Electric vehicles have been at the forefront of the investment world for most of 2020. However, as my colleague David Moadel points out, not all companies received the same love. One such company is electrified powertrain solutions provider Hyliion (NYSE:HYLN), which hopes to commercialize long-haul electric trucks. HYLN stock is down roughly 31.4% in the past couple of months, in times when most EV companies are rallying. Risks remain with the investment, but it appears it’s building a nice head of steam so far this year.
It appears that Nikola Motors (NASDAQ:NKLA) woes have unjustly impacted HYLN stock. Investors incorrectly believe that Nikola and Hyliion have virtually the same business model. Unlike Nikola, Hyliion isn’t looking to replace existing truck fleets. Instead, its alternative powertrain solution offers existing trucks to go green.
Assuming the technology does what’s expected of it, the opportunity for growth is massive for Hyliion. It offers a product that potentially solves many problems without forcing managers to replace their existing fleets. Moreover, the company has a massive cash balance to see its plans through to the finish line. It most recently raked in $142 million from the sale of its stock warrants. Therefore, the stock is an exciting EV bet for sure but has a lot to prove to investors in the not-so-distant future.
The Need For Hybrid Trucks
Hyliion is developing long-term and short-term electrified powertrain solutions for most commercially available Class 8 trucks. In the short term, we have its hybrid offering, which offers a few unique features that could hit its customers. The first benefit is that fleet managers would not have to replace scraping off their existing fleets. Hyliion’s hybrid solution can be fitted on Class 8 commercial truck to improve performance and achieve carbon reduction goals.
Another benefit of the hybrid system is that it enables trucks running on natural gas to have a similar performance as diesel truck engines. Moreover, these solutions do not purely focus on electric motors, as they incorporate Hyliion’s proprietary software solution, battery systems, and analytics. Additionally, in my previous article, I also mentioned how the company claims that its electric-hybrid retrofit could increase fuel efficiency by 30%.
It’s tough to say whether hybrid trucks are the industry’s future, but if it can do all that’s mentioned above, things could interesting. Hyliion will be looking at a massive addressable market, valued at over $500 billion.
Of course, Hyliion’s long term goal is to provide a fully electric powertrain system called the Hypertruck ERX. The hypertruck offers several unique advantages to its customers, covering performance, fuel efficiency, and accessibility.
According to the company, the powertrain batteries are re-charged using an onboard generator. That means that the generator could effectively convert whatever fuel you put into the truck. This essentially means that the vehicle becomes net carbon-negative, providing it with a major edge over conventional EVs. Moreover, the ERX system will produce roughly 30% of electricity than the costs from the USA’s domestic grids.
Another fascinating aspect is that Hyliion will be looking to leverage existing infrastructure for refuelling. It estimates that an EV charging infrastructure will cost over $7-$12 billion; therefore, it’s easier to expand the existing infrastructure. Moreover, with similar performance systems as existing trucks, it is likely to win over many OEM manufacturers in the industry.
The company targets a 2024 sales figure of 19,000 hyper trucks and over 15,000 hybrid systems, which makes its target revenue past the $2 billion marks. All this is speculation at this point, though, and the next few months or so will be critical in adjudging its business model’s strength.
Final Word on HYLN Stock
Hyliion is a novel EV play that could potentially develop a new niche in the industry. It’s making some tall claims about its proposition, and it appears that investors would not have to wait a long time to see the results. It will be interesting to see how its hybrid solution gains traction, setting the stage for its fully electrified solution. Investors should keep tabs on repeat orders from Caterpillar (NYSE: CAT) and Wegmans and the delivery of 1000 pre-ordered Hypertruck ERX systems by Agility. Therefore, it’s best to wait and see how things play out in the next few months before investing in HYLN stock.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article