In this episode of Industry Focus: Energy, Motley Fool auto specialist John Rosevear joins host Nick Sciple to break down the latest round of electric vehicle announcements from Volkswagen and BMW, as well as take a look at Hindenburg Research's short report calling out EV start-up Lordstown Motors (NASDAQ:RIDE)

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This video was recorded on March 18, 2021.

Nick Sciple: Welcome to Industry Focus, I'm Nick Sciple. This week on the show, John Rosevear returns for another roundup of electric vehicle news with Volkswagen making a big splash earlier this week, Lordstown Motors getting hit with a short report from Hindenburg Research and more. John, welcome back on the podcast.

John Rosevear: Nick, it's great to be here once again.

Sciple: It's great to have you on. We've had you working over time [laughs] on fool.com over the past few months with all this EV news. What does it feel like to be in the center of the spotlight?

Rosevear: I have to say there are mornings where I get up and I'm paralyzed. I tell my wife there's so much going on, I don't know where to start writing. When that happens, you start to look at things like Twitter and so forth. What's the news flow? Which stocks are moving the most? Then just start to think about it from there. But there is almost a paralysis when there's so much, there are four stories I need to write right now. [laughs] Where do you put the pen to the paper, virtually speaking, it can be quite something.

Sciple: As you're speaking, I'm thinking about that gift from the office for Michael. He's like, "It's happening, it's happening." I think they just pulled the fire alarm or something like that. But anyway, let's talk about other news, lots of big news this week. I said in the opener, Volkswagen is in the news on Monday, they held their power day for investors. The company laid out its roadmap for batteries and electric vehicles. Going forward, the stock is up over 30% in the past week. Why is everybody so excited, John?

Rosevear: Well, VW has been saying that for a few years, we're going to throw tens of billions of dollars in electric vehicles. We want to sell three million by 2025, blah, blah, blah; and the market has said, "Yeah, right. Show us." Now they came out on Monday and said, "Okay, here's how our battery technology is going to evolve over the next 10 years. Here's how we're going to build enough batteries to do this. By the way, we expect to be the global leader in EVs by or before 2025." For some reason, this time, which is not the first time they've come out and said so, but this time it really caught fire with the market and people really heard it. They kept it in the news a couple more days because the next day -- a lot of German companies do these annual reports in March, where they have a real presentation to investors into the media and so forth, and Volkswagen's was the next day after that. 

They talked about new models coming and they did well in 2020 and got into some of the financial details of that, costs of what the batteries are going to cost over the next several years, how they're going to get them down below 100 euros per kilowatt hour, which is the target. They're already not far from regular internal combustion Volkswagen margins with the first idea electrics that are coming out. I think the market really, it was the right time [laughs] when people are starting to maybe feel a little squeamish about some of these speculative EV start-ups. For a giant to come out and say, "We're building six gigafactories for batteries in Europe and here are where the first two are going to be," and things like that and I think it really got investor's attention at the right moment.

Sciple: You mentioned that word, gigafactories, and that's something that really popped out to me. You can mention that maybe Volkswagen has been laying the seeds for its EV strategy for a number of years, but maybe hasn't been recognized for what it's done there now, starting to get some credit from the market. I think part of that is adopting a narrative that Tesla has used to a lot of success. What do you make of them choosing that gigafactory term, which is a term that's very much kind of a Tesla TM branded term.

Rosevear: Well, VW CEO Herbert Diess has been pretty clear. We've looked really closely at Tesla, we admire what they've done, now we're coming for them. It's that dynamic. I think that's the term. If you want to communicate, particularly to investors, we're going to build a big giant factory to build batteries and for electric cars, gigafactory is the term now, props to Elon Musk for coining that. Then we argue, how big a factory is a gigafactory? The idea is that each of these six factories that VW is building will be able to do 40 gigawatt hours of batteries per year. So it's a total of 240 by 2030 they'll be able to build, and we should note that this is just Europe. They haven't shown us China or North American components of this yet, but there will be China and North America components. 

