Amid mounting concerns regarding climate change, automakers are fast shifting gears to electric. While emission-free cars are already taking off in a big way, the electric truck space is also set to gain traction this decade. Competition is intensifying as various startups and automotive giants are directing their attention to electrify delivery and distribution trucks.
The electric pickup space is set to heat up with a new entrant, Hyliion. Founded in 2015, this Texas-based firm delivers Class 8 trucks with hybrid and fully-electric powertrain solutions. The company plans to merge with Tortoise Acquisition Corp. by the end of third-quarter 2020.
Tortoise-Hyliion Merger Talks Create a Buzz in the Market
Shares of Tortoise, a special purpose acquisition company (“SPAC”), have skyrocketed 95.4% since the announcement of its merger with the electric powered heavy duty truck company on Jun 19, 2020. Upon closure of the deal, the combined entity will be named Hyliion Holdings Corp. and listed on NYSE under the new ticker symbol “HYLN.”
The market capitalization of the combined entity is likely to be more than $1.5 billion. Per the company’s presentation, Hyliion expects to generate sales of $344 million in 2022 and more than $2 billion in 2024. The company projects EBITDA of $8 million in 2022, which will rise to $602 million by 2024.
The deal is reminiscent of the recent Nikola-VectoIQ agreement. Shares of Nikola NKLA, a high-flying producer of heavy-duty electric pickups, has soared 98.7% since it joined Nasdaq after a reverse merger with VectoIQ — a “SPAC” — on Jun 3. Investors are indeed betting big on EVs. Just like Nikola, Tortoise-Hyliion merger talks have drawn much attention from the market ahead of the deal completion, as is evident from Tortoise’s share price rise.
One of the world’s leading logistics companies, Agility is certainly optimistic about Hyliion’s prospects. Agility has already confirmed a pre-order of up to 1,000 trucks and agreed to invest in a private offering of securities to be issued by Tortoise in connection with Hyliion’s business combination.
Like Nikola, Hyliion also seeks to disrupt the heavy-duty electric pickup business.
Is Hyliion a Direct Competitor of Nikola or Tesla?
Nikola aims to develop Nikola-branded trucks, and build and operate hydrogen filling stations to refuel vehicles. Conversely, Hyliion does not intend to manufacture vehicles but just wants to offer electric and hybrid powertrain solutions to truck makers in a cost-effective way. In that way, Hyliion is more similar to diesel-engine maker, Cummins CMI. Cummins has been selling powertrain solutions to heavy duty track makers for years. For instance, a Cummins diesel engine is available for PACCAR’s PCAR Peterbilt and Kenworth brands. While Cummins sports a Zacks Rank #1 (Strong Buy), PACCAR is a Rank #3 (Hold) firm. You can see the complete list of today’s Zacks #1 Rank stocks here.
Notably, Hyliion has two product lines. One is the hybrid drive system for the existing diesel powered trucks, which increase vehicles’ range and efficiency. The hybrid drive system is already available for purchase, with companies including Penske PAG and Ryder R being its major customers.
Another product is Hypertruck ERX, an all-electric drive system for Class 8 trucks. Interesting, it does not require a huge battery pack. The Hypertruck ERX system involves a small battery pack that can be recharged via natural-gas powered onboard generator. ERX trials are likely to commence in 2021 and production is set to ramp up in 2022. Considering Hyliion’s long-standing relation with Dana Incorporated DAN, the latter intends to provide its state-of-the-art manufacturing capabilities to enable Hyliion achieve full volume production of its powertrain systems.
Hyliion's products do offer a couple of advantages over battery powered or hydrogen-fueled powertrain solutions. Unlike the much-hyped Tesla TSLA Semi, the Hypertruck ERX system does not need a heavy battery pack that can reduce the vehicle’s overall hauling capacity. Also, Hypertruck powertrain can recharge faster via refueling. Moreover, Hyliion claims that a fleet of Hypertruck-powered trucks will be much more cost effective than a fleet of either Nikola's battery/hydrogen-powered trucks or Tesla's ell electric Class 8 trucks.
Further, with more than 700 public stations across the United States that can refuel with natural gas, the Hypertruck ERX leverages a robust natural gas refueling infrastructure. While Nikola’s hydrogen-powered truck plans are truly ambitious, there is a dearth of hydrogen refueling stations currently.
The EV market is expected to reach $1,299.3 billion by 2030 at a CAGR of 19.8% during the 2020-2030 time frame. The global EV market is getting red-hot, courtesy of superior technologies and favorable government policies amid climate issues.
In a landmark judgment to combat climate crisis, California recently mandated that more than half of all the trucks and vans sold in the state should be emission free by 2035. All major truck manufacturers including Daimler AG, PACCAR and Navistar are focused on manufacturing electric trucks powered by batteries or hydrogen electric fuel cells. Alongside stalwarts like Tesla, Ford and General Motors, startups like Rivian, Bollinger and Lordstown are also taking the EV trucking business very seriously.
Investors will have yet another way to play the EV trend with the Tortoise-Hyliion merger plans. If you are intrigued by automakers that look for solutions to lower global carbon emissions to provide a cleaner energy future, Hyliion will definitely be worth a watch.
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