Today, investors have plenty of reasons for excitement. Commercial electric vehicle (EV) enhancement company, XL Fleet (NYSE:XL), was awarded a government contract to hybridize a slew of military vehicles over the next year. Consequently, XL stock is up more than 10% today after the Department of Defense made the announcement this morning.
The contract is part of a series of emissions reduction efforts being championed in recent legislation. Indeed, the arrangement will see XL Fleet develop technology to reduce the idling fuel-consumption of many popular U.S. Army vehicles. XL Fleet is actually one of two companies that received the contract for a hybrid conversion kit prototype, alongside Volta Power Systems. Furthermore, the contract began on Oct. 1 of this year and will continue for 13 months.
XL Fleet specializes in plug-in hybrid solutions to commercial fleet vehicles. Currently, its technology allows a variety of vehicles to become partial hybrids, thus reducing emissions and enhancing fuel efficiency. The technology is even capable of boosting torque and doesn’t nullify manufacturer warranties related to the power train. Current offerings for plug-in electrification include the Chevrolet Silverado, Ford’s (NYSE:F) F-250, and a variety of commercial cargo and passenger vans.
What Does This Mean For XL Stock?
The news has held up well with investors, as the contract was apparently very competitive. Moreover, it will give XL Fleet the opportunity to become a long-term government resource in electrification. If the current EV boom gives any insight, it could be very lucrative for all parties.
The contract allows for the development of hybrid conversion kits for more than a quarter million tactical vehicles. As mentioned in the announcement, these vehicles spend a substantial amount of time stationary. Therefore, the ability to cut fuel consumption would be hugely economical.
Indeed, Defense Innovation Unit (DIU) department director Ben Richardson commented on the solicitation:
“By integrating an anti-idle capability into our existing fleet of tactical vehicles, the DoD has the opportunity to meaningfully reduce fuel consumption by its operational forces, enabling them to operate longer between refueling. This also promises to reduce the amount of fuel that must be transported into combat zones, reducing the demand on, and risk to, logistics supply chains.”
It’s clear that the next year will be telling for XL Fleet. The opportunity to become a go-to government EV contractor could spell harmony for the EV company, from combat zones to Wall Street.
On the date of publication, Shrey Dua 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.