If you are curious about the price- point that convinces drivers to switch to an electric vehicle (EV) think $27,389. That’s a winning window sticker. In dollars, it’s a tad more than the $25,000 car that Elon Musk promised in 2020. Instead, Musk brought the Cybertruck to market which can cost more than $100,000.
There’s automotive history to buttress the $27,389 EV. In 1900 there were more than 150,000 horses plying the streets of New York City and only 4,000 cars. Around 1908 the number of cars surpassed horses. Four or five years later, there were 356,000 cars. It was the affordable people’s car, the Model T, that precipitated the great switch from animal to auto. In 1913 the Model T sold for $859.00. Today, adjusted for 111 years of inflation, the people’s car would sell for $27,389.
There’s a second-act: After the initial wave of sales and improvements to the assembly line, Henry Ford dropped the price of the Model T to $360. By 1924 the vehicle sold for $290. Ford’s strategy was to make transportation affordable for the average factory worker or school teacher who earned about $400. a year.
People’s EV:
Jumping to present times, many would say that China is engaged in a similar effort to bring transportation to the people. The EVs they produce there sell between ten and twenty thousand dollars, and are as stylish and contemporary as any North American made car. The Chinese are making full sized EVs, not micro -cars with diminished range.
Whether North American automobile manufacturers choose to sell electric cars at a market-driven rate is a debatable issue, since EVs cannibalize their legacy. The Ford company does not innovate in the steps of its founder: in 2024 they reported a loss of $40,525 loss per electric vehicle. But Ford, and other auto companies, are not transparent about the accounting: where are the expenses bundled in for research and development (R&D) and for setting up new assembly lines? Excluding these, what are the per unit cost for batteries, other materials and labor?
Full Accounting:
Of course, we do not have full accounting for the electric cars rolling off the assembly line in China either. How much does their government subsidize each vehicle? On the balance sheet, where do they incorporate startup costs? Economically and socially, the Chinese government might wish to incentivize the EV market. New third world vehicle markets are emerging and they “leapfrog” over the gasoline engine towards cleaner, less polluting vehicles.
Recent U.S. elections aside, it would be a good idea for automakers to come square with actual production costs. EVs will likely have to be sold or leased without the sweetening of a $7500. tax credit or other income-adjusted rebates. Fortunately, robust sales over the past four or five years have moved the needle forward. Most 2024-2025 vehicles have a range above 300 miles and performance that matches or beats a gas vehicle. While almost all of them have an average sticker price above $40,000, the Chevrolet Equinox, the successor to the Chevy Bolt, lists at $33,600. Still, that’s close to 20% more than the reasonable $27,389 updated Model T.
Approximately 8 percent of new vehicles sold in the US today are electric. But they need a dependable, convenient charging network on the road, and at multi-family residences. Government incentives are still needed to build out a high-speed charging infrastructure along the interstates and in rural areas. It is similar to the role that public funding plays in extending the telecommunications network in hard-to-reach places.
Legacy Drags:
But let’s circle back to the $27,389 EV, and to less expensive models that could follow suit. Could the Chinese automakers export them, and succeed, even with new tariffs? In North American the car companies have legacy operations they drag along that hamper their per-unit cost. Dealerships are supported, as well as their after-market dependency on vehicle maintenance and repairs. Only a few companies, like Tesla, are free of this old-fashioned model.
A better sales market might resemble the one for smartphones. Like the phones we buy today, or the Japanese cars shipped to the US in the 1970’s, the hardware must be durable and require little maintenance. Tire rotation may be the exception. Tires might be like software updates- expected and necessary. After their serviceable life, both phones and cars are broken down for their valuable battery parts and mostly recycled.
It’s a big transition for the automotive market, one that makes the people’s car affordable again. And, with historical perspective from 111 years ago, both carriage makers, the horses, and car dealerships are endangered.