With the Tesla Model 3 refresh on the way, the coming months could see more aggressive EV price action by market leader Tesla.
The average price for electric cars as of July of this year is about $53,500, according to Kelley Blue Book. (The average price for gas cars is about $5,000 less.)
While EV prices have been coming down in 2023 — led by the low-cost leader Chevy Bolt — it can still be leap of faith for the average gas car buyer to switch to an electric vehicle since there’s no low-cost equivalent like a $16K Nissan Versa or a $20K Subaru Impreza.
“The average transaction price of all electric vehicles has been coming down slowly,” Brian Moody, executive editor for Autotrader, told me in an email.
Highland reset
The cheapest* Tesla, a RWD Model 3, is still close to $39,000. But the Highland refresh could lower prices, according to China-based reports (with some local reports estimating the price will be $27,000.)
“The new update to the Model 3 should…bring the price down,” Moody said. “This may be done by streamlining features and options or by renegotiating with suppliers,” he said.
Moody continued. “Tesla is the dominant electric vehicle brand and they want to keep that crown,” he said.
CEO Elon Musk has spoken repeatedly over the years about a $25,000 car. The question now is whether the Model 3 refresh gets close to that price or whether it’s a future car — sometimes referred to as the Model 2 (or Model C or Model Q — take your pick).
While Musk hasn’t talked about a $25,000 car recently, he may have elliptically addressed this in the Master Plan 3, which projects 42M lifetime sales of a future “compact” Tesla.
“The success of updating the Model 3 and Model Y could help fund a ‘Model 2’ type vehicle,” added Moody.
Or will other carmakers lead the way?
Other carmakers could lead the way to more affordable EVs, according to Moody.
“Most new entries [offered by startups and legacy carmakers] into the EV market have been high priced models but as early adopters snap up all the high-dollar, unique vehicles, the mainstream folks need to be considered next and price is one of the main ways to do that,” according to Moody.
That said, Tesla is the market leader in the U.S. and other markets around the world. And any movement on price by Tesla will almost certainly disrupt pricing.
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NOTES:
*Federal and state incentives can, in some cases, bring down the price of a current Model 3 to below $25,000. But tax credits and rebates come and go. And the criteria frequently change, making it harder for car manufacturers to qualify.
Also note that another hurdle to more widespread EV adoption is charging. Most apartment buildings in cities, for example, do not provide hardware for charging.
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