Breaking down how long the automotive industry will take to shift toward EVs

Other car companies besides Tesla are hopping on the electric car band wagon, with companies like Nikola and GM developing electric vehicles. Yahoo Finance’s Rick Newman joins The Final Round panel to break down when he anticipates the automotive industry to make a hard shift to electric vehicles.

Video Transcript

SEANA SMITH: Welcome back to "The Final Round." Well, electric cars are creating a frenzy, you can say, for investors. Tesla, of course, hitting an all-time high. Now we have a new stock that's getting a lot of attention. Its name is Nikola. You might have heard about it over the last week or so. Shares have continued to soar. Now they have a valuation of more than 26 billion.

And Rick Newman, I mean, when you take a look at some of these sky high valuation-- $26 billion. They don't have a car that's actually been manufactured that people are driving on the road right now. Yet, it doesn't seem like investors seem to care at all.

RICK NEWMAN: No, I mean, so is this the dot com bubble all over again, where we don't care if you have revenue, we just think you're going to dominate the future? Or is this something more like Tesla, which is obviously still around, whether it's a bubble or not? I don't know the answer.

There are some industry-- some well-known industry people involved with this company. So it has a young founder or co-founder. But Steve Girsky, who was vice chairman of General Motors, his firm merged with Nikola. So Steve Girsky is involved with the company. And he knows what he's doing. He was a Morgan Stanley analyst who went to General Motors around the time they were declaring bankruptcy. And he helped GM recover from its bankruptcy.

So they have some smart people involved. And the idea is to focus on trucks, all the way from pickups up to 18-wheelers, big trucks. So that's a-- that is a pretty good place to focus, I think. Because in a big truck, it's easier to pack a lot of batteries. You know, one of the things with batteries is the capacity. Just getting a range requires a lot of batteries. And they're heavy.

So maybe it's the right way to focus. If nothing else, this will certainly-- what's one more player that will perhaps speed the adoption of this technology and get the costs down, which is what you need.

SEANA SMITH: Yeah, and also, I mean, going off of that, there's so much at risk here. I mean, when you take a look at what Tesla continues to face, the stock is at an all-time high. Yet, they're now saying that they're facing issues of boosting the output of their Model Y crossover and Elon Musk saying that he's walked the assembly line on a weekly basis to try and troubleshoot production issues.

So when you see a name like Tesla that continues to have trouble, it's hard to kind of take a look at a name like Nikola and say that maybe they won't follow in similar footsteps to Tesla.

RICK NEWMAN: Well, they can only wish, I think. I mean, Tesla, the Model Y actually was doing really well. I mean, Tesla has had tons of production problems. But those production problems seem to be improving on a consistent basis, until the shutdown of the plant in Fremont, California. That's where the Model Y is built.

And, you know, Elon Musk, of course, opposed this shutdown and forced the reopening against what the county health commissioner said to do. So maybe that's-- maybe he realized that this was going to disrupt Model Y production.

Model Y is really important for Tesla because it's an SUV. It's the type of car people really want right now. And they need to get that car out in the market while people want to buy an SUV. So that's why Elon Musk is pressing there and walking the assembly line.

SEANA SMITH: Hey Rick, I mean, the big question I think that kind of goes along with all this is just how long it will take for electric cars to become this dominant form of transportation? There's a number of forecasts out there from various industry insiders or analysts. Mary Barra of GM was out recently, and she was basically saying that she thinks it's going to take decades. I'm just curious what you think about the timeline of this.

RICK NEWMAN: It depends how you frame the question. The timeline for what? I mean, we already have electric vehicles here. They're not science experiments anymore. But they're expensive. And right now, I think they're still less than 1% of all new car sales.

So if you're talking about a time when most cars sold are electric vehicles or the gasoline engine completely goes away, I think Mary Barr's completely right. It's going to be 20, 30 years, because the economics just can't make it happen any faster than that.

Tesla has a-- and Elon Musk have a very different point of view. They think the revolution is now. But these two companies, Tesla and GM, are looking at different universes in a way. So Tesla has almost always sold its cars to wealthy buyers who are environmentally oriented and can afford an electric vehicle.

And GM has to sell its cars to everybody. So GM sells the whole range of everything on the market, from small econo boxes all the way up to, you know, lavish pickup trucks that cost $80,000 or $90,000.

And I think GM-- you know, basically, the universe GM sees, I think they're right. I mean, how many people are going to have the money to spend an extra 10,000 or whatever it might be just to buy a battery powered car? Not a lot. Not a lot of the whole universe of car buyers has that money.

We just need to get the technology out to more people, to scale it more, get the costs down. And we probably still need some technology breakthroughs in terms of the batteries themselves, which everybody's working on, but aren't really here yet. And remember, these are still essentially lithium ion laptop style batteries strung together.

AKIKO FUJITA: You know, Rick, I was thinking about a few months ago, we were having this conversation about what all of this-- you know, what the economic pain we're feeling right now would mean for companies like a GM and their investments for electric vehicles. And the consensus seemed to be that there's going to be much more consolidation and that, you know, companies like Tesla who have this very loyal following will continue to do well.

But a lot of these companies that are sort of invested in EVs on the side may sort of put it to the side for a while. Does that argument still hold, or do you think companies are going to continue to invest in EVs because the long term potential is there?

RICK NEWMAN: Yeah, I think some of the big automakers for sure have-- I mean, it's not an all or nothing thing. But they've probably scaled back R&D into electric technology. So it's going to take a little bit longer. But General Motors still says that electric Hummer is coming on the same schedule as before, which I think was sometime next year or so.

You know, all the big companies are hedging their bets, and Tesla is making only one bet. I mean, Tesla's-- the whole company is wagered on the idea that electric cars are here to stay and that Tesla is going to be the best at it. And the other automakers are trying a lot of this and a lot of that.

And by the way, to go back to Nikola, they also say they're going to have a fuel cell hydrogen-powered vehicle, believe it or not. That's, you know, basically space travel to Mars. If you could get the technology right and scale that and get the cost down, hydrogen-powered vehicles are actually the most appealing form of transportation, just in terms of the science.

But they're really expensive, and nobody has figured out how to make them affordable yet. So if Nikola thinks they can do that, they could one up Tesla.

SEANA SMITH: Yeah. Well, I think that one of the similarities that we could draw between Nikola and Tesla is that both their CEOs, they're not shy. They both have very ambitious, lofty goals. And they put them out there in the public, so we'll see exactly what Nikola is able to produce on the other side.