Under dogged pressure from electric competitors and government emissions standards, the combustion engine keeps becoming more efficient, making it harder for electrics to compete on price. In its 2040 outlook last week, ExxonMobil—admittedly not a company that is predisposed to be bullish on electric vehicles—cast doubt on whether electrics will make much headway for the next quarter century.

But there is a counter-argument: The internal combustion engine's dominance is actually almost over. Over the next decade, the cost of electric and combustion vehicles will more or less equal out, Deutsche Bank analyst Rod Lache writes in a new note to clients. Electrics could even be cheaper than combustion vehicles, Lache writes, which could "serve as a catalyst for significant expansion" of electric car sales.

There are two factors that could close the cost gap: The first is that battery prices are expected to drop by more than half to $100 per kilowatt hour—not because of a scientific leap, but due to engineering improvements and economies of scale, particularly at Tesla's "gigafactory." The second factor is that combustion engines will get a lot more expensive, Lache says. US gasoline efficiency standards, which require that light vehicle fleets average 54.5 miles a gallon by 2025, will incur added costs of $2,000 to $2,600 per vehicle. That will raise the total cost of a typical drive train—an engine, transmission, and fuel and exhaust system—to $7,000 to $7,600 per vehicle in the United States, he writes.