It’s been the year of the EVs. Many consider 2020 to be the industry’s turning point. EV stocks have outperformed the broader market and continue to win over investors at the tail-end of the year. Not all EV stocks have been so lucky, though. Hyliion (NYSE:HYLN), a company looking to commercialize long-haul electric trucks, has seen its stock tank 30% in the past month. With skepticism mounting towards its claims and any revenue potentially still a few years away, Hyliion stock is unattractive at this point.
It completed a reverse merger with a special purpose acquisition company (SPAC), Tortoise Acquisition Corporation, in October. The deal yielded roughly $520 million in net proceeds to fund the company’s expansion plans.
Several companies this year have foregone a traditional IPO and have taken the SPAC route. This method robs investors of valuable information that would’ve otherwise been available to them.
Minimal Revenues
Hyliion recently reported its third-quarter results, which happen to be its first earnings report since going public. The company posted $1 million in revenue from delivering 20 trucks equipped with its electronic-axle system. Moreover, it reported a net loss of $9.1 million for the quarter, taking its net loss to $18.7 million for the nine months that ended in September. Its operation expenses for the nine months came in at $11.8 million.
However, several developments in the quarter suggest that it’s on track to follow through on its developmental milestones. Specifically, it’s speeding the commercialization process of its Hypertruck, and it struck a deal with FEV North America.
FEV has all the critical testing equipment that the company needs to evaluate its powertrains. Moreover, it also inked a deal with American Natural Gas to supply that company with 250 of its natural gas-powered Hypertruck ERX electric systems. On top of that, it remains on course to deliver test versions of its ERX Hypertruck system by mid-2021.
Hyliion’s CEO, Thomas Healy, stated that, “We are experiencing strong interest for our solutions and are utilizing our resources to develop a scaled infrastructure that will be able to support demand from this $800 billion market.” The bottom line, for now, is that the company probably won’t be reporting any meaningful sales for at least the next two years.
Electrification of Long-Haul Trucks Remains Questionable
Trucks’ fuel demand is expected to rise, albeit at a sluggish pace. In 2019, road freight accounted for roughly 15% of the world’s oil consumption or 15.5 barrels per day. Long-term forecasts suggest that demand will rise to 19 barrels per day by 2040.
Therefore, any strategy for limiting carbon emissions should include a solution for trucks. However, the trade-offs among energy load, range, and weight make the electrification of trucks a serious challenge.
Improvements in battery density, tire rolling resistance, and power trains’ efficiency could potentially make heavy-duty, battery-powered trucks technically feasible. However, at this point, it seems challenging for such trucks to transport freight cost-effectively over long distances. Analysts at research firm Wood Mackenzie have forecasted that by 2040, electric trucks will eliminate 0.6% of the world’s oil consumption.
The majority of that, though, will be attributable to light and medium trucks. Tesla (NASDAQ:TSLA) recently held its annual shareholder meeting and talked about its plans to increase its EV ranges by 54% and reduce its cost per kilowatt-hour by 56%. However, the company stated that it wouldn’t be producing these new batteries until 2022.
Hyliion, with its electrified powertrain solutions, is hoping to make long-haul electric trucks cost-effective. However, its claims that its hybrid technology instantly increases fuel efficiency by 30% seem a bit far-fetched.
Short-seller Bonitas Research made a similar point. The firm states that there is no scientific research that supports these lofty claims.
The Bottom Line on Hyliion Stock
Like any other pre-revenue company, Hyliion is banking heavily on positive developments to drive its stock price higher. However, in light of the stock’s performance in recent weeks, it seems that investors aren’t buying into the hype at this point.
The company’s plans appear to be progressing well , but meaningful revenues are still a long way off. Moreover, as alluded to by Bonitas Research, its long-term sustainability is also a concern. Therefore, Hyliion stock is too risky to buy at this time.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.