He downgraded the stock because of what he thinks “will be an increasingly competitive environment within zero- and low-emission vehicles coming to market.” This would include offers from people like

You’re here

(TSLA) and

Nicholas

(NKLA).

Additionally, Peterson is uncertain whether Hyliion’s initial technology, which uses a natural gas generator with batteries, won’t be a long-term solution for the industry, and says heavy-duty truck buyers will will increasingly turn to offers based solely on batteries and fuel cells.

The market for zero-emission, battery-electric heavy-duty trucking is a bit different from the market for electric passenger vehicles. Trucks are so heavy and have so much work to do that battery-only solutions for large long-haul rigs are not yet feasible. The batteries needed to generate 1,000 miles of range per charge would mean the vehicle would be too heavy to tow anything.

This is why heavy trucks have a slightly different approach to eliminating exhaust emissions. Tesla’s semi-trailer, for example, only has batteries, so it is suitable for short-haul applications. Nikola’s plans include fuel cells to generate electricity that will drive electric motors. The fuel cells will run on hydrogen carried on board in pressurized tanks. Hydrogen plus an electric motor can, in theory, provide as much range as a diesel engine and a tank of fuel.

Hyliion’s initial solution is a natural gas generator that charges a small battery on the fly. The batteries drive the motors and the generator recharges the batteries. Natural gas has a lower carbon footprint than diesel fuel, so there is an environmental benefit today. And later, Hyliion trucks will be able to use any fuel, including hydrogen, to recharge the on-board batteries.

The downgrade doesn’t do much for the stock Hyliion. The shares rose 1.5% to $3.72 in recent trades, on a good day for the market. The

S&P500
and

Dow Jones Industrial Average
increased by 2.6% and 1.9% respectively.

Equities have already been hit hard. Hyliion stock is down 40% year-to-date and 71% from its 52-week high of nearly $13 per share.

Rising interest rates and inflation have undermined investor enthusiasm for stocks that do not generate free cash flow and may depend on external funding in the future.

Hyliion ended the first quarter with over $520 million on its books. Wall Street expects the company to spend around $265 million in 2022 and 2023 combined. Hyliion has lower capital expenditure requirements than other EV startups. It focuses on supplying batteries and hybrid powertrains to existing truck manufacturers and does not build a factory to manufacture Hyliion-branded trucks.

Five analysts cover Hyliion stock. One rates the stock to buy, two rates it to hold, and two rates it to sell. Analysts’ average price target is now around $4 per share.

Write to Al Root at [email protected]