Electric vehicles could cost less than $5,000 some day, Morgan Stanley analysts predict
- A new electric car could eventually cost as little as $3,000, Morgan Stanley analysts said.
- The bank expects electric-vehicle prices to continue to drop for the next decade at least.
- Plummeting EV prices could render gas-powered cars completely obsolete, they said.
The cheapest electric car for sale in the US right now is the Mini Electric, which retails for around $30,000. But some Wall Street analysts think a new battery-powered vehicle may eventually cost one-tenth that.
According to a team of analysts at Morgan Stanley led by Adam Jonas, electric vehicles will likely cost $3,000-$5,000 at some point in the future.
"Based on our frequent discussions with OEMs, suppliers and domain experts in the EV business, we would not be at all surprised to see the prices of many EVs eventually fall to below $5k/unit," they said in a Monday note to investors.
The cost of a new EV has dropped significantly over the last decade or so as batteries have become cheaper and as production has scaled up. Tesla's first vehicle, the 2008 Roadster sports car, had a starting price of around $100,000. Today, its lowest-priced Model 3 sedan will run you $37,490, less than the average price paid for a new car in the US.
And there are already some ultra-low-priced EVs for sale outside of the US. General Motors sells a tiny $4,500 EV in China, and French automaker Citroën sells a $6,600 city car called the Ami in Europe.
Morgan Stanley expects prices of EVs to continue to fall for at least the next decade as carmakers achieve higher volumes, streamline their production processes, and improve vehicle designs. The number of parts needed for an EV could eventually drop from around 10,000 today to 100 or less, they said.
To prove their point, analysts looked to the first mass-market car: the Ford Model T.
In 1907, before the Model T hit the market, the average cost of a car was roughly $80,000 in today's dollars, the analysts said. But by 1925, the going price for an entry-level Model T Runabout was around $3,790 in 2021 dollars, less than 5% of the 1907 price. "The equivalent revolution in high volume manufacturing" hasn't happened for EVs yet, they said.
The prospect of a $3,000 car with less than 100 parts raises questions about whether carmakers could profit off of such a vehicle in the US, and whether it could comply with safety regulations. Naturally, EVs becoming increasingly cheaper to produce and purchase would spell disaster 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.