Tesla’s $25,000 Electric Car Means Game Over For Gas And Oil
The monumental Tesla Battery Day last week clearly wasn’t as monumental for some as they had expected. The day after the much-anticipated event, Tesla shares dropped by nearly 10%. This seems to be partly because the “million mile battery” wasn’t part of the presentation. The fickle investment community was hoping for an easily understood revolutionary announcement like an EV battery that will do a million miles without needing replacement. What they got instead was a series of incremental improvements based on technologies that were hard to understand and not very well explained. But the tail end of the Battery Day presentation was incredibly significant and foretells the final nail in the coffin of the traditional car industry based around fossil fuel propulsion.
Without much more than a single slide and a couple of sentences, Elon Musk delivered the punchline revealing where all the minor improvements up until that point in the presentation were leading. Numerically, it was a 56% reduction in battery costs. But then he explained that this would enable a $25,000 Tesla TSLA -2.1% “with fully autonomous capability”. In atypical style for Musk, he didn’t make any bolder claims about what this car would be able to deliver, but we can read between the lines.
Musk infamously cancelled the Standard Range version of the Model Y, stating that under 250 miles EPA range was too low, and subsequently that 300 miles of EPA range was the “new normal”. From this we assume that the $25,000 car will have at least 300 miles of EPA range, which would mean well over 300 miles with the more frugal WLTP test. You can also be certain this car will be fast because there’s no such thing as a slow Tesla, so it will definitely do 0-60mph in under 6 seconds. There have already been rumors of Tesla planning a small hatchback / subcompact vehicle, with a design teased back in January, and this will likely be the format of the new car given the price.
The $25,000 tag doesn’t initially sound that impressive, when you can buy an internal combustion engine Toyota Corolla in the USA starting at under $20,000. But this isn’t the market the car will be aimed at. The Tesla Model 3 starts at just under $40,000 in the US, and was clearly aimed at the luxury mid-sized market epitomized by the BMW 3-series, which its sales have annihilated in the USA. The new $25,000 car – shall we call it the Model 2? Everyone else is – will be aimed at another European icon, the hugely popular VW Golf, which represents quality at an affordable price. You can pick one of those up for just over $23,000.
Obviously, the “Model 2” is still a theory, but Musk was talking about the new battery enhancements being able to deliver the price enabling a Tesla EV at this level in 1.5-3 years’ time. So in around 3 years you could well have the choice of a well-built German fossil fuel car, or a semi-premium EV with over 300 miles of range and much faster performance – that will then go on to be much, much cheaper to run because even in the USA, electric miles are considerably less expensive than fossil fuel ones. In the UK, where petrol and diesel prices are astronomical, the running cost differential will be huge.
Teslas tend to come across to the UK at around the same price numerically in pounds as they are in dollars – the Model 3, which is $40,000 in the US, is around £40,000 in the UK. But the VW Golf is also numerically about the same. So a $25,000 Tesla Model 2 would probably be around £25,000, in the same ballpark as the VW Golf 8, which starts at just over £23,000 in the UK. VW’s all electric ID.3, just released in Europe (but not being launched in the US so far), will be right out of the picture, because it’s closer to the Tesla Model 3 in price.
Which would you choose for $25,000 – a Tesla Model 2 EV or a VW Golf with a conventional fossil fuel engine? No longer will the argument hold that “I can’t buy the EV because it’s too expensive”, because they will be the same price. You could still say “300 miles is not enough to get me all the way from New York to Los Angeles or London to Edinburgh in one go”, but who really does that? In three years from now, recharging will be much more ubiquitous, too – and it’s hardly a trial for Tesla owners already. When you can buy an EV with over 300 miles of range that is faster and equipped with better technology than an internal combustion engine VW Golf, as well as being much cheaper to run, only groundless anti-electric prejudice will stop you. There won’t be any real reason to buy a car that runs on fuel derived from oil and gas anymore.
By James Morris
Source: ForbesOctober 21, 2020