Part of this is also VW speaking to its home crowd saying we are building in Europe, we are investing in Europe, we're not buying batteries from Asia. We're going to make them in Europe, in European factories, with European workers and so forth. Which is very important politically for Volkswagen, which among other things is Germany's largest employer and there are sensitivities around that. They want to remain Germany's largest employer and Germany wants them to remain their largest employer. When Tesla announced its gigafactory, the Nevada Gigafactory, the original in 2013 or 2014, they said some huge number for what it would eventually be able to build. But the more realistic number was 35-ish gigawatt hours per year by 2020 and so these are roughly comparable in size and Volkswagen saying, "We're going to build six of them to support our production goals and we're taking control of the battery supply chain, and we have our own chemistry and by 2023, 80% of our vehicles are going to be on this new lower-cost chemistry that we're developing. The other 20% will be on premium chemistry." They didn't quite say it this way, but that's the Porsche and Audi chemistry. [laughs] That maybe has a little more performance or something. 

Then talking further out, solid-state batteries is where Quantumscape comes into the story. We know that VW is a strategic investor in Quantumscape. They said, eventually we'll go to solid state, certainly on the premium end and then more broadly as they become more widely available as production ramps up. That was somewhat exciting for Quantumscape. But Quantumscape stock didn't jump a whole lot mostly I think because that was all priced in. That's what we all knew was going to happen with them and for Volkswagen to confirm it as nice, but it didn't blast the stock up 30% or anything. VW stock, of course, got blasted by all of this. 

Then there's another part of this, the whole charging thing, they are building a ton of charging stations in Europe with partners including Spanish utility Iberdrola, an Italian electric and gas utility Enel Group. They are public, but I don't know if they're traded in the United States and then BP, British Petroleum. They're going to install fast charging points at BP gas stations throughout Europe, they've already got the real estate and people know to go to the gas station so put in fast chargers. Here in North America one more part of this in Europe, which is IONITY, which people may have heard of. It was established by VW in partnership with BMW, Daimler, Ford, and I think one other automaker in 2017 to build, in Europe, a fast charging network and that has been moving out. VW said, as part of this, they're going to put more money in IONITY and accelerate that. In the U.S., VW has Electrify America, which is a joint venture building fast charging networks. This was part of the Dieselgate settlement a few years back. They say they'll have 3,500 fast charging points up and running by the end of the year. When we say points, we're talking about an individual charge or a plug, so we need to just clarify the lingo, and of course, they're building them like crazy in China, just like everybody else does. [laughs] VW said something like, in a joint venture they have there at 17,000 fast charging points by 2025, there are multiple efforts to build fast charging networks in there. I know that both NIO and Nexteer are building their own, BYD is building one and then there are various state-owned and state-funded efforts going on as well.

Sciple: Yeah, so lots of exciting things going on with BMW when it comes to laying out their roadmap for batteries as well as just their production schedule for batteries. One thing I did think that was interesting on the charging front is, at the same time as we've seen, lots of hype and excitement around new electric vehicle companies, in conjunction with that, there's been lots of excitement around new electric vehicle charging companies like EVgo is one of them, ChargePoint. There are others as well. I think what really jumped out at me from this deal is that when you look at Volkswagen, who we can project to be, I think in Europe it's going to be a top three seller of electric vehicles. They're going to be a very important producer.

Rosevear: Quite comfortably. [laughs]

Sciple: Yes. Yeah we can say that very comfortably. [laughs] I will bet money on that. The fact that the relationships they're forming over companies like BP, utilities and then joint ventures that they own both in Europe and North America, as well as a joint venture in China. Is there read through, John, or do you have thoughts on whether we should read through into the potential market size for some of these other charging players, just given the priorities that the producers of electric vehicles seem to have are around who their partners are going to be?

