Ladies and gentlemen, thank you for standing by, and welcome to the Halyon Holdings Second Quarter 2021 Earnings Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer I would now like to hand the conference over to your speaker today, Louis Baltimore. Please go ahead, sir.
Thank you, and good morning, everyone. Welcome to Hileon Holdings Second Quarter 2021 Earnings Conference Call. With us today, we have Thomas Healy, our Chief Executive Officer and Sherry Baker, our Chief Financial Officer. During today's call, we will make certain forward looking statements regarding our future business expectations, which involve risks and uncertainties. Forward looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and as a result, are subject to risks and uncertainties.
Many factors could cause actual future events to differ materially from the forward looking statements on this call. For more information about factors that may cause actual results to materially differ from forward looking statements, please refer to the press release we issued yesterday after the As well as our filings with the Securities and Exchange Commission. Forward looking statements speak only as of the date they are made. You are cautioned not to put undue reliance on forward looking statements. We undertake no duty to update this information unless required by law.
Before turning the call over to our CEO, Thomas Healy, we'd like to share with you a short video about Hylian and our mission.
We live in an increasingly connected world, one where convenience is at the heart of every interaction. One simple click and your order is on the way from across the world to your front door in record time. While progress provides many benefits, it also comes at an unsustainable cost. Each year, heavy duty trucking consumes over 38,000,000,000 gallons of diesel fuel in the United States alone, making the industry one of the fastest growing sources of greenhouse gas emissions. It creates a massive carbon footprint and imposes an everyday tax on this planet we call home.
We are Hyliion, an innovative company with big ambitions, born from the idea that real All while reducing their impact on the environment, a company that recognized the urgent We transformed them to be part of the solution. With 2 powertrain systems designed to improve performance and lower the cost of ownership. Hylian is ready to jumpstart Our first solution, the Hylian Hybrid Powertrain Uses an intelligently controlled electric axle to power the truck, immediately reducing fuel consumption and lowering emissions. And our second solution, the Hynlion HyperTruck ERX electric powertrain is charged by net carbon negative capable renewable natural gas and offers an industry leading 1,000 plus mile range. With state of the art proprietary software that maximizes fuel economy While optimizing performance and offering remote diagnostics and over the air updates, driving a Hylian outfitted truck isn't just a net positive for the planet.
It is also an enhanced experience for the driver. The future is undoubtedly electric and whichever option fleets choose, Hylian offers the technology needed to unlock their electrification potential. The demand for Commercial transportation shows no sign of slowing down and creating sustainable trucking fleets is vital
Good morning, everyone. I hope you enjoyed that short video, and I'd like to welcome you to Hylian's Q2 2021 conference call. It has been about a year since we announced that we'd be taking Hyliion public. So I'd like to start this call off with a little background on Hyliion and our mission for anyone who may be new to our company. I founded Hyliion back in 2015 with one goal, To become the leading powertrain provider of electrified solutions for the commercial vehicle industry.
This mission is underpinned by Hyliion's core values. We act with integrity and we strive for excellence in all we do. We take pride in delivering on our commitments and focus on the details to achieve the highest quality of products. We will succeed as one team by empowering our employees to make decisions And to support each other. This ties to our ultimate goal of changing the world, one truck at a time.
With these core values solidly ingrained in our Culture, we are starting to hit major inflection points here at Hylian. The first one is the completion of the first of our HyperTruck ERX demo unit, which we 2nd, we will unveil our improved hybrid product, which will also be on display at the ACT Expo. Feel free to drop by our booth next to both Peterbilt and Volvo. If you'd like to set up a more formal discussion, reach out to Lewis in IR And we'll schedule a meeting. If you are unable to make it out to Long Beach to see us live, our marketing team is working on some exciting video content as part of this product launch too.
If you turn to Page 4 in the presentation, these are the key topics we'd like to cover today. First, we'll provide an update on our improved hybrid commercial product launch and our continued progress towards the development and the commercialization of the HyperTruck ERX. Then we'll give a brief status update around our supply chain, which we spoke about on our last call. We are also excited to announce that we have a new Chief Operating Officer joining us next week, which I'll cover in more detail later on this call. We'll also provide a regulatory update that is very favorable for our products.
