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Hyliion Has One Giant Problem Between Its Vision and Its Reality

Hyliion (NYSE:HYLN) is one of the latest electric vehicle-related stocks to come onto the market. And like many of its predecessors in 2020, Hyliion arrived by way of a special purpose acquisition company (SPAC). There’s nothing wrong with that per say. But it has become an all-too-convenient way for companies to go public while avoiding the scrutiny of the traditional IPO process.

An image showing natural gas storage containers.
Source: Muratart/Shutterstock.com

If you believe the company’s founder and chief executive officer Thomas Healy, the SPAC was necessitated by its announcement of the Hypertruck Electric Range Extender (ERX), its long-haul, fully electric powertrain. “What I didn’t want to do is tell the industry we were going to go do something and not have the capital to go do it, said Healy. “That is why we announced the funding and the powertrain right after that.”

Fair enough. And the company does have a binding pre-order for up to 1,000 trucks for the ERX powertrain which the company says will begin production in 2022.

In the meantime, Hyliion has a hybrid product that can be retrofitted on any class 7/8 heavy-duty truck. The product matches the company’s proprietary battery systems with a data management and analytics package that according to the company has been subject to 2 million miles of road testing.

Lots of Sizzle, But Little Steak

In a former career, I would help companies develop presentations like Hyliion’s glossy investor presentation. I was impressed. The company answers many of the top-line questions investors would have. There’s no doubt the company is a true believer.

But I’ve also spent countless hours looking over the minutiae of data to make sure I presented my clients case in the best possible light. I’m not suggesting Heliion is doing anything untoward. The nature of marketing is to present our best self.

It simply remains to be seen if its prospective customers feel the same way.

No Universal Standard

The rosy narrative for Hyliion starts to break down a little when you realize that there are many competing narratives for superiority in the electric long-haul market. Companies like Nikola (NASDAQ:NKLA) and Tesla (NASDAQ:TSLA) are building trucks from the ground up.

For its part, Hyliion will be relying on a series of original equipment manufacturers (OEMs) to build the ERX based on the company’s proprietary patents and technologies. But this product won’t be available until 2022, which is about the time when Nikola plans to have its electric truck ready to go.

That leaves the company’s immediate fortunes incumbent on its plug-and-play solution for retrofit applications. Perhaps it will be able to nudge its way along until its ERX is available. As Mark Hake wrote recently for InvestorPlace Hyliion expects to sell 20 of its electrified powertrains this year.

But it’s the future outlook that has some analysts scratching their heads. Hake went on to point out the company’s forecast to move from 20 electrified powertrains this year to 300 next year to 6,600 in 2022. That’s a huge jump. Particularly for a company that’s outsourcing most of the means of production.

And it becomes even larger when you consider that Amazon (NASDAQ:AMZN) has a contract with Rivian for 100,000 electric vehicles. That’s a huge part of the addressable market that comes off the table. Amazon isn’t the only company with EV contracts. United Parcel Service (NYSE:UPS) and Republic Services (NYSE:RSG) have also signed agreements with companies not named Hyliion.

You Can Wait on Hyliion Stock

The EV sector is getting noisy. That’s really exciting for what the future brings. But as an investor you have to be careful not to go after the shiny object. Shares of Hyliion have dropped significantly since the reverse merger was completed.

But you may want to let the stock drop into the mid-teens before you try to snatch it up. At that price, it would seem to be worth speculating on. After all, Healy is required to hold onto the majority of his shares for two years. He’s all in. But that doesn’t mean you have to be.

On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.


Article printed from InvestorPlace Media, https://investorplace.com/2020/11/hyliion-stock-has-shrinking-addressable-market-cseo/.

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