Four EV Stocks to Avoid as the 'Great EV Consolidation' Unfolds

Editor's note: Today in Empire Financial Daily, our friend and colleague Luke Lango over at our corporate affiliate InvestorPlace is back with more insights on the electric-vehicle ("EV") space... Yesterday, Luke explained how we could be on the cusp of a "Great EV Consolidation." Today, he takes it a step further to explain that while […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily Weekend] Editor's note: In today's Weekend Edition of Empire Financial Daily, our friend and colleague Luke Lango over at our corporate affiliate InvestorPlace is back with more insights on the electric-vehicle ("EV") space... Yesterday, Luke explained how we could be on the cusp of a "Great EV Consolidation." Today, he takes it a step further to explain that while some companies in the sector could see their stocks soar as a result of this transformation, others could plunge to zero... --------------------------------------------------------------- Four EV Stocks to Avoid as the 'Great EV Consolidation' Unfolds By Luke Lango --------------------------------------------------------------- [Elon Musk's secret fuel?]( In addition to leading the charge for batteries, electric vehicles, and solar-powered homes, the Tesla founder is quietly working on a new type of fuel to power his SpaceX rockets. McKinsey, a leading consultancy, claims this technology will change our lives forever and create a $4 trillion industry. And one little-known company at the forefront of this industry has the potential to become "America's Next Big Monopoly." If you missed out investing in Tesla, Apple, Amazon, Google, or Netflix early on... this could be your second chance. [Get the details here](. --------------------------------------------------------------- Back in June, reports of electric-van maker Electric Last Mile Solutions' (ELMSQ) bankruptcy filing flew under the market news radar... Electric Last Mile came public via a special purpose acquisition company ("SPAC") in 2021 amid a wave of other EV startups. At the time, it was pitched to investors as one of the best pure plays on commercial fleet electrification. Today, it's headed for the graveyard. This story is a canary in the coal mine for EV stocks. While the EV industry is due for huge growth over the next decade, it's also due for major consolidation. There are simply too many EV makers out there today, and only about 5% of them will make it in the long run. The other 95% will go bankrupt. Electric Last Mile Solutions may be the first. It most certainly won't be the last. And it's happening outside the realm of bankruptcies, too... Indeed, EV maker Nikola (NKLA) recently announced its acquisition of battery maker Romeo Power (RMO). The "Great EV Consolidation" has begun. We always thought this consolidation would take several years to play out. But the Fed is accelerating that timeline. Its aggressive rate-hiking path is rapidly increasing the cost of capital in the U.S. economy. And that's making it largely impossible for a lot of these cash-burning EV startups to raise funds. --------------------------------------------------------------- Recommended Link: [Bill O'Reilly reports on 'the next great medical breakthrough of the decade']( The Gates Foundation, Fidelity, and Elon Musk are going all-in on a new development that Inc magazine says "will change health care forever." [Click here for more on O'Reilly's special report on "the next great medical breakthrough."]( --------------------------------------------------------------- The result? Over the next 12 months, we expect to see a lot of these startups file for bankruptcy. And a lot of EV stocks will go to zero. At the same time, we anticipate this consolidation to help certain strong companies and []send those high-quality EV stocks soaring! So... which ones are you holding in your portfolio right now – the ticking time bombs set to hit zero any day, or the next Teslas (TSLA)? We're about to witness a great consolidation in the EV space over the next 12 months... Dozens of EV stocks will head to zero. And []those that survive will end up soaring as they hog all the industry growth. As I explained yesterday, this thesis is rooted in historical precedent. To recap, let's rewind to the dawn of the gas-powered car... Bicycle mechanics J. Frank and Charles Duryea of Springfield, Massachusetts designed the first successful American gasoline automobile in 1893. Six years later, in 1899, 30 American manufacturers collectively produced 2,500 of these cars. And that was just the beginning. Over the next decade, some 485 companies entered the automobile manufacturing business. All were hoping to strike it rich as the gas-powered car redefined the world of transportation. It was a "gas-powered car boom" – much like the "electric-vehicle boom" of today. We all know what happened next... This innovation did go on to redefine the world. Today, around 70 million new passenger cars are sold every single year. But almost none of those 485 companies that popped up back in the early 1900s became a success story. Less than 50 of them were still in operation by 1930. And just three accounted for 80% of the market. Though gas-powered cars did take over, nine of every 10 car companies that emerged didn't survive to see that success. And less than one in 100 turned into auto-industry titans. [][]The EV Revolution will play out similarly. Today, there are hundreds of EV makers in the world, all hoping to strike it rich as EVs redefine transportation... EVs will do just that over the next 20 years, just as gas-powered cars did in the early 1900s. And similarly, the EV boom of the 2020s and '30s will see just a few top players that differentiate themselves in terms of major value-add, whether it be cost, design, performance, or branding. Those movers will attract all the consumer demand and reap all the rewards of the EV Revolution. And they'll squeeze out the other 90% of companies in the industry. So, when I look at the landscape today, I see a graveyard with a few shining stars. The key to striking gold in this revolution, then, is to []find those shining stars, and avoid the companies doomed for what will soon be a crowded EV graveyard. I've long been expecting this industry consolidation. However, I've also thought it would happen gradually over the next five years. The Fed has changed the timeline here. Rates are on a rapid ascent, and the cost of capital is surging. It increasingly appears that industry consolidation will happen very quickly over the next 12 months. In that stretch, I expect dozens of EV stocks to plunge to zero... Among those I expect to fail are: - Ayro (AYRO) This tiny company making small, low-speed EVs for niche-use cases looks like all talk and no walk. It has just $44 million in cash on the balance sheet against a trailing 12-month burn rate of $30 million. So, it needs some big commercial wins soon to stave off bankruptcy. We doubt that will happen. - Arcimoto (FUV) I love the idea of tiny, three-wheeled EVs. But I don't think this is the company that's going to execute that vision. And if it does, it will require so much more capital that shareholders will get diluted to near-zero. Arcimoto has just $5 million in cash on the balance sheet, and its cash burn was $15 million last quarter. Ouch! - Workhorse (WKHS) Ever since this electric-van maker lost the USPS contract – after first losing a UPS (UPS) contract – we've been convinced that the tech platform here is pretty poor. Bad technology just won't cut it in the hypercompetitive electric-van market. That's especially true with just $167 million in cash against a quarterly burn rate of $35 million. Not a great situation. - Lordstown Motors (RIDE) We were never convinced that this company – lacking talent and resources – would compete pound for pound making electric trucks with Tesla (market leader), Rivian Automotive (RIVN) (backed by Amazon), and Ford Motor (F) (the legacy truck leader). Now the pressure is on. The company has just $300 million in cash on the balance sheet with a quarterly burn rate of $80 million. Bankruptcy looks very likely here. A great consolidation is coming to the EV industry... That's bad news for low-quality EV stocks. They're doomed to fall to zero. []But it's also great news for high-quality EV stocks. Investor confidence will grow stronger as the industry purges all the unsubstantiated, all-hype startups. And the companies left after this elimination will have less competition and will likely grow faster, with better profit margins. The result? In the post-consolidation era, high-quality EV stocks will have bigger sales, bigger earnings, bigger multiples, and much higher prices. The time to buy those future winners is now – before this consolidation pushes them higher! In a special presentation, I share the details with how I identified one of those winners – it's a tiny stock with the potential to see gains of 40 times over the new few years. [Learn more here](. Regards, Luke Lango August 20, 2022 --------------------------------------------------------------- If someone forwarded you this e-mail and you would like to be added to the Empire Financial Daily e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2022 Empire Financial Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Empire Financial Research, 380 Lexington Ave., 4th Floor, New York, NY 10168 [www.empirefinancialresearch.com.]( You received this e-mail because you are subscribed to Empire Financial Daily. [Unsubscribe from all future e-mails](