As if you needed more news about electric vehicle debuts, we have another one to discuss. Last month, DiamondPeak Holdings (NASDAQ:DPHC) generated headlines when it announced it will merge with electric pickup truck startup Lordstown Motors. The deal will take Lordstown public. Certainly, investors were enthusiastic about the potential of the company, resulting in DiamondPeak stock skyrocketing.
As you probably know, DiamondPeak is a special purpose acquisition company or SPAC, essentially operating as shell companies without an underlying business.
SPACs have been hot commodities this year, providing an alternative to the typical initial public offering. With DiamondPeak stock, investors have a process that is similar to Nikola (NASDAQ:NKLA).
Proponents of DiamondPeak stock will argue the two are distinct in that Lordstown has a more tangible path to revenue creation. Unlike other speculative EV plays, Lordstown plans to build its trucks late next year in a former General Motors (NYSE:GM) factory. Further, it has investments from GM, while Workhorse Group (NASDAQ:WKHS) owns a 10% stake.
Put another way, while DiamondPeak stock is risky, the underlying company appears to have its fundamentals locked tight. Should you then take a shot at shares? Like anything involving new technology, it’s complicated.
Here are two pros and two cons to consider.
Pro: DiamondPeak Stock Tied to a “Real” Business
As I mentioned above, Lordstown already has tangible plans underway to manufacturer and distribute its electric pickup trucks. Again, while no one should mistake DiamondPeak stock as a surefire bet, management has laid out a viable business plan. Accordingly, Lordstown received 27,000 orders, representing $1.4 billion in potential revenue mostly from commercial fleet clients.
According to a CNN report, Lordstown will sell the pickups at a starting price around $52,000. That competes reasonably well with other electric trucks. Yes, the Tesla (NASDAQ:TSLA) Cybertruck has a lower starting price. At the same time, Lordstown’s pickup doesn’t look like a geometry question coming to life via a Frankenstein experiment.
Like the Nikola Badger, the Lordstown Endurance features a futuristic yet familiar profile. Likely, this will have mass appeal relative to the Cybertruck. And the Endurance is priced lower than premium electric trucks.
Pro: The Endurance Should Be More Reliable
Technically, the most groundbreaking element of the Lordstown Endurance is its in-wheel motor system. Rather than housing the electric motor into the chassis, it is instead incorporated into all four wheels of the pickup truck.
This setup features multiple advantages, including superior traction in low-friction surfaces (muddy or slippery conditions). Obviously, that’s a crucial component for a commercially used pickup truck.
Most importantly, the in-wheel configuration has fewer moving parts than traditional vehicles. Therefore, drivers and operators don’t have to deal with the recurring, almost incessant maintenance typical of combustion-engine trucks. Over time, the cost-savings, especially for fleet operators, will be incredibly significant.
Plus, the Endurance only takes 30 minutes to recharge on a fast charger, according to Lordstown’s website. Time is money and even here, the Endurance delivers for its customers.
Con: Lordstown Takes a Technical Compromise
If you’re thinking that the Endurance’s in-wheel motor is a radical departure from how vehicles (whether electric or otherwise) are made, you’re right. By removing the motor component to the wheels, the Endurance has more usable space. Again, that’s a net positive for commercial buyers.
However, by moving the motor to the wheels, the Endurance has an unsprung weight dilemma. In a practical view, unsprung components absorb the forces of the road independently to the rest of the vehicle. Thus, this creates potential reliability issues. Not only that, the wheels represent rotational mass, meaning they also absorb torque
To be fair, Lordstown claims that it undergoes extensive testing simulating all kinds of real-world conditions. Plus, it will be bad marketing to introduce a pickup called the Endurance that couldn’t, you know, endure.
To get around the reliability concerns without spiking up the cost of the pickup, Endurance has given up some performance. Based on Lordstown’s estimate, its truck will hit 60 miles per hour from standstill in 5.5 seconds. That’s slower than molasses, especially today and especially for an EV.
The Nikola Badger launches to the same speed in a blistering 2.9 seconds. I don’t think the Endurance’s core customers will care about acceleration too much. But because the Badger is so thrilling, it will appeal to commercial buyers and personal drivers.
And believe me, that 2.6 seconds shaving makes a huge difference.
Con: Customers May Be Weary of ‘Too New’ Tech
As any smart car buyer will tell you, you never buy a new car on its debut year. Admittedly, this probably applies more to combustion-engine cars than EVs, but the principle remains the same. Basically, you want to let the first-year buyers be the guinea pigs. When reported problems are disseminated in automotive publications, you can make more informed decisions as a buyer.
Frankly, I’m still hung up on Lordstown’s in-wheel motors. Yes, I recognize that it’s a brilliant technology. But let’s face it – very few companies have experimented with this technology. Lordstown will be one of the few that has implemented it into a production vehicle.
It’s just a common-sense concern here: if the technology was so great, why isn’t everyone rushing to do it? Likely, customers will wait out for a year or two before diving into the Endurance.
An Exciting and Viable EV Play
While DiamondPeak stock is a risky idea, the narrative has strong fundamental support. With a credible manufacturing plan, Lordstown is already a step ahead of the game.
Additionally, the company’s Endurance is priced right for the commercial customer, with fast-charging capabilities and superior traction in rough conditions. Therefore, EV investors may want to take a close look at this opportunity.
On the date of publication, Josh Enomoto held a long position in NKLA.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
