Shares of electric-truck drivetrain start-up Hyliion (HYLN 1.93%) were trading lower on Wednesday, after a Goldman Sachs analyst released a bearish note and downgraded the stock.
As of 1:45 p.m. EST today, Hyliion's shares were down about 7.3% from Tuesday's closing price.
In a note released late on Tuesday, Goldman analyst Mark Delaney cut the bank's rating on Hyliion's stock to sell, from hold, with a price target of $12, down from $19. His concern is that the heavy-trucking industry is moving more quickly than expected to zero-emission technologies, meaning that Hyliion's hybrid solutions (which are considerably greener than regular diesel engines, but aren't zero emission) might be overlooked by the market.
Texas-based Hyliion has two products. One, which is already shipping, is a kit to convert diesel-powered semi trucks to hybrid-electric operation. The second, due in 2022, is a complete battery-electric heavy-truck powertrain with a natural gas "range extender," essentially an onboard generator in lieu of a large, heavy battery pack. That second product, called Hypertruck ERX, can be installed in any semi made by the six largest makers of heavy trucks.
Delaney has a point, and it's not just about Tesla's (TSLA 2.55%) upcoming Semi. A growing list of truck makers are planning and testing zero-emission heavy trucks, including industry heavyweights Daimler (DMLR.Y 2.56%) and Navistar (NAV), as well as new entrants like Nikola (NKLA 1.99%).
Last week, Navistar announced that it will begin a large-scale pilot test of fuel-cell electric heavy trucks late next year, with trucks powered by fuel cells from General Motors (GM 2.17%) and supported by a new hydrogen refueling network. Those trucks could be shipping to customers sometime in 2023.
Take all that together, and that's why Hyliion's stock is sinking today.
Does this mean that auto investors should give up on Hyliion? Not necessarily. This is a smart company with a nimble business model. I won't be surprised if it adapts its upcoming Hypertruck ERX to work with third-party fuel cells instead of a natural-gas generator, giving it a true zero-emissions option with minimal additional investment.
Given that the company already has manufacturing and installation partners in place, it could conceivably move quickly to overcome the concerns raised by Delaney. But until it does, trade carefully.