It’s Time to Watch the Fully Electric Threat for Hyliion

Inarguably, one of the biggest disappointments among public market debuts over the trailing year has been clean-emissions-based commercial transportation provider Hyliion (NYSE:HYLN) stock.

Photo of Hyliion tractor inside service bay
Source: Hyliion media

Starting off as a special purpose acquisition company, HYLN stock closed at nearly $56 in early September.

Unfortunately, that would prove to be the peak as despite the best efforts from the bulls, shares began tumbling.

It wasn’t until recently that the bloodshed appeared to have hit bottom. As I write this, HYLN stock is down 79% from its peak close, a remarkable fall from grace.

However, around the middle of May, share closed briefly below $8 before breaching the $13 level in early June. It will open today just shy of $11.50.

Therefore, contrarians are beginning to have positive sentiment for HYLN stock. Yes, this remains a risky proposition, especially when you consider the wildness of former SPACs.

What I’ve always appreciated about HYLN stock fundamentally is that it’s a transitional business. And in moments like this, transitional businesses are credible businesses.

As my InvestorPlace colleagues mentioned, Hyliion specializes in both electrified modular powertrains to convert diesel-powered trucks to run on clean renewable natural gas (RNG) or turnkey solutions via its Hypertruck.

Because of RNG involvement, one of the main criticisms against HYLN stock is that the underlying company isn’t completely clean as all-electric solutions.

But the counterargument to this narrative is infrastructure. First, Hyliion’s products can convert existing diesel fleets to operate through RNG, which saves fleet owners considerable upfront costs.

Second, Hyliion’s Hypertruck can advantage existing RNG infrastructure, enabling long-haul transportation.

In other words, Hyliion is ready now. No, from a purely environmental perspective, HYLN stock is undergirded by a less-than-absolutely-perfect solution. But with electric vehicle infrastructure presumably still many years away due to economic concerns and political gridlock, Hyliion is the solution that’s most feasible.

A Surprising Obstacle May Stymie HYLN Stock

While the concept of clean transportation excites advocates for EVs, a major sticking point remains: getting fleet owners and associated entities to buy into the narrative.

Under a booming economy, you’d imagine it such negotiations would be more agreeable than say during a bad economy, but following the novel coronavirus pandemic, the situation for HYLN stock is murky.

For instance, fleet owners would gravitate toward modular solutions for their lower upfront costs relative to electric trucks. However, if the economy recovery sputters, I can’t imagine that fleets will be open to any kind of transition.

Recent research, though, may end up blowing up this paradigm — and not in a good way for HYLN stock.

According to analysis from Lawrence Berkeley National Lab, University of California Los Angeles, and University of California Berkeley, rapidly declining EV battery costs could make electric commercial trucks economically viable quicker than anticipated. Specifically, the report noted that:

…recent dramatic declines in battery prices and improvement in their energy density have created opportunities for battery-electric trucking today that were seldom anticipated just a few years ago. At the current global average battery pack price of $135 per kilowatt-hour (kWh) (realizable when procured at scale), a Class 8 electric truck with 375-mile range and operated 300 miles per day when compared to a diesel truck offers about 13% lower total cost of ownership (TCO) per mile, about 3-year payback and net present savings of about US $200,000 over a 15-year lifetime.

Also important is that these attributes can be achieved at only a 3% reduction in payload. Further, this study was published in March of this year. Thus, it (presumably) incorporates the latest data and technical capacities.

No matter what you think about the report, it’s safe to say that you should consider it before buying HYLN stock.

Not Quite the End of the Road

Before you go the other way and become ultra-bearish on Hyliion, it’s also important to consider the above report’s caveat:

However, as with almost any clean technology, higher upfront capital costs of both vehicles and charging infrastructure are major barriers when electric trucking is in its infancy. Without strong policy support, coordinated investments in both vehicle manufacturing and fuel infrastructure will not be forthcoming on the scale needed to harness the true potential of battery electric trucks.

For me, the skepticism about electric transportation vehicles stems from charging infrastructure or lack thereof.

Also, I’ve been watching a lot of Fox News lately and I have a feeling that former President Donald Trump is going to make a big comeback in 2024. Frankly, these crowds he is attracting as a “losing” candidate are unreal.

All this to say that even on the political end, electric trucks might not be able to depend on Democrats continuing to push clean energy policies. So HYLN stock does have a chance, but you want to be super careful on how you approach it.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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.

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