Rosevear: Well, as we were noting before the recording here, ChargePoint's stock has had a rough several days in the wake of this. Not surprisingly, because expanding in Europe was a part of their growth case, their growth story, and now it's, well, you're going to be bumping in against Europe's largest selling automaker, one of the world's two largest selling automakers, or three depending on how we count. But in any event, an industry mega giant that is pouring tens of billions of dollars into this whole electrification effort. It makes the market a lot more competitive. Among other things, they're going to have to compete on price with these stations funded by BV and VW, which may be run at slightly over break even to get people in BV's convenience stores or whatever. Gas cells are very low margins because of all the extras the gas station sells. You can see this easily going in a similar direction in terms of pricing and with utilities in this likewise. 

It's rough for ChargePoint, who's got to make a profit that will impress their investors and who doesn't have utility customers or convenience stores [laughs] or a giant global auto business to fall back on here. Yeah, it is tough, and it does point out that we've been saying this for years. But now you start to see it with the big players coming into electric vehicles, it's going to be harder than it looks for start-ups to gain traction. ChargePoint already has some traction. Certainly in the U.S., I don't know offhand the size of their network and Europe, but there's some. But they're bumping up against stiff competition that maybe doesn't have to make a meaningful profit or a significant margin on charging services themselves. Yeah, it's going to be tough, and you're going to see this play out in other corners of this electric vehicle transition space as well.

Sciple: Yeah. Something to keep in mind as we pay attention to these deals playing out, there's this real competition. There's going to be some players coming into this EV charging space, or just electric vehicle space in general, that we haven't thought of as big EV players historically; and along those lines, we had another announcement from another major German automaker this week on Wednesday. BMW held an event where they discussed their rollout for electric vehicles. What were the big takeaways for BMW?

Rosevear: They want to bring battery-powered models to half of their global sales by 2030. BMW is not quite all in on EVs. We've heard companies like General Motors saying we're going to try to sell 100% EVs by 2035. BMW is hedging their bets on that a little bit. They are accelerating their EV programs. What has happened to BMW is, early in the last decade, they were out front at least among the German luxury makers with the i3 and then the hybrid i8 sports car. It looked like they were making some real progress there, and then there was a boardroom squabble, a CEO change, etc. Those efforts got put on the back burner and they were like, before we do that, we've got to sell a lot more SUVs and things like that, to get our margins up and get more cash in the bank. Now they're at the point where they're saying, "Okay, now we're going to accelerate our electric vehicle efforts. We're going to have at least one fully electric vehicle in our lineup in 90% of our global markets in two years. We're going to try to deliver two million by the end of 2025." But like I said, they're hedging their bets. They are not, at least as of right now, building their own battery supply chain. They're going to buy from existing suppliers. 

They are also not ending internal combustion engine development. As we've heard from some other automakers that one more generation and we're done, BMW thinks that there will be some customers for internal combustion over EV for some time to come and not just like in the developing world where charging may be scarce, but also like in parts of the United States, where people have money and so forth, but just don't want to do the EV thing yet or whatever. They think that some of that business is going to be worth chasing and winning indefinitely, probably not 50 years out, but certainly 10 or 15 years out. That's interesting and it's different from what we're hearing from companies like Volkswagen and GM and even Ford and so forth. 

They also, one other thing they did, was they showed three months ahead of plan the i4. It looks like an electric BMW i3. It sits a little bit higher, if you're familiar with BMWs gran coupe models. It's in that design language neighborhood. This is intended to be an electric version of the 3 Series, which is BMW's iconic car, the luxury sports sedan. It's a four-door. It looks about the size of a 3 Series. It has that big grill that they just introduced on the 3 Series, something very similar. They're saying all the things you want to hear, a sporty performance, 300 miles range, so forth and so on. Is this the competitor to the Model 3 that we've all been waiting for? [laughs] Yeah. Tesla named its car Model 3 for a reason, and I think that they were looking at the corner of their eyes saying, "Okay, you like the BMW 3 Series? Here's the model 3." I really think that was some of that thinking going on at Tesla, although they haven't quite acknowledged it. But now here's BMW saying, "Okay, you want an electric BMW? This is it and it looks the part and it will drive like a BMW and deliver on BMW's brand promise and so forth and so on.

