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Does a Santa Monica startup have what it takes to upend the auto industry?

Miles Electric Vehicles Inc. a small company with big ambitions, is on the threshold of bringing to market the car that has long eluded the largest manufacturers in the world: an affordable all-electric, five-passenger vehicle capable of keeping up with freeway traffic and is aimed at the mass market.

This month, Miles will have about 25 prototypes of its Highway Speed Sedan at test facilities in the United States, Europe and China. Next year, Miles plans to sell 9,000 such cars almost exclusively in California and mostly in the Los Angeles area.

Automakers have long been stymied by an all-electric car because of the difficulty and expense of building rechargeable batteries that can power a vehicle for long distances. Until now, the most well-known electric car was General Motors Corp.’s EV-1, which was lauded by alternative vehicle enthusiasts when it debuted to limited release in 1996 but failed to catch on with consumers.

But Miles, with about two dozen employees, claims to have a big advantage: Its car will be assembled in China. The company said that will keep costs down and allow a price of about $40,000. While that’s roughly the cost of an entry-level Lexus, it’s on the lower end of the price scale of other all-electric cars trying to hit the mainstream.

Miles might be the first carmaker to outsource its assembly work to China, a model that Chief Executive Kevin Czinger said is no different from what Apple Inc. does with the iPod.

“Apple doesn’t spend billions of dollars to create a factory,” Czinger said. “They focus on brand, design and intellectual property.”

Miles’ path so far has not been without speed bumps. The sedan’s introduction date was pushed from 2008 to late 2009, and its retail price crept up from a ceiling of $39,000 to about $45,000.

Miles also faces stiff competition ranging from established automotive companies like Nissan Motor Co. to startups such as Aptera Motors Inc. in Carlsbad, which plan to introduce all-electric cars by 2010. About that same time, General Motors and Toyota Motor Corp. plan to offer the Chevy Volt and a plug-in Prius, respectively, hybrid vehicles powered by both gas engines and batteries.

And with the price of oil falling to around $50 a barrel, some environmental advocates fret that the consumer push toward all-electric cars will stall.

Analysts called Miles’ plan ambitious given that startup car companies have to take on the established manufacturers in Detroit, Japan and Europe. Then toss in the fact that Miles is using a largely unproven manufacturing model to build an electric car that it wants to sell as both affordable and attractive to the masses.

“No one’s been able to do it yet,” said Jim Hossack, an analyst with AutoPacific Inc., a consulting firm in Tustin. “And we’ve been making cars for 110 years now.”