Hyliion (NYSE:HYLN) is one of the flood of electric vehicle (EV) SPACs that emerged over the past year. HYLN stock, like its peer group, has also had a rough run in 2021 after the initial price spike.
Unlike most of the EV companies, however, Hyliion has a unique vision. Rather than aiming to build its own EV brand from the ground-up, Hyliion is working on niche solutions to enhance the already-existing trucking industry. It aims for incremental improvement rather than reinventing the wheel.
So, will Hyliion’s new approach find commercial success?
Currently, Hyliion is working on a few different items to improve trucking efficiency. The company makes powertrains, which can be added to trucks. These are intended to capture power as a vehicle rolls downhill. That retained power charges a battery, which can help assist the vehicle once it needs energy again. However, the high $25,000 sticker price for HYLN’s product counteracts the fuel savings; so far, demand has been limited.
Hyliion is also working on battery packs. However this is a competitive field where it may not have a significant advantage.
The firm’s most promising item is the Hypertruck ERX. This is a unique product. It offers a truck a dual-powered system that runs on both a battery and a natural gas engine. For shorter-trips, it goes purely off the electric battery, offering clean emission-free driving. It has built-in features such as regenerative braking to help conserve and maximize power from the existing battery as well.
Once the vehicle goes beyond its range, however, it switches to using the on-board natural gas engine. Natural gas is much cleaner than diesel. Historically, it’s also been much cheaper, though that’s currently under question given the ferocious rally in natural gas prices over the past few months. Regardless, historically, there’s been a considerable amount of interest in using natural gas for trucking.
A combination natural gas/battery engine could be a best-of-both-worlds solution. It offers many of the efficiency and environmental benefits of electric, while having a much larger range thanks to the natural gas backup. Additionally, it gives trucking companies a relatively simple way to improve their business and improve their environmental profile without having to totally overhaul their whole fleet.
Is There Demand for This Solution?
There’s a bearish talking point on HYLN stock is worth considering. Simply put, there are dozens if not hundreds of companies in the EV space, with many of them focusing on trucking in particular. Yet Hyliion is the only one—or at least the only public one—pursuing this sort of hybrid approach.
Thus, one can reasonably suggest that Hyliion’s solution simply isn’t that promising . The existing trucking industry has operated as it has for decades. It may take a total rethinking of trucking from the ground up to disrupt the existing supply chain. Even if Hyliion can produce incrementally better results, that may not be enough to move the needle.
More broadly, there is a dilemma so many SPAC firms find themselves in. They have little in the way of profits or even recurring revenues yet. So, investors have to believe in the story to maintain their confidence in the firm. That certainly applies to HYLN stock, which has generated minimal revenues up to this point. The company does have a decent balance sheet and a number of pre-orders. Still, it will take more time to see if Hyliion can convert its potential into tangible results.
HYLN Stock Verdict
Hyliion is doing something different. You can argue that either way. Bears say no one else is pursuing this path because it is unlikely to garner much commercial interest. And that’s a fair argument.
On the other hand, there are way too many generic EV companies with a spiffy-looking prototype vehicle and little else. You might have better odds taking a chance on a company that is trying to advance a practical—albeit less flashy—solution to a widespread problem.
Hyliion lacks a lot of glamour you’d find in other EV companies. Relying partly on natural gas fails to check certain environmental, social and governance (ESG) boxes as well. However, if the company can deliver on its promises in terms of efficiency and cost savings, that other stuff shouldn’t matter too much. Hyliion still has to prove out that potential commercial demand. But the concept makes a lot of sense, and the valuation isn’t too demanding at this price, either.
On the date of publication, Ian Bezek 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 InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.