Hyliion (NYSE:HYLN) is one of the dark horses in the electric vehicle (EV) manufacturing sector. After a blockbuster debut in July last year, when the stock rose close to 5x in a short number of months, HYLN stock came crashing back down to earth.
As I write this, HYLN stock has lost close to two-thirds of its value since its all-time high. Quite the rollercoaster. However, at its current market capitalization of $2.13 billion, I believe HYLN stock could be a good investment for long-term investors given the opportunity it has in the EV market.
Hyliion is taking a different approach than its peers in the EV industry in two ways. The first is that the company is focused exclusively on the niche of Class 8 trucks. Its only real competitor in this space is Tesla (NASDAQ:TSLA) as there are questions of legitimacy hounding the other entrant, Nikola (NASDAQ:NKLA).
The second reason is that rather than target a fully electric truck, HYLN has what it calls electrified powertrains, which can be used to convert existing diesel trucks to hybrid or electric vehicles. Hyliion’s electric vehicles do not run exclusively on electricity. Rather, you fuel the Hyliion truck with either natural gas or hydrogen, which are passed through an onboard generator that produces electricity.
There are certain advantages to this approach as opposed to an all-electric. There is an existing infrastructure for refueling natural gas, as there are over 700 natural-gas fueling stations in North America.
A natural-gas-based system is also much faster and more convenient to refuel than an electric one. The latter could leave your truck idle for hours while recharging. At this rate, it may take years for a comparable EV charging infrastructure to exist for Class 8 trucks. Remember, a Class 8 truck is a massive vehicle, and a lot of the current EV charging infrastructure is built for smaller vehicles.
New Battery Technology Could Be a Game Changer
Furthermore, Hyliion is targeting the performance and range of its system to be comparable to existing trucks. The company also recently announced a next-generation battery module, which utilizes Toshiba’s (OTCMKTS:TOSYY) LTO (lithium titanium oxide) cells and battery-cooling technology that is 40% more effective.
These improvements will increase the battery life, charging rates and safety profile of Hyliion’s solution. The company has stated that the design has passed UN 38.3 battery testing procedures. Additionally, it can “withstand the stresses and rigors incurred on the road.”
I believe that Hyliion has a good chance of being the dominant EV solution for Class 8 trucks. This is because the economics of these trucks are different. Performance and reliability are key factors when making a decision to purchase them. There is a “weight penalty” for full battery trucks, as the battery needed will be very large, thus reducing capacity and increasing weight.
Now, Tesla might be up for this engineering challenge. Certainly, we have seen incredible technological breakthroughs from the company in the past. However, Hyliion has a solution that is available in the very near future with close to the performance level of existing diesel trucks. In the Q4 2020 earnings call, CEO Thomas Healy summarized the company’s approach:
“Hyliion’s focus is to utilize small battery packs that consistently get recharged as the vehicle is in operation as opposed to having a large battery pack that gets recharged once a day and carries all that energy around in the battery. By leveraging this strategy and taking advantage of the battery characteristics mentioned above, our Hypertruck ERX solution utilizes a battery that has approximately 120th the size of a conventional EV truck battery.”
Takeaway on HYLN Stock
Hyliion recently released its Q4 2020 results, and they were pretty uneventful. There wasn’t much going on in 2020, as the company only installed a total of 20 Hybrid electric units during the entire year. The company is still pre-revenue as it decided not to book revenues from its early orders. Additionally, HYLN ended 2020 with a net loss of $39.2 million.
The good news is that 2021 should prove to be instrumental for the company as it prepares to launch its electric truck, Hypertruck ERX. Investors can expect a full commercial launch in early 2022. The company estimates that it has an $800 billion total addressable market, as 8 million trucks are currently in operation and would need to be replaced.
I believe the market could be underestimating this company. HYLN stock may very well prove to be a good investment for patient investors.
On the date of publication, Joseph Nograles held a LONG position in HYLN.