Sciple: Right. So this adds to that, you always hear these auto commercials. "It's the best in its class." This adds to the class with the Model 3, and so the extent to which we see continued competition come online. One thing I wanted to ask you about, John, is we do have this a little bit different approach from BMW saying, we think we're still going to be producing traditional internal combustion engines into the future. The CEO seems to be a big fan of hybrids and says, I really like how hybrids drive and those sorts of things. We talked earlier about Volkswagen, they've adopted Tesla's branding with the gigafactory. Definitely seems to have a marketing approach to their push into electric vehicles. General Motors ran a Super Bowl ad around their electric vehicle rollout. There's certainly some marketing, some narrative going on, and the stocks have moved along. BMW putting forward a different narrative. If you had to pick, which one of those do you think is closer to the truth? The narrative of we're all electric by 2030 or BMW's narrative of, "We think that there's going to be some demand for internal combustion engines for an indefinite period into the future," or somewhere in between?

Rosevear: I think it's somewhere in between. I think BMW has a point. BMW isn't the only company saying that Toyota has been saying for a long time. We think hybrids are a better solution until recharging times come way down. They're talking five, 10 minutes to completely recharge. Certainly, Toyota plans to build internal combustion engines indefinitely. Probably through 2040, I think is the most recent thing they said. But, Toyota sells in markets where maybe there isn't going to be a lot of electric recharging infrastructure, In Africa and places like that for a while. They think there are still improvements to be found greening up to do with hybrids. You get to plug-in hybrids. If you've got a city where they say, OK, you can't run internal combustion in the city center between these hours on these days or whatever. Well, the plug-in hybrid, you can switch at least in theory, to an electric-only mode and go into the city. Then once you're on the highway going home, switch back to a hybrid mode. 

Solutions like this that Toyota is already not only invested in for years and years but gain significant market share with in green vehicles and hybrids and so forth, they are I think the world's leader in hybrids, certainly leading in the United States. They think that's going to run for a while longer. One of the things I've been hearing from Toyota executives for several years is we don't believe mass market consumers on a huge scale are going to put up with recharging times, where you have to sit for 40 minutes or 30 minutes or even 20 minutes. That was one reason why they have been investing some money in fuel cells. You can recharge a fuel cell car by refilling the hydrogen tank in five minutes and it's fully electric. The costs haven't quite come down to where that makes sense as a Corolla level product, but people tinker and there's still experimentation going on and I think what we're seeing in the broader market is there's going to be a niche for fuel cells, first responders, military, things like that, heavy trucks. But there are a lot of ways that this can all come together to clean up a lot of the pollution put out by internal combustion engines today. 

For a lot of people, electric cars are going to make a lot of sense. You're in the developed world, you have easy access to charging, you're mostly using it as a commuter vehicle. Absolutely. Charge it up at home at night and maybe once every few months, when you go see grandma 200 miles away, you've got to charge out into a public charging station; or you do the Tesla thing, where in some areas the supercharger stations become social things. I'm going to go over to the station on Saturday morning and wait in line and chat with other Tesla owners while I wait to charge. For a lot of people, that's going to be completely workable. Other people, they're going to want to go to the gas station, they're going to want internal combustion, they're going to say, "But what about hurricanes when you can't get to the charging station? If I have a full tank of gas in my garage that's always ready even if the power goes out, even if this or that." It's going to take more time to win those people over and it's going to take a couple of evolutions of products probably to win those people over. In the meantime, I think BMW and Toyota have a point that there will be some market for internal combustion vehicles for at least another 20 years, give or take, and that number is off the top of my head to some extent. Could it move faster? Sure. Could it take longer? Yes. Equally sure. 

It depends on how well the next generation of mass market electric vehicles are received by mass market consumers. You're going out to buy a new SUV, you looked at the Toyota, you looked at the Honda, you looked at the Ford, how many of those are electric in 2026? Which one's the best one for your family versus a hybrid or something like that? It's going to be people making those decisions by the millions over the next decade that determine the outcome. My sense is there's still going to be some room for ICE, to wrap back up to your original question here, but we're going to reach a point on cost and features and performance and charging ubiquity, where EVs sell themselves to a lot of people.

Sciple: I think that the big thing that you have, the auto market, this is something a product that eventually everybody has to have is the theory. Everyone has a car, or at least everyone in the developed world for the most part. If you look at the numbers, it's actually more cars on the road than registered drivers, and we can get into all those sorts of things. But it's a product that has to somehow meet the needs for everyone. You have this classic thing from early adopters, all the way through to the latest adopters or maybe crossing over into the mass market now, but it's going to take a long time for that to take place. We'll just see what happens there. One last thing I did think was interesting from BMW, we talked about Volkswagen's approach to build a network of battery factories across Europe. BMW has said, we're not going to do that. We're going to work just with suppliers, going with the traditional auto model, very supplier focused; pros and cons of that approach for BMW versus owning it's proprietary technology like it sounds Volkswagen is attempting to do?

Rosevear: GM is also attempting to do that. We should point out GM and LG together are working on a couple of gigafactories in the United States and I don't think they're going to be far off what Volkswagen's said, although they haven't announced it all yet. But with respect to BMW and what they're doing, well, it's a strategy. It's a strategy that requires less upfront investment and they have less cash to work with unlike somebody like Volkswagen, just because of the size of their business and so forth. Maybe that makes sense for them, maybe they've got commitments from LG, CATL, one of the other Asian battery giants that they can get sufficient supply. Maybe they don't care about building in Europe so much as long as they can get enough batteries. Also very possible, maybe in 2024, they're going to completely rethink that plan. [laughs] When their new EVs are more popular than they can comfortably keep up with in terms of production, maybe they're going to say, "Well, OK. Now we need some battery factories." [laughs] I think that's entirely possible.

Sciple: We'll see what happens here. Lots of exciting things going on with some of these traditional automakers doing new things when it comes to electric vehicles and this new technology. In other news on the electric vehicle front, we've got news about an electric vehicle company that apparently isn't doing things [laughs] that they said they would do. On March 12th, Hindenburg Research released another short report. They were the short-sellers behind the original Nikola short report back in September. But on March 12th, Hindenburg Research released a short report on Lordstown Motors, that ticker RIDE, stock is down over 20% since that report came out, John, what is Hindenburg alleging is going on with Lordstown here?

Rosevear: There's a lot to it. It's a long report. If you own Lordstown stock, I assume you've already read it. If not, go do that right now and then come back and listen to the rest of the podcast [laughs] or at least read the executive summary. The gist of it is this, Lordstown came out in January and said, we had 100,000 pre-orders for our endurance pickup truck. Their first product is an electric pickup. It's being built in an old GM plant in Lordstown, Ohio, hence the name of the company. They have designed this, they say for the needs of commercial fleet operators, and they think there's a big market for the zillions of pickups that companies like Comcast, like oilfield services, companies like big contractors buy every year. They think they can sell profitably into that market. They came out in January and said, we've got 100,000 pre-orders for this, and the stock went up and investors said, yeah, and Wall Street smiled. Now Hindenburg comes out and says, yeah, you paid some consultants to go out and find pre-orders and some of your fleet pre-orders that you've touted come from companies that don't seem to operate fleets and don't even seem to be real maybe, [laughs] and that CEO Steve Burns has been paying consultants to generate pre-orders for several years. He was the CEO of Workhorse Group, which is an affiliated company, we'll get into that in a moment. Workhorse owns about 10% of Lordstown. That's another company that we've talked about that seems to be a company in search of a business model to some extent, but Hindenburg alleged that he had been doing that at Workhorse as well. 

Generally, a lot of the report just trashes Steve Burns, they say he's a conman, he's PT Barnum. [The report says] "One senior employee told us, while working with Steve for a couple of years, they saw more questionable and unethical business practices than they had seen in their entire career." Well, I don't know where that senior employee worked before, but that certainly doesn't sound good. They also separately and relatedly said Workhorse showed the Endurance pickup last year, it was in June or July, I think and they said, "All right, we're working to put it into production and the first ones we'll ship in September of 2021," this year. But Hindenburg has alleged that they've been making drastic changes to the truck's design and could actually be three to four years away from full production. Lordstown has claimed that it will build its battery packs in house, but Hindenburg alleges that the equipment to do so won't even arrive at the factory for months yet. They are currently building battery packs by hand, which is not a high-volume operation [laughs] to say the least, battery packs are complicated. I don't know if you've ever seen one, but wiring up all the cells and so forth and installing the controllers and then putting them into hardened cases. If it's two guys with soldering irons, it's going to take you quite a while to do this. 

They also, in a note, somewhat reminiscent of the rather vicious takedown of Nikola, they said, "Lordstown's first on-road test of a prototype Endurance only happened in January, and it ended after 10 minutes because the vehicle caught fire." [laughs] This is going into production in September? No, it is not. Ford is saying they're going to start building their electric F150 in the middle of next year, 2022. We've already seen them out hammering on prototypes. They look like regular F150s, but then photographers note they don't have any exhaust pipes and they're not making any sound. Ford's already out there beating on these things. Lordstown is using somewhat of a new design where the motors are in the wheel hubs too, and they apparently say they're going to do 20,000 miles of testing on that design before they begin production. The whole auto industry said, "You ought to be adding a 0 to that, at least, with something like this, you're going to be selling these to fleet customers, they're going to be beat on every day, maybe out in the sticks on bumpy roads and so forth and so on, and people will expect them to just work with minimum downtime. What are you all doing?" [laughs] 

Then they had their earnings report last night and their loss was somewhat wider than Wall Street had expected, but big deal. More significantly, Steve Burns acknowledged that following the release of the Hindenburg report, the Securities and Exchange Commission has been asking for more information about these allegations. Then Burns went on CNBC this morning with Phil LeBeau and was like, "We never said we had actual orders. We didn't have a product yet, so by definition, you can't have orders. I don't think anybody thought we had actual orders." Which is, to my mind, if you watch the whole clip and you should go do that, he's admitted guilt here. [laughs] It certainly has that feel to me. Not a court of law feel, but certainly as an investor, if I was feeling good about my Lordstown investment a week ago, and the Hindenburg report gave me some qualms, I today have a lot more qualms. [laughs]

Sciple: We've talked about how there are some parallels to the Nikola Motors story when it comes to having a vehicle that you say can do one thing that in practice can do another. When it comes to a CEO, a leader publicly making claims about the company that in reality doesn't back up, it seems to mirror that very closely. Also Hindenburg is involved, and like the Nikola story, the allegations are one thing and short selling reports come out all the time with varying levels of accuracy to their allegations. But the response is really where you can get a lot of valuable information as the investor. In the case of Nikola, it was a non-denial denial. In the case of Lordstown, this appearance on Squawk Box this morning. I highly recommend folks check out that clip. I'll throw that link in into the podcast notes. Not the strong response you would look for someone who has the good on their side.

Rosevear: Yeah. With Nikola, you had the non-response response that we're hiring all the lawyers ever, and then the founder's out the door. Some of the products they were talking about, well, we're not actually going to be building those after all. Some of the partnerships that had been teased before this came out, well, they're not happening actually. [laughs] You had a big reset of the business and frankly, Nikola, it's still going and there is still the bones of a business there, but it looks a lot shakier than you might have thought last summer that it would ever look. What happens to Lordstown? Well, they do have a real factory in the sense that they have a giant building that used to belong to General Motors. GM is an investor here. Have that in common with [laughs] Nikola too. Is Hindenburg, GM's after the fact due diligence department, [laughs] we were joking.

