Electric vehicle leader Tesla may take advantage of its trillion-dollar market value and its world-leading margins and deliver a no-frills $US15,000 ($A20,000) EV as early as 2025, according to a new report from respected analyst Adam Jonas from Morgan Stanley.
The analysis, issued a day after Tesla reported another strong quarterly profit, notes that Tesla is already the most valuable and highest margin major car company in the world, and also wants to become a “cost leader” in EVs.
“We believe Tesla could bring to market a vehicle at a $15k price point or less, likely this decade… if not before 2025,” Jonas writes in the report. And he argues it could do this through manufacturing innovation, such as the new “giga-press” and by sheer scale, producing at more than one million units per plant.
A $15,000 EV, even from Tesla, would not be long range, nor would it be particularly quick. The savings would be made with a smaller battery and modest performance. But according to Jonas it would be “safe, reliable, (importantly) easy to manufacture, and can be supplied with readily available raw materials… securely sourced.”
The implications of such a move should not be underestimated. It would be great for consumers, and potentially devastating for legacy car manufacturers, simply because they could not hope to match Tesla’s scale and price points in such a short time frame.
Jonas notes that Tesla is already a “tera-cap”, meaning it has a market value of more than a trillion dollars on a “fully diluted” basis, which includes share options and the like not already converted or matured.
It is also by far the most profitable car company in the world in terms of margins, but its future profits may lie not in the sale of vehicles themselves, but in all the add-ons and subscriptions and ride shares that will accompany EVs and the rapid shift in software and self driving technologies and driving habits.
“We expect Tesla will invest this margin into price, capability, and scale… potentially adding vice-like pressure on established auto companies,” Jonas writes.
“The combination is potentially disruptive for the legacy players.”
Jonas notes that Tesla doesn’t just have vast amounts of capital, it also has a leadership position in technologies. That puts it in pole position to set technology standards, and accelerate the pace of deflation and key inputs.
In the meantime, competitors are scrambling to catch up. But there are so many big battery bets in the market that some are likely to be proved obsolete in short order, noting the fate of Betamax, VHS, the Palm Pilot and the Blackberry. It’s a risky business for those trying to catch up.
The latest prediction is interesting. It is less than two months since Jonas and his team were predicting a $20,000 Tesla possibly before the end of the decade.
Now the price prediction has fallen further and the timeframe shorter. But that is exactly how quickly the game is changing in the EV market right now.