With the massive push toward clean energy solutions, along with the allegedly growing acceptance in the White House regarding the future administration of President-elect Joe Biden, the narrative for Hyliion (NYSE:HYLN) appears robust. Since making its market debut, Hyliion stock has skyrocketed along with many electric vehicle and alternative fuel investments.
Even with Hyliion taking a sizable hit to its valuation since late September, shares have been incredibly profitable for early stakeholders.
Further, the bullish thesis for Hyliion stock seems much more practical than the full-electrification strategy. While EVs are known for their zero-emissions platform, the harsh reality is that they’re more expensive on an apples-to-apples comparison. And that’s because EV batteries are pricey, making them prohibitively expense, even at scale.
Yes, it’s very conceivable that future technologies will reduce the overhead associated with batteries. After all, companies like Tesla (NASDAQ:TSLA), Toyota (NYSE:TM) and Panasonic (OTCMKTS:PCRFY), to name but a few, are researching and developing next-generation batteries featuring range, performance and lower costs. That’s the trifecta. Of course, trifectas are also unicorns.
What appeals to speculators about Hyliion stock is that the underlying company isn’t necessarily about creating unicorns. Rather, it’s taking a horse and attempting to attach the distinguishing spiraling horn.
At the heart of Hyliion is a hybrid system, whether you’re talking about its Hypertruck ERX or its modular platform that can, according to the company, “be installed on most major Class 8 commercial vehicles.” It’s an intriguing concept, where renewable natural gas powered by biodiesel fuels a generator, which then charges batteries that power an electric motor. From there, the concept is very similar to an EV, including the ability to provide regenerative braking.
From the surface, this combination platform seems the most practical strategy for clean commercial transportation, the best of both worlds. It sounds too good to be true and that’s where some investors are hesitant.
Hyliion Stock Represents Solutions on Paper
There’s no question that the political and social winds have changed in favor of investments like Hyliion stock. Sure, Biden probably won not because people voted for him but rather against incumbent President Donald Trump. Nevertheless, Biden and the Democrats didn’t make it a secret that they support zero-emissions policies.
But getting there is a problem. Therefore, the idea of fully electric tricks doesn’t resonate completely with the trucking industry. As Trucknews.com noted:
In early 2020, the business case for medium- and heavy-duty electric trucks just doesn’t work, and there’s little if any public infrastructure in place to support the growth of the commercial electric fleet. If we are to see broad uptake of zero-emission transportation, manufacturers and consumers will need massive government support, possibly market intervention, and a serious examination of the regulations that apply to electric trucks.
While trucks powered by renewable natural gas offer quicker refueling, they also suffer from the public infrastructure issue. If you want to travel cross-country, for instance, you must plan your route carefully. Refueling stations are plentiful but they feature significant coverage gaps between certain states. That’s just an inconvenience you don’t get with traditional combustion-powered trucks.
A counterargument, though, is energy efficiency. According to Georgia Tech School of Civil and Environmental Engineering, on average, “electric urban delivery trucks use about 30% less total energy and emit about 40% less greenhouse gases than diesel trucks, for about the same total cost, taking into account both the purchase price and the operating costs.”
Still, the university notes that “electric delivery trucks lose their advantage in suburban routes that involve fewer stops and higher average speed. Electric vehicles have a limited daily range and top speed, and without a lot of stops, lose their regenerative braking advantage.”
Here again, Hyliion stock might lose out. Big transportation routes feature long boring trips, negating the benefits of regenerative braking. In addition, such routes gravitate heavily toward the high energy density of fossil fuels.
Efficiency Is Akin to Affidavits
Over the course of the past few weeks, we’ve been hearing accusations from many conservatives regarding rampant voter fraud. To bolster such allegations, members of the White House and Trump’s legal team have produced affidavits.
As you know, affidavits are written statements confirmed by oath or affirmation, hence the name. But if you’re looking at this voter fraud issue objectively, the existence of affidavits was never the point. Instead, it’s the validity or credibility of the affidavits that matter.
It’s the same thing with the electrification of vehicles. Yes, they’re far more efficient than combustion engines, which conversely are horribly inefficient. But that’s not the point from a consumer and commercial perspective, is it? If net capacity is limited because of platform choice, it doesn’t matter how efficient that platform is.
Effectively, Hyliion stock is running into a science problem. The electric component of its underlying technology is not as practical/economically viable for commercial transportation. However, the renewable gas component also introduces infrastructural limitations that traditional platforms don’t suffer from.
Assuming that everything is on the up and up (but you don’t want to assume anything in this space), Hyliion stock is a great idea. Indeed, the Democrats are the party of great ideas. But the end practicality is a major challenge. For that, I’m going to sit out HYLN.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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.