Betting on Hyliion Is About the Science of Green Transportation

Over the years, both public and investor sentiment has gradually accepted that electric vehicles (EVs) — or vehicles that utilize electric platforms, like hybrids — are the future. With their strong performance and zero emissions, they represent the next generation of transportation. But that’s no longer the debate. Where people really duke it out is in specific providers. Not surprisingly, Hyliion (NYSE:HYLN) has encountered friction, leading to volatility for HYLN stock.

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

Of course, one of the biggest question marks against the company is its claims of enhanced fuel efficiency. According to Bonitas Research, those claims are grossly exaggerated — they cite an expert source that says achieving 30% in fuel efficiency with its natural gas and electric hybrid platform defies the laws of physics.

Given this and other evidence, HYLN stock finds itself trading in the teens. And even that may be questionable based on the red ink printed on the final Monday of 2020. Still, if you’re interested in speculating on a potentially quiet winner in the broader alternative vehicle space, you shouldn’t completely ignore Hyliion’s offering.

HYLN Stock and the Limitations of Electric Transportation

Aside from the bearish accusations, there’s another knock against HYLN stock that’s more fundamental. With the dramatic rise of battery electric vehicles, the appetite for hybrid systems deteriorated. Naturally, investors want one or the other. And in some ways, going hybrid seems like a copout considering available EV technologies.

But while consumer-level EVs achieved remarkable gains, the large-scale transportation industry is a different animal. Primarily, current lithium-ion batteries are not flexible nor robust enough to accommodate the variable needs of semi-trailer trucks. The best example of this? The depth of discharge (DoD) issue.

According to Energy Sage, DoD “indicates the percentage of the battery that has been discharged relative to the overall capacity of the battery.” Energy Sage continues:

“The more frequently a battery is charged and discharged, the shorter its lifespan will be. It’s generally not recommend to discharge a battery entirely, as that dramatically shortens the useful life of the battery. Many battery manufacturers specify a maximum recommended DoD for optimal performance of the battery.

“For example, if the manufacturer of a 10 kWh battery recommends a maximum DoD of 80 percent, you shouldn’t use more than 8 kWh from the battery without recharging.”

Put another way, going beyond DoD parameters can greatly impact an EV’s battery lifespan. In fact, ChargeDevs.com notes that just a 10% change can dramatically affect lifetime usability. Under average consumer-level conditions, DoD isn’t that big of a consideration. But when you’re talking about transportation, that minutia can add up.

Tied to the Most Relevant Solution

Of course, the reason for bringing up DoD constraints is that at some point, electric trucks must stop at a charging station for a “refuel.” And if it already takes several minutes for passenger EVs to charge up, that process will be especially burdensome for large, battery-powered semis.

Eventually, batteries will improve and EV semis will become economically feasible. But that could be many years away. So for now, the best solution we have is to combine the best of combustion technologies with that of EVs. This is the underappreciated bullish narrative of HYLN stock.

Essentially, Hyliion solutions — whether you’re talking about its modular hybrid system that attaches to compressed natural gas (CNG) trucks or its standalone Hypertruck ERX — convert energy from a generator to an all-electric drivetrain. In this way, the company enables fleet operators to leverage the high-energy density of fossil fuels and combine them with the advantages of EVs, such as regenerative braking and enhanced performance.

The end result is a transportation platform that has the range and quick refueling rate of traditional semis with the superior emissions profile and energy efficiencies of EVs.

Working with What We Have

Again, hybrid systems aren’t exactly aligned with current popular sentiment due to the rapidly advancing technologies in the EV space. Certainly, ever-declining battery costs will make electric trucks more feasible. However, there are other concerns to take into context.

Perhaps the biggest is the infrastructure overhaul. According to research published by ScienceDirect.com, while a full-electric trucking industry won’t dramatically increase overall net consumption of electricity, fleets of electric trucks will have a “large impact on local grids near charging stations.” Depending on the location, certain areas may not have the capacity necessary to accommodate that.

However, the nation’s CNG infrastructure is much more developed. Furthermore, it’s feasible right now for hybrid trucks to utilize it.

Admittedly, HYLN stock isn’t for everyone. But with how much shares have fallen, this is a solid bet for your speculation-earmarked portfolio.

On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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Article printed from InvestorPlace Media, https://investorplace.com/2020/12/hyln-stock-about-science-of-green-transportation/.

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