The $25K Tesla

 From Teslarati

Morgan Stanley analyst Adam Jonas believes electric vehicles in the market could drop as low as $5,000 in the future. Tesla seems well on its way to releasing more affordable electric cars with its $25,000 car. 

Jonas explained that high volume production of EVs would eventually lead to price cuts. 

“We would not be at all surprised to see the prices of many EVs eventually fall to below $5k/unit,” Jonas wrote in a note after talking with carmakers, suppliers, and experts in the electric vehicle sector. 

Since the sales and release of the Model 3, Tesla has introduced several price cuts in its vehicles made within the United States and China. The Model 3 Performance is a good example of this, as the car debuted with a $78,000 price tag before Autopilot. Today, a Model 3 Performance with basic Autopilot costs $55,990.  

Tesla doesn’t seem to want to stop at price cuts for its current lineup, either. The company has also shared its plans to release a $25,000 car in the future. There is already talk of Tesla’s $25,000 electric vehicle being developed in China. 

Elon Musk talked about the company’s price goals during the Q3 earnings call last year, revealing Tesla’s objective to make its cars as affordable as possible. 

“I do not think we lack for desire for our product, but we do lack for affordability,” said Musk. “And so 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.”

According to Street Insider, Jonas highlighted the impact manufacturing efficiencies would have in high-volume EV production in his note, which Tesla seems highly aware of based on past comments by Musk and the company’s CFO Zachary Kirkhorn.

Global Equities Research analyst Trip Chowdry argued that Tesla has a “generational lead in battery technology.” He estimated that Tesla’s battery tech might have reduced the price per kilowatt-hour by 56% and production costs by 69%. 

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I hadn't realised just how much the cost of the Model 3 de luxe versions had fallen.  The Model 3 was only introduced in July 2017.  At the same time, Tesla has been steadily increasing the cost of autopilot software ("full self-driving") from $3K in 2017 to $10K in October 2020.  In other words, the cost excluding FSD  software has fallen from $75 K to $45,990, or 39%.  It's not clear whether the price of the new 'Model 2' will include FSD software, but it is obvious that an EV costing $5,000 won't.  Is the $5,000 pricing implausible?  Judging by the cost declines for the Model 3, perhaps not.  The Dacia (= Renault) 'Spring' is already available for $10K, though not in all markets.  Which also suggests that Tesla's $25K EV will have full self-driving.  Which will make it a compelling choice for cash-strapped consumers.

The Tesla Model 2 (concept)