After discussing some positive developments in the renewable natural gas space, I'll talk about the growth of our team and provide an update on our headquarter expansion project. I will then turn the call over Sherry to go through some of our financial details and walk you through our expectations for the second half of twenty twenty one. There have been so many major milestones Hylian has accomplished since we founded the company back in 2015. From the completion of that dark gray HyperTruck ERX proof of concept model that many of you have seen to the consummation of our SPAC transaction that enabled us to raise over $700,000,000 to fund commercial development to the formation of the Hyper Truck Innovation Council earlier this year. It has been an exciting journey to get to where we are today and we see that we are well positioned to be the leading provider of electric Powertrain solution to the Class 8 market for many years ahead.
If you turn to Page 5, You'll see an update on our hybrid powertrain. We plan to unveil the improved hybrid powertrain later this month and begin shipping these units in the latter part of this year. With this new design, we have significantly streamlined the installation process by consolidating a significant amount of our components into a larger battery box. We are also reducing the net system weight and have improved the overall systems efficiency. One of the main focuses has been on improved reliability and installation of the system.
In this new version, we also refined the software and cloud connectivity to deliver over the air updates more efficiently, giving us the ability to push out the latest version of our proprietary software and performance algorithms. Included in these software improvements is a feature that enables automatic traction assist for drivers. We've also designed it to accommodate future mechanical upgrades in a more scalable manner. Until launching our commercial revenue generating improved hybrid powertrain, Our goal has been to continue to ship low volume units of our hybrid systems to industry leading fleets to see the market and garner customer interest. During the Q2, we continued to deliver additional hybrid units.
In the latter part of this year, we will begin to deliver the improved hybrid version to customers. We will also begin to recognize revenue on these shipments after the product launch. Now I'd like to shift to the HyperTruck ERX. So please turn to Page 6. Before we go on, I want to give a huge thank you to our HyperTruck Innovation Council On behalf of everyone here at Hyliion, the amount of insight, engagement and level of commitment to our cause they have demonstrated has been invaluable to our development process.
1 of the most significant indicators towards future success is customer interest and demand. To this point, we recently announced a product reservation agreement for the purchase of 300 HyperTruck ERX units from Detmar Logistics, a leading oilfield logistics company. One of the exciting parts of this relationship is that Detmar plans to use our technology to expand their operations by offering their customers a unique way to achieve their emissions targets. In the second quarter, we announced that Detmar placed a binding order for 10 hybrid units. Their ultimate goal was to use the hybrid as a stepping stone to our HyperTruck ERX product.
After seeing some early success with the hybrid product And strong driver feedback, Denmar made the decision to extend their relationship with Hainan by signing this reservation agreement for HyperTruck ERXs. We will begin showcasing our HyperTruck ERX demo units to the Detmar team later this year. Please note that this purchase and sale of the 300 Hypertruck ERX units is subject to the execution of a final agreement between Hylian and Detmar. We are very excited with the level of interest and commitments we are seeing from Detmar and others and wanted to share this exciting news with you. Over this past quarter, we also held a significant number of meetings with fleets who are part of the Hyper Truck Innovation Council as well as others who are interested in being early adopters.
I believe that the interest in our product is continuing to grow And fleets are viewing our solution as practical in being able to offer the greatest benefit to their fleets' needs when looking at both payback and emissions improvements. Now shifting to more details around the build out of initial ERX demo unit and the commercialization process, which you can see on Page 7. We recently completed the build of our first demo unit with our engineering partner FEV. As we discussed in our last quarterly call in May, this is another stage in our multiphase product development approach we're using to ultimately reach Commercialization of the HyperTruck ERX. We will be sending 1 of these demo trucks out to the ACT Expo later this month.
Once that trade show is over, it will travel to the TMC fall meeting and Transportation Technology exhibit in mid September. Starting shortly after these major trade shows, we have a full schedule of sales and marketing events planned for these showcase units. Beginning in the 4th quarter, We plan to take some of these HyperTruck Earex units on the road traversing the country to showcase these vehicles with our HyperTruck Innovation Council members Along with other prospective customers, we expect to release some great content to our social media and traditional media channels along the way. While these trucks travel the country, we plan to begin building the next phase of demo units during the Q4, Another accomplishment in our multi phase development process. These will be built on Peterbilt's new Model 579 and these units will go through extensive validation testing.
