume manufacturing” hasn’t happened for EVs yet, analysts said.
EVs becoming cheaper to make and buy would be disastrous for traditional gas-powered cars, the bank said. “In the not-too-distant future, we believe the internal combustion automobile may be so expensive to buy and maintain that it will be extremely difficult to justify its continuing role in the mobility ecosystem,” the analysts said.
Elon Musk talked about Tesla’s price goals in 2020, saying he wanted its cars to be as affordable as possible.
“I do not think we lack for desire for our product, but we do lack for affordability,” Musk said. “We have to improve the affordability of our products, so they are not out of reach of people. We want to bring them more in reach over time but also improve our cost of production.”
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Better known for its trucks and muscle cars, General Motors scored a surprise hit in China. Its Hongguang Mini EV sells for less than $5,000 and is the hottest EV in China, the world’s No. 1 automobile market. It can run up to 106 miles on a single charge.
One of the top challenges in making EVs cheaper is the battery, which represents about 25 percent of a car’s cost because of metals such as lithium, cobalt, nickel and manganese.
At least in China, “A lot of consumers don’t need anything fancy, a commute is all they ask from a car,” said Yale Zhang, founder of Shanghai-based consultancy AutoForesight.