By Joseph White
DETROIT (Reuters) -Henry Ford (NYSE:) democratized car ownership with his ultra-cheap, mass-produced Model T, and Elon Musk once promised to do the same for electric cars with a Tesla (NASDAQ:) that could sell for $25,000.
Now, sources have told Reuters Musk is putting aside the idea of bargain-priced Tesla for the masses in favor of self-driving robo-taxis. Musk replied via a post on his X.com platform that “Reuters is lying (again).” He did not identify any specific inaccuracies.
The uncertainty over Tesla’s plans, and delays to EV projects at rival automakers, present would-be EV buyers and Biden administration environmental policy makers with tough choices.
“A critical precursor to the EV transition is much greater availability of more models across more segments and at more price points,” said Peter Slowik, U.S passenger vehicles lead at the International Council on Clean Transportation, a non-profit research group.
Tesla and Musk did not immediately respond to a request for comment.
Prices for new EVs are dropping in the United States. But they are still roughly $5,000 higher than the $46,997 average transaction price for a new vehicle, according to Cox Automotive data.
Elon Musk set a goal in 2006 of building a profitable EV Tesla could sell for $25,000 – less than half the current average for EVs.
But in the marketplace, Tesla took advantage of its superiority in software-driven features and charging to charge premium prices until competition and slowing sales forced it to slash prices starting last year.
“I always thought Tesla should stay in that upper quadrant,” said Gary Silberg, head of KPMG’s global automotive practice. Look at Apple (NASDAQ:), he said. “They do not make a $100 phone.”
It’s not that there are no cheap EVs.
China’s BYD (SZ:) sells a version of its Dolphin EV for $13,865, and BYD sells versions of its Seagull EV for as low as $9,700 in China – cheaper than many gasoline cars. The cheapest Chinese EVs lack the range and features Western markets demand, but U.S. and European auto executives see these low-cost Chinese vehicles as a threat.
Chinese automakers are ramping up exports and gaining market share in Europe, Latin America and Southeast Asia – all important markets for Tesla and established automakers.
“If you cannot compete fair and square with the Chinese around the world, then 20-30% of revenue is at risk,” Ford CEO Jim Farley told an investor conference in February. Musk warned in January that Chinese EV manufacturers could “demolish” Western rivals.
Ford has launched what Farley called a “skunk works” project to develop a low-cost EV architecture. The project team is based in California, far from Ford’s Michigan headquarters.
U.S. President Joe Biden and Republican presidential candidate Donald Trump both say they will block access to the U.S. market for Chinese vehicles. Biden has called for the investigation of whether Chinese vehicles represent a security risk.
But without cheaper EVs, the Biden administration’s goals of boosting electric vehicles to more than half of new vehicle sales by 2030 could be at risk.
“As an industry right now we are struggling to make electromobility affordable,” Stellantis (NYSE:) CEO Carlos Tavares said during a forum this week.
Concerns about affordability have not stopped automakers from dropping cheap cars of all kinds from their new vehicle lineups for years.
New vehicles priced below $20,000 accounted for just 0.4% of U.S. auto sales last year, down from 7% five years ago, according to data compiled by Edmunds.com analyst Jessica Caldwell.
General Motors (NYSE:) killed its cheapest EV, the Chevrolet Bolt, last year.
“If there’s really not many automakers putting a competitive vehicle out in the low-cost market, you’re going to start to get more sympathy for having someone else come into the market,” said Mark Wakefield, co-leader of consulting firm AlixPartners’ automotive practice.
In the short term, many consumers will be able to find $25,000 EVs on used car lots. A 2022 Tesla Model 3 long range sold for an average $25,859 in March, according to Cox data.
(Written by Joseph White. Reporting By Joseph White, Giulio Piovaccari in Milan and Abhirup Roy in San Francisco; Editing by Anna Driver)