We will also utilize these trucks as the first that will be deployed in fleet's day to day operations. These trucks will also be equipped with integrated drive axles provided by Meritor. A week ago, Meritor announced that we have selected them She produced the electric axles for the launch version of our HyperTruc ERX powertrain and will be a preferred supplier to Hylia. We chose Meritor's product because it fits well with our customers' vehicle performance requirements. This is another milestone achieved in selecting suppliers who can meet the needs for launching the HyperTruck ERX.
We remain on track for showcasing trucks with fleets later this year and we will carry this into 2022. We will then provide initial units to fleets to operate in their operations followed by commercially available units ready in late 2022. This will then be followed by commercialization volume ramp up of the HyperTruck ERX powertrain. As I mentioned at the top of the call, we have good news on the regulatory front. Tylen's products, especially our upcoming HyperTruck ERX, Present opportunities for fleets to reduce their total cost of ownership and reduce emissions even in the absence of tax credits that other Technologies require to bring TCO in line with CECL.
We are looking for ways to improve our product design to capture the various Because regulations and incentives differ Greatly from state to state and fleet needs also vary. We recently announced an enhanced configuration of our HyperTruck ERX that can travel over 75 miles on battery only and has plug in fast charging capabilities. These design enhancements will enable truck manufacturers that sell vehicles with Hylian Typer Truck ERX electric powertrain to generate 0 emission vehicle sales credits that are required as part of California's advanced clean truck rule. Class 8 truck tractor manufacturers to sell vehicles in California, a minimum of 5% of their total California sales Must be 0 emission vehicles by 2024. This percentage increases year over year to 40% by 2,032.
A near 0 emission plug in hybrid electric vehicle can also earn partial ZEV Sales credits depending on its all electric range. Based on this rule, truck manufacturers will be able to achieve a 75% DEV sales credit by selling a Class 8 truck with the HyperTruck ERX long range electric powertrain. While have initiated formal regulatory processes to adopt the ACT rule. Massachusetts, Rhode Island, New York and Connecticut have also begun consideration of the ACT regulation. At product launch, we plan to offer the 75 mile HyperTruck ERX configuration, but we plan to later offer a shorter battery only range version for fleets with different product specification needs.
Now we'll talk about the supply chain disruption so many companies, both large and small, are facing. In past calls, we had mentioned how supply shortages have impacted some of our timing. We are seeing tightness in the semiconductor supply Like most major auto manufacturers are these days, in most instances, we have been able to implement alternative solutions and workarounds. However, We still have a small percentage of parts that we are continually working to secure supply on a day to day basis. Over the Several quarters, we expect availability of these components will improve and cost pressures should ease.
Fortunately for us, This improvement in the supply chain should coincide with our volume ramp expected to start later this year with our improved Hybrid can continue over the years ahead with both the Hybrid and Hyper Truck ERX. Our procurement team has been doing a great job finding alternative sources for the same parts or identifying equivalent parts from other manufacturers that also meet our requirements. One major differentiating factor between the Hylian Electrification Solutions and most other solutions in the works is that our products work well with today's existing infrastructure in North America. While Hylian's HybriTruck platform Is designed to embrace and utilize hydrogen in the future as the world's hydrogen production and distribution infrastructure improves, Our ability to helpfully decarbonize in the near term is underpinned by domestically produced natural Ideally, Renewable Natural Gas or RNG. We saw 2 major milestones come out of California with regard RNG utilization in 2020.
The first is that 92% of all natural gas used in transportation was RNG. So almost all the natural gas used was from renewable sources. The second was that the average carbon intensity of RNG fuel used was net carbon negative. The reason that this is so significant is because it means that California has achieved RNG production that is actually creating a negative emissions score for its users. As we hear about more and more companies setting net zero Carbon emissions goals by 2,030 or beyond, a net carbon negative transportation emissions profile can enable companies to get to net 0 across Shifting to Slide 8, we previously announced the expansion of our headquarters facility in Austin, Texas and we broke ground on this project in early July.
The goals here are to meet both our headcount and anticipated customer demand growth. We are expanding our installation footprint along with the number of trucks able to We will continue our R and D efforts at our facility and we are increasing the size of our battery technology development area and our powertrain and battery testing area to enable us to assess and validate next generation solutions. This expansion will also accommodate our growing base of employees. We have recently moved our work temporary administrative and operations facilities in order to support the renovation process. The renovation work, including structural remediation, is expected to last several months.
