Hyliion, which provides Class 8 trucks with hybrid diesel and fully electric drivetrain architecture, announced plans to merge with Tortoise Acquisition Corp., a publicly traded special purpose acquisition company. Once the transaction has closed—expected in Q3 2020—the ticker symbol will change from SHLL to HYLN.
The move brings an additional $560 million in funding to Austin-based Hyliion, currently valued at about $1.1 billion. The influx of money will be used to expand and expedite product commercialization, product production, and operational growth, as well as for general corporate purposes.
“Over the past 15 months since our IPO, we have evaluated more than 200 companies looking for the ideal opportunity where our expertise and capital could be the catalyst needed to unlock the full potential of a high-growth business,” said Vince Cubbage, CEO and chairman of Tortoise Acquisition Corp. “We found that exceptional company with Hyliion—with a market-disruptive business plan, transformational product, and remarkable founder and CEO. We are honored that they made us a part of their team and are looking forward to helping them deploy their sustainable, electrified trucking solutions to significantly reduce emissions and contribute to a cleaner energy future.”
The company, founded in 2015, will offer two key solutions by next year: the Hybrid Electric, available now, and Hypertruck ERX, set for production in 2022. The ERX, short for Electric Range Extender, will employ a compressed natural gas (CNG)/renewable CNG generator and could challenge Tesla and Nikola for “clean” Class 8 supremacy in the near term. Hydrogen fuel cell technology will also be developed as the fueling infrastructure becomes more available.
“We are building solutions that are available today and address the immediate needs of today’s trucking fleets,” said Thomas Healy, CEO and founder of Hyliion. “Hyliion’s solutions were specifically developed to utilize existing infrastructure in an effort to support rapid technology deployment. Our mission is to enable our fleet customers to quickly realize lower carbon emissions and significantly lower cost of ownership benefits provided by our technology.”
There are currently more than 20 Hyliion Hybrids on the road, accruing 2 million miles. Penske has three 6X4HE heavy-duty models, though data is not yet available. In a case study included with the Security Exchange Commission (SEC) filing, Hyliion called out a pilot fleet (which has about 50 trucks) testing the Hybrid Electric on back-and-forths from Montreal to Los Angeles. Healy said the drive van truck saw an efficiency increase from 7.3 mpg to 8.3 mpg.
The customer said, "Based on Q3-2019 fuel receipts, I expect we can save $15,000 per year per truck in fuel costs with [Hyliion's] system."
The fleet also used the diesel-free auxiliary power unit for about 3,500 hours in the past year. Healy said the total cost of ownership savings “drives about a less than two year payback on the product, which is fantastic.”
The majority of the capital investment from Tortoise will go directly to increasing the truck maker's ability to enter into volume manufacturing at its 80,000-square-foot Austin, Texas plant, which has a “full load of customer trucks right now,” Healy said.
In March 2019, Hyliion entered a strategic partnership with Dana Inc., which will provide driveline components and fully integrated electric axles, specifically the TM4 motor and Spicer e-Axle, for the Hybrid. Hyliion provides the batteries, software and the power distribution. Dana’s Monterrey, Mexico plant will assemble the powertrain solutions before they head to any of the five major North American truck OEMs for installation.
Sensata is also a strategic partner and provides senor technology and advanced data analytics and predictive maintenance capabilities.
On the software side, Hyliion said its algorithms can optimize fuel economy and performance, improve battery usage based on upcoming terrain data, and deploy regenerative braking better based on vehicle weight estimation.
Less than zero?
Heavy-duty trucking has been a target of emissions reform regulations. As of 2017, medium- and heavy-duty trucks accounted for 7% of greenhouse gas emissions in the United States, according to the U.S. Environmental Protection Agency (EPA). The agency is now developing updated standards via the Cleaner Trucks Initiative. Hyliion projected in the SEC report that 335 of its Hypertruck ERXs could remove 1 million metric tons of C02.
Several OEMs and vendors are getting ahead of potential regulations by providing zero-emissions solutions. The Zero-Emission Technology Inventory (ZETI) projected that the available number of models in the U.S. and Canada from which to choose will expand 78% year-over-year (95 to 169).
While Tesla is going all in on electric to power the future, and Nikola is hedging its bets with both battery-electric and fuel cell electric technology, Hyliion is going the vintage route with CNG, the “OG” clean fuel for its Hypertruck.
“It has the lowest total cost of ownership by far, it also has the lowest emission levels out of all three solutions, and the other benefit is the infrastructure is already set up out there,” Healy said.
The benefits convinced Agility, which pre-ordered 1,000 units.
Trevor Milton, the CEO of Nikola, which famously just went through its own high-profile merger to land on the NASDAQ, tweeted:
“One of the big differentiators with us is that we're using CNG, but also renewable natural gas [RNG],” Healy noted. Through the RNG process, methane is captured from dairy farms or landfills and turned into a usable fuel as opposed to entering into the atmosphere.
“The emissions levels when you use it as a fuel are so much less than if you had just let it gas off that your vehicle is actually a net carbon negative producing vehicle,” Healy said. “So in a in a weird way, it's actually better for the environment for you to drive your truck as to not drive it.”
“We're the only one that is offering that that negative ability,” he added.
Another important point is that Hyliion is not an OEM and can focus on perfecting the architecture so any truck can take advantage of the savings.
Here’s a breakdown of the three technologies head-to head:
When asked for a response to Milton’s tweet, Healy said: “There's plenty of space for everyone playing here. I think there are going to be some parts of the market that are perfect for Trevor’s solution and then there are going to be a lot of parts of the market that are perfect for our solution.”
He continued: “We really see our sweet spot as being the regional and long-haul applications. And we've already got the infrastructure set up we've got over 700 natural gas refueling stations for Class 8 trucks already out there.”
Even if a truck operates in an area with less CNG fueling options, Healy said the Hypertruck has a range of up to 1,300 miles, or about two and half days of driving.
“We're extremely excited to be able to offer both the lowest cost of ownership and the lowest emission solution, which is what's really important to these fleet owners,” Healy concluded.