There is something here. Is it going to turn into a real business? I have no idea at this point today. I have little confidence that they're going to come through unscathed. They're already scathed to some extent. The story now has some very big questions open on it. I don't know where it goes from here, but it does call the whole growth case, the whole bull case for the company into question. Also raises some big questions about Workhorse here. This is really a spin-off of Workhorse, not structurally, but functionally, in that this was Workhorse's truck. Steve Burns, when the opportunity to acquire the GM plant came up, they set up a separate company to do it. Steve Burns had been CEO of Workhorse. He went to be CEO of Lordstown. Workhorse owns 10% of Lordstown and gets a royalty on every truck they sell, and also gets a small cut as Lordstown raises money, as they raise capital. You have to go back and look at Workhorse, which I know is a favorite in the Cathie Wood world, or it has been, and say, well, what's really going on at that company now? I wonder if that isn't the next shoe to fall here.

Sciple: Yeah, it's something we'll continue to watch. This juxtaposition of some of these traditional automakers really putting significant cash to work and saying, we're pushing our chips in an EV, at the same time, we're seeing some narratives and the start-up companies start to maybe show they're not as well supported as they'd been in the case of Nikola. Now we see what's going on here with Lordstown. We'll watch, and we'll give the company the benefit of the doubt. We'll just see how they respond and what they're able to do. But if Nikola is any example, I'm not very optimistic. Maybe any last thoughts on Lordstown before we wrap up, John?

Rosevear: Only that when you get a big bubble like this, Tesla stock ran way, way, way up and then all of a sudden we saw all these other electric vehicle companies coming out of nowhere or out of quiet existence. The SPAC deals going public, blah, blah, blah. This seems like part of that. I remember seeing some of this in 1999, in the fall of '99 into early 2000, as these crazy dot-coms were coming out of nowhere and a lot of them turned out to be nothing more than a PowerPoint presentation, as we said at the time. Obviously, you need to show more in the car business, but maybe it turns out there's not as much there. I will note, and I want to be careful how I say this, I looked this morning and Fisker stock was down 6% or 7%. We have no reason to suspect anything is fishy with Fisker at all at this hour. But I think people are saying, "Okay, here's another speculative, free revenue electric vehicle stirred up. Maybe I'm losing my appetite for these kinds of investments," and I wonder if we're going to see more of that effect throughout what I've called the EV start-up cohort over time, over the next few weeks as this continues to unfold, where it's like, fool me once, that was Nikola, fool me twice, well, now we're going to think about all of these things, and especially if this leads into Workhorse and some questions about that business as well.

Sciple: This is a George Bush quote, right? Fool me once, shame on you, fool me twice, I won't get fooled again.

Rosevear: [laughs] Something like that. Yeah. There's another one that I can't recall right now, but anyway, yeah, something like that. [laughs]

Sciple: Yeah. You made the 1999 comparison, an example I've talked about on Fool Live and maybe on this podcast in the past is when Tesla came public, it was the first automaker to come public in the U.S. in over 50 years. This year, we're looking at over 10 in 2020, maybe more than that. I don't even know if I laid them out and counted them. Clearly, the narrative right now and around electric vehicles is very positive. I think "frothy" is an adjective that would be fair to use. You look out three years from now, Volkswagen has said they want to have their new battery chemistry being deployed in 2023. I think three years is a good time to say maybe some of these plans will play out. How do you think the narrative around electric vehicles is different three years from now than it is today?