But given construction delays in the Austin area, the project may take longer to complete. We do not anticipate significant disruptions to our business operations as a result of all this work. Now shifting to some exciting updates around our As I mentioned, we have a new COO starting at Hylian next week. Dennis Gallagher comes to us after having spent over 20 years at Danaher Owned Companies, Most recently as the President of Jacobs Vehicle Systems, an industry leading supplier to the heavy duty commercial vehicle market. Dennis has a proven track record of delivering excellent results.
As Hylian increases its focus on the commercialization elements to the market. Lastly, in this past quarter, we exceeded our hiring goals during the Q2 with an addition of 59 employees in roles and other important business functions. We will continue to hire great talent that will help us achieve our goals. With that, I'd like to turn it over to Sherry to discuss some updates on the financial side.
Thank you, Thomas, and good morning, everyone. Let's now turn to our results for the Q2 of 2021. Turning to Slide 9, our team continued to invest in R and D as we against our product development road map. R and D spending was $13,400,000 an increase of $4,100,000 sequentially and $10,800,000 year over year. SG and A spending was centered around the continued build out of necessary For the quarter, SG and A spend was $10,100,000 an increase of $2,700,000 sequentially and $9,200,000 year over year.
Overall, Halyon reported a net loss of $23,200,000 compared to a net loss of $16,600,000 in Q1 and a net loss of $4,000,000 from a year ago. Turning to our capital structure and balance sheet, we ended the quarter with approximately $318,000,000 in cash and cash equivalents, but including our short term and long term investments, We had over $617,000,000 Our short term and long term investments are high quality credit instruments with no maturities beyond 36 months an average maturity of 18 months across this portfolio. We are very pleased with this large liquidity position and believe that some of this Capital is more than sufficient to fund our business until we begin generating sufficient cash flow internally. We previously said that we expect to begin generating revenue on the improved hybrid product after launch later this year. We are on track to accomplish this goal and initial revenue recognition on our improved hybrid is a major milestone for Hylian.
However, we do not expect the revenue generated in 2021 to be material. For the full year of 2021, We are lowering our total operating expense guidance to the range of $130,000,000 to $140,000,000 consisting primarily of R and D and SG and A expense. We are looking forward to executing against our product development roadmap
Please be advised to ask one question with one follow-up. Your first question comes from the line of Steven Fisher with UBS.
Hey, guys. Good morning. This is Avi Jaroslawitz on for Steven Fisher. Just kind of curious, so What's causing OpEx to run a little lower than expected for this year? Is that kind of related to sales or Just the progression in terms
of the supply chain disruption.
Yes. Good morning and thanks for the question. So The lower OpEx is really because of our pullback on installations, waiting for the launch of our new hybrid products later this year. So our OpEx is coming in a little bit lighter. So once we launch that product, we'll start to see that ramp up.
But also keep in mind that a bulk of the R and D and SG G and A is also related to our hyper truck development. So as we're getting into future phases of that development, I would expect to see Both the R and D increase as we move throughout the year and then SG and A really as we continue to add talent to support those commercialization goals.
Got it. So even at this point, it should still be more Q4 weighted than evenly split in the second half?
I think you could probably expect it to ramp up at a higher pace than what you saw in Q2 as we get into Q3 more related to that hybrid launch And then, more equally weighted as we're moving throughout the rest of the
year. Got you. Okay. Then I can ask another one. How are you guys thinking about production capacity for 2022?
Yes, absolutely. So just to kind of start with our High level plan of how we're going to produce systems. So initially, we're going to start with being able to build systems at our own facility in Austin. And then from there, we will move the install of the product into mod centers. And that's something we've spoken about in past calls where We partnered up with some facilities like Lone Star Truck Centers as well as Fontaine, a Berkshire Hathaway Company, to be able to utilize their facilities right next to many of Major truck OEMs to be able to actually do the installs.
Now at their facilities, they're capable of doing thousands of units a year. So really we don't see any limits there in terms of being able to ramp up volumes. And then from an assembly standpoint, As we start to hit capacity of what we can build in house at Hylian and once again it's really more of the early units that we plan on doing at our own facility, We'll then move to contract manufacturers to do the assembly for us. So really sticking with that asset light approach here where we don't need to go set up our own 100 of 1,000,000 of dollar manufacturing facilