Tesla announced that it will considerably reduce the asking prices of its battery cells and packs, meaning, the company’s next goal is a $25,000 electric car.

It looks like Tesla will soon be coming with a new electric car carrying a $25,000 price tag. The company’s chief executive Elon Musk said its new “tabless” battery cells, and changing the materials used inside the cell, will enable the company to have the price per kilowatt-hour, which will enable them to make electric cars about the same price as combustion engine cars.

The kWh price per (kilowatt-hour) is the unit of energy, ideally used to measure the capacity packed by the battery inside modern electric vehicles. Those prices have been significantly declining over the last decade, from $1,100/kWh in 2010 to $156/kWh in 2019, a drop of 87 percent.

Experts suggest that the price is likely to hit $100/kWh by 2023, but Musk said Tesla will initiate a three-year process to bring the price below that, but did not reveal the exact price target. There is more to a battery than just its cell.

A lithium-ion battery cell that would normally cost you $100/kWh to produce mean a battery pack, with its additional components including cooling systems and battery management, could set you back $125–$130/kWh or more.

Today’s battery packs cost about $10,000–$12,000, based on their capacity. Reduced battery prices could pave the way for more affordable, higher volume electric cars. Tesla is bent on bringing the cost of future packs down to $6,000 or less, putting the cell cost under $100/kWh.

The average price of electric cars in the United States continues to drop – from $64,300 in 2018 to $55,600 last year, a 13.4 percent decline. That’s primarily because of Tesla’s Model 3.

This is still high as compared to the average price of a gas-burning vehicle at $36,600. It is worth mentioning here that the price has been ticking upward recently.

The Model 3 was originally slated to be Tesla’s first car for the broader market. Tesla’s master plan from early on, as outlined by Musk in a blog post in 2006, revolves around how it would build a highly appealing electric sports car in a bid to convince buyers that EVs can be cool too, use the revenue from there to bankroll a more affordable luxury sedan, and use the funds from the effort into building a car that people could buy without burning a hole in their pockets.

Due to Tesla’s well documented “production hell,” Musk’s plan to build a $35,000 Model 3 did not come to fruition. The Model 3 Standard Range Plus starts at $37,990, the Performance starts at $54,990, and the Long Range starts at $46,990.

Musk first promised a $25,000 EV two years ago, which he said was possible within three years. “I think in order for us to get up to…a 25,000 car, that’s something we can do,” Musk said in an interview with YouTuber Marques Brownlee.

Musk: “Long-term we want to make about 20 million vehicles per year”

That’s roughly twice the production volume of Toyota, GM, or Volkswagen.

— E.W. Niedermeyer (@Tweetermeyer) September 22, 2020

“But if we work really hard I think maybe we can do that in about three years,” he explained. At Battery Day Musk made a new prediction hinting at 20 million cars a year, which roughly is twice the current production of Volkswagen, GM, or Toyota, author of Ludicrous: the Unvarnished Story of Tesla Motors Ed Niedermeyer tweeted.