It's Not Just Tesla, Electric Cars Are Getting Cheaper

If the environmental benefits and coolness of electric cars don’t sway people, perhaps price will.

A new report from Cowen & Co. says that electric cars will be cheaper than gas guzzlers by the early- to mid-2020s, thanks to falling battery prices as well as the costs that traditional car makers will incur in order to make sure their vehicles comply with new fuel-efficiency standards. Cowen’s Jeffrey Osbourne writes that these developments could accelerate electric-vehicle adoption from 1% of all global sales this year to 3% in 2020 and 7.5% in 2025, Cowen’s Jeffrey Osbourne writes. It’s a more optimistic forecast than most.

Tesla is already doing its part on price with its launch of the Model 3. The cheaper car starts at $35,000 less than the company’s luxury Model S sedan.

Rising interest in the category is good news for Tesla, but it also means there’s more incentive for rivals to take the space seriously. “We see the competitive tides shifting in 2019 and beyond as European [car makers] roiled by the diesel scandal and loss of share to Tesla in the high margin luxury segment step on the gas and accelerate the pace of EV introductions,” Osbourne writes.

Though Tesla cars are spiffy, he argues that “a significant amount of the purchase price of a Tesla comes through vanity,” whereas luxury rivals “have spent years perfecting the interior of their vehicles.” Once electric-vehicle buyers find themselves with more make and model options, they might choose a flashy interior over a flashy name.

Big Picture: There’s good news and bad news for Tesla in an analyst’s forecast about electric-vehicle adoption.

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