Rosevear: Three years from now; I think you're going to see a lot of the longtime major global automakers having stepped up fully and embrace this with good products. Holy smokes, the Ford Mustang Mach-E is getting great reviews. Everybody's like, "Well, you want a Tesla alternative? Here it is, from the Ford Motor Company." They deliver. They said they were going to do that and they delivered. You're going to see more of that. You're going to see that from GM, you're going to see that from Volkswagen, and certainly, I expect BMWs will be pretty good. Daimler Mercedes-Benz will be in here. Some of the Japanese automakers have been quiet, but we know that Toyota is going to show a significant electric vehicle next year. Maybe others sooner. There's another one coming much sooner for China, I know. But just you're going to see some of these companies coming out with very credible, very serious products that can compete with anybody, whether it's Tesla or whatever the favorite start-up of the day. You're going to see some of these start-ups really hitting a wall. Well, you're going to make electric delivery vans. That's great. Ford and GM are shipping thousands of theirs a month, where's the market for yours? You're going to start to see those questions. 

This is a tough business and I think electric vehicle investors, in their excitement, have not really realized this is a gritty, low margin business where you make money on volume and you spend millions and millions and millions of dollars, hundreds of millions of dollars before you ship a single vehicle when you're developing a new one. That's all true of electric vehicles, even if, as our experts tell us, they'll have fewer parts, there'll be somewhat cheaper to build too and so forth, but it will still be true that you need a huge industrial investment, a huge R&D investment, a huge product development investment, all those people out the prototype Ford trucks banging over rocks for a year to make sure nothing breaks. All of that stuff costs a lot of money, and a lot of these little companies just aren't going to be able to compete in that world. The narrative may be that a few of the best of the best -- I don't think Tesla is going anywhere. I think that company may go through some restructuring, some changes, if the market hits the skids for a while, but certainly, Tesla has both the volume and the cash and the brand, three things not both, to be around for a while. 

You may see names emerge out of the smaller, earlier stage companies as well. NIO looks like it might be around for a while in China. Some of these others, Fisker could find a niche assuming they're not Hindenburg's next target or [laughs] something. Again, we have no reason to believe there's anything less than up and up about Fisker. But I think the narrative around electric vehicles is going to shift in three years to when will there be enough for everybody. Is there a reason to stay? You'll have consumers debating, is there still a reason to buy a gas car, or should I just go with this? When half of your local Ford dealers lot is electrics, and then there's hybrids and a couple of Mustangs, it's going to start to look very ordinary to people in three years, if not before, to buy an electric vehicle. Not just a techie thing, a cool thing and early adopter thing. The technology will cross the chasm into the mainstream. How many of these companies that have appeared from Tesla on will cross into the mainstream, I don't know. I think in 2030, a lot of your electric vehicles are going to come from companies with names like Ford and GM, and VW and Toyota and Honda and so forth, along with a few new entrants. But most of these companies won't get traction. Again, I think in three years, the narrative will shift more toward the established players and what kind of progress they're making and what consumer adoption looks like.

Sciple: Yeah, John. When you talk about the difficulties of scaling, I think it's a testament to what Tesla has accomplished. You talk about Tesla being the first automaker to become public in the U.S. in over five decades, it's because it's really, really hard. The fact that Tesla has been able to build is a miracle.

Rosevear: I don't think Tesla is a disruptive company, but they entered the auto business and that is a huge thing. It's a huge thing.

Sciple: Yeah. I think when we look back three years from now, I think we're going to appreciate even more how hard it was for Tesla to be able to accomplish what they did and some of the challenges that these other companies face. We'll live up to that. I think lots of people are looking for the next Tesla. I don't know if there will be a next Tesla. What they've accomplished I think is going to be very, very, very hard to duplicate, but we'll see. We will continue following the story, John, and if this past few months is any precedent, we'll have a lot more to talk about in the months ahead. Thank you for joining me as always.

Rosevear: Thank you.

Sciple: As always, people on the program may own companies discussed on the show and the Motley Fool may have formal recommendations for or against the stocks discussed, so don't buy or sell anything based solely on what you hear. Thanks to Dan Boyd for his work behind the virtual glass, for John Rosevear. I'm Nick Sciple. Thanks for listening, and Fool on!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.