While electric vehicle sales continue to grow significantly across the world, EVs have yet to fully go “mainstream.”
According to EV-Volumes, a total of 6 million electric vehicles were sold during the first half of 2023. That is up an astounding 40% year-over-year. But EVs still accounted for just 14% of total new car sales over that same time.
That’s not very much.
But thanks in most part to a series of strategic moves from Tesla (TSLA), that number could be about to surge above 50%.
Here’s the cold reality about EVs. Despite their environmentally friendlier nature, their adoption is going to hinge on economics.
In short, when EVs become cheaper than gas-powered cars, people will start buying electric vehicles instead.
And I’m not talking about “lifetime cost,” which includes tax-break and gas-cost savings. I’m talking about sticker prices.
When the sticker price of an EV is less than that of a comparable new gas-powered car, we will all start buying electric cars.
And we believe that thanks to Elon Musk, that day has finally arrived.
Stepping Closer to Electric Vehicle Affordability
Over the past year, Tesla has embarked on a series of aggressive price cuts on its two most popular models – the Model 3 and Model Y.
After the latest round of price cuts, those cars are now selling for significantly less than new gas-powered cars.
The average sticker price of a new gas car currently runs at about $48,000. The Model 3 is selling for nearly $9,000 less than that at just below $39,000. And at $45,000, the Model Y is selling for about $4,000.
For the first time ever, both the Model 3 and Model Y are cheaper than the average gas-powered car.
Of course, that’s great news for Tesla. It means a lot of prospective car buyers will start considering the Model 3 and Model Y more seriously.
But let’s zoom out and look at the bigger picture here.
Tesla is the leader of the electric vehicle industry. It’s the trailblazer for the whole space. It charts the course. And where it goes, others follow.
Now Tesla has successfully charted a course to EV cost parity.
Other EV makers will follow suit.
Within three to five years, a huge secular decline in EV battery costs (which are dropping by 19% per year, on average) will allow EV makers to build EVs that cost less than their gas counterparts.
The Final Word
It seems that EVs have finally reached their tipping point.
And so have many other technological revolutions.
Perhaps the most exciting thing about the 2020s is that we are at the convergence of multiple technological revolutions reaching their own respective tipping points.
And within the next few years, all of these technologies will change the world profoundly.
Tech investors are going to make fortunes as a result.
Make sure you don’t miss the party.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
