2020 will be remembered as the year of the electric vehicle (EV) revolution. Notwithstanding the unprecedented economic effects of a global pandemic, excitement among investors around opportunities in the EV world has been climbing steadily.

Consequently, a number of new EV players have entered the market this year through special purpose acquisition companies — better known as SPACs — that have no commercial operations but are created solely for raising capital through an initial public offering. Hence, the EV space is getting crowded and not all the players possess sound fundamentals.

Investors should be judicious in picking the best companies to ride the industry’s growth. It is wise to avoid Hyliion Holdings Corp. (HYLN) and Kandi Technologies Group, Inc. (KNDI) at this moment because these companies could struggle to stay afloat due to recent company-specific developments.

Hyliion Holdings Corp. (HYLN)

HYLN designs, develops, and sells electrified powertrain solutions, particularly electrified powertrain solutions for Class 8 commercial vehicles. It provides battery management systems for hybrid and fully electric vehicle applications. The company recently went public via a SPAC through a merger with a shell company, Tortoise Acquisition (SHLL), in a deal worth over $500 million.

HYLN initially claimed that its technology would improve the fuel efficiency of its trucks by 10% to 30%. However, Bonitas Research characterized the company’s fuel efficiency claim as lie. An external test of HYLN’s technologies by PAM Transportation Services was performed that found only “a small percentage” improvement in fuel efficiency. 

HYLN has recorded zero revenue to date;  it anticipated  $1 million of revenue this year. However, the company installed eight hybrid electric units in the third quarter of 2020 for four fleet-based customers. It reported a loss of $0.76 per share compared to the year-ago loss of $0.45 per share. HYLAN company signed a natural gas fueling partnership with American Natural Gas during the quarter that also executed a pre-order agreement to purchase up to 250 Hypertruck ERX vehicles. However, the company’s long-term revenue depends on the ERX product whose success is uncertain right now.

HYLN began trading under its own ticker on October 2nd and the stock has lost nearly 51.6% since then. It closed yesterday’s session at $19.13 to trade 67.4% below its 52-week high of $58.66.

HYLN’s POWR Ratings are consistent with this bleak outlook. It has an overall rating of “Sell” and an “F” for Trade Grade and Buy & Hold Grade, a “D” for Peer Grade, and a “C” for Industry Rank. Within the Trucking Freight industry, it’s ranked #18 out of 20.

Kandi Technologies Group, Inc. (KNDI)

KNDI is one of the leading EV supply chain companies in China that designs, develops, manufactures, and commercializes EVs, vehicle parts, and off-road vehicles. The company operates four business lines – the development and sale of pure electric automobiles, electric vehicle parts, intelligent battery swapping systems, and all-terrain vehicles.

On November 30, 2020, short-seller firm Hindenburg Research released a scathing report that accused the company of faking sales to raise $160 million from US investors. In that report, the firm found that almost 64% of KNDI’s sales over the last year have been to undisclosed related parties. KNDI has issued an initial response to the allegations, saying it believes the report “contains numerous errors, misstatements of historical facts, inaccurate conclusions, and superfluous opinions.” The company’s management plans to release detailed explanations and highlight “key inaccuracies” in the near future.

In the third quarter, KNDI’s total revenues were down 40.9% to $18.7 million as EV parts sales declined 67.4% year-to-date to $8.4 million. However, off-road vehicle sales of $8.9 million increased 51.6% compared to the same period last year. Hence, the company reported a loss of $0.03 per share, significantly improving from the year-ago loss of $0.23 per share.

KNDI tanked nearly 37% in the last two trading sessions after the release of the report. The stock closed yesterday’s trading session at $8.57 and is presently trading 51% below its all-time high of $17.45.

NKLA’s poor prospects are also apparent in its POWR Ratings, which accords it a “Sell” rating. It also has an “F” for Buy & Hold Grade, a “C” for Trade Grade and Peer Grade, and a “B” for Industry Rank. It is ranked #65 out of 115 stocks in the China industry.

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HYLN shares were trading at $18.42 per share on Wednesday afternoon, down $0.71 (-3.71%). Year-to-date, HYLN has gained 85.13%, versus a 15.60% rise in the benchmark S&P 500 index during the same period.

About the Author: Sidharath Gupta

Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...

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