Richard Engdahl sits down with the Fool's own John Rosevear to discuss the auto industry. Now The Motley Fool's senior auto analyst, John says it all started with his 2009 article, "Talk Me Out of Buying This Stock" (about Ford -- still one of his favorites). Today, he offers an in-depth look at Tesla (TSLA -3.40%) and the electric vehicle market, as well as Chrysler's unique situation with Fiat (NASDAQOTH: FIATY).

There's little doubt that electric, or hybrid, or other green technology will play a big role in the future of the automotive industry. But which technology and which companies should you support? In this video segment, John discusses his views on how the green vehicle market will evolve and why he hasn't chosen to invest in Tesla just yet.

A full transcript follows the video.

Richard Engdahl: Finally, just in that same vein, whether it's electric vehicles, whether it's... My very first -- and worst -- investment ever was Ballard Power, buying that at the peak. I was all about the future of hydrogen vehicles at one point.

Whether it's hydrogen or electric or autonomous cars or whatever, as an investor where do you see the biggest opportunities? Do you make small bets in all these areas? If you think that the future of the auto industry is less fuel consumption, where do you look as an investor? What are the best places?

John Rosevear: That's a good question. I have not invested in Tesla. On the one hand, the company has executed very well so far. On the other hand, I'm worried about what happens when competition shows up, in terms of Tesla. And, of course, the valuation now has gotten very high and whether they can catch up with that, I don't know.

My attitude toward Tesla is I will pop popcorn and watch with interest as the story develops, because it's a cool story to write about and to report on. But where are the opportunities? It's hard to say.

Setting aside Tesla for a moment and looking at the global auto business, you have this small group of companies that are really top tier and they compete very hard for very small margins.

Toyota, Honda, Ford, General Motors, Nissan, a Volkswagen... and then in the luxury segment, you have Mercedes, you have BMW, you have a few smaller players. But the competition is so fierce, and these companies are looking at six, seven, eight, maybe 10% margins.

Even in the luxury space, you're looking at a 10% operating margin. These are not consumer electronics, these are not iPhones. And the massive fixed costs, and so forth, that you need to do that.

Where does the innovation come from? The answer: Tesla is an interesting test of the idea of whether the auto industry can really be disrupted, or whether they will just establish themselves as a niche player selling their 400-500,000 cars a year, and life will go on where, at the top no disruption has really happened, although everybody has maybe moved their products along in a different way.

The resources by the key players, that they have, are so massive. If you develop some cutting-edge technology for the auto business, for most people, most little companies in a position to do that, their best bet is to bring it to GM, which has an active venture fund, to bring it to Toyota, to bring it to somebody who will invest in you and commercialize it and buy the first 18 months' production, or whatever, to bring that to market.

When you ask where is the innovation going to come from, it's going to come to market mostly via brands you already know. There are a mess of Chinese automakers right now. That industry is really in its formative stage. You might get one, maybe two, global players that emerge out of that.

SAIC, the Shanghai company, they are partnered with Volkswagen and General Motors in China. If you want to build cars in China, you need a local joint venture partner. SAIC is the partner of Volkswagen and GM.

GM and Volkswagen are number one and two in market share in the Chinese market, so SAIC has become very powerful and they've learned a lot.

That's a company that could emerge as a global player that isn't on our list of known brands, but, by and large, I think 15 years from now, if you want a cutting-edge car, chances are that it's going to come from a brand that we've heard of today and that we've talked about today.