My colleague Brian Bolan has been a fan of Tesla (TSLA Quick QuoteTSLA - Free Report) ever since the IPO in 2010. Meanwhile, I was skeptical for nearly a decade until I listened to the arguments of long-vision investors like Ron Baron, Cathie Wood, and the Scottish investment fund Baillie Gifford.

Then I decided I would buy Tesla shares in early 2020 on the next pull back to $500 (pre 5-for-1 split). Well, I got my wish in the form of the Corona Crash in March.

I could have bought shares near $100 but I blinked during the market panic and what I later called the "flash recession." Brian Bolan did not blink. He scooped up Tesla under $100 for his Technology Innovators portfolio and never looked down again.

Recently, he did a presentation for Zacks Strategists on the EV space. What was intriguing was comparing the eager enthusiasm of lots of young aspiring EV makers with the now mature Tesla monolith.

So I invited him on Cook's Kitchen to give us a condensed version of that presentation so we can all learn a little more about the opportunities and the challenges of investing in the next phase of transportation and energy.

It's a good 15-minute discussion with key insights from Brian about why Tesla is winning and why there will likely soon be fewer small players.

Tesla Leads The Way

In this article, I will share some excerpts from Brian's recent Zacks Confidential report where he recommended his top 3 EV picks. You can clearly guess his #1 pick. I'll let him explain why in his own words...

When we talk about electric vehicles (EVs) we have to talk about Tesla. I added that stock to Tech Innovators during the Covid Crash and we have seen a tremendous gain over the last two years.

The Tesla story taught us many things, not the least of which is the complexity of building an EV. The high priced Model S and Model X were opportunities to learn on the job. The real challenge was the mass production of the Model 3.

Elon Musk talked to us about "production hell" when ramping capacity for the Model 3, but things have changed since then. Let's review a couple of those market moving changes.

Technology Has Changed Production

One of the early reasons the shorts were all over TSLA was that there was a basic misunderstanding about how the company was making its cars. A certain reporter that was close to a major short seller highlighted how the company was making cars in a manner inconsistent with GM or Ford.

The inability to think outside the box was a huge impediment for the shorts. The fact that TSLA was doing it a different way was bewildering to them and a reason to be short.

Tesla reworked how cars are built from the ground up. This radical change brought about plenty of opportunities for efficiency changes. Along the way, these improvements built upon themselves as the production process was continuously tweaked and improved.

(end of excerpt from the April 4 edition of Zacks Confidential)

Pickup Truck Becomes the EV Battleground

In the video, Brian and I talk about my favorite EV company Ford (F Quick QuoteF - Free Report) and the potential of the F-150 Lightning to be the best-selling truck in this new class, thus maintaining the tradition of the classic ICE (internal combustion engine) version. I get a chance to explain why I like the Ford Lightning so much, as both an investor and an observer of technology innovation.

Brian also looks at the unique offerings of some of the smaller EV truck players, like Lordstown Motors with their non-traditional 4-motor "drive train." The in-wheel drive system utilizes four independent hub motors with integrated software. Lordstown says this gives the Endurance truck "a motor and mind in each wheel."

Lordstown is only a $600 million company with projected sales this year of $32 million. But sales are expected to ramp to $150 million next year, representing 370% growth.

Then we discuss the potential fortunes of Rivian (RIVN Quick QuoteRIVN - Free Report) with their large customer Amazon. The balance of sticker price and driving range on various battery designs will be the key metrics on which consumers evaluate these trucks. As Brian pointed out...

"The Rivian RT1 starts at $67K and will have 260 to 300 miles of range. The Endurance from Lordstown Motors starts around $52K but will go up to $63K as it gives you more than 200 miles of range."

I believe the F-150 Lightning, starting at $40K with significant battery and "intelligent connected" options up to $60K, is the winner here for me, with range options from 230 to 300 miles.

Lucid Has Been Designing Since 2007

The one EV company I'm scratching my head about is Lucid Group (LCID Quick QuoteLCID - Free Report) with a $38 billion market cap and only $26 million in sales last year. I didn't know they've been in operation for so long, and their Air class of luxury cars are beautiful and look really competitive with Tesla's.

As of Lucid's February 22 earnings report, the company has produced over 400 EVs and delivered 300. Reservation orders reflect potential sales of over $2.4 billion. Those reservations sound encouraging, but there is a lot of potential success already priced into the shares.

What Brian makes clear is that all these companies must go through several years of doubt and proof-of-value just like Tesla did.

Specifically, this means things like the unpredictable quarters of unit production, expanding costs, and the sustainability of EV tax credits driving sales. There were many quarters where the bears were justified in their pessimism about Tesla becoming a world-class manufacturer.

Now, Tesla has definitely achieved its own critical mass of demand, production, and efficiency to compete with any traditional auto maker.

So the question becomes "How many of the little players will make it through that gauntlet?"

Supply Chains Favor Scale

Another challenge arises for smaller EV hopefuls with supply chain constraints and the accelerating inflation of costs that will impact their production goals.

Reuters recently reported that "Automakers racing to develop battery-powered, software-driven vehicles to compete with Tesla are confronting a new challenge: what technology to build themselves, and what to keep buying from suppliers.

"Becoming more vertically integrated by doing more manufacturing in-house represents a major shift for most global automakers, who have relied for decades on suppliers to produce critical parts and software, and manage sprawling manufacturing networks in low-wage countries."

This is another component of Tesla's critical mass. Be sure to tune into the video to get Brian's take on who survives.

Disclosure: Brian owns TSLA and I own Ford for the Zacks TAZR Trader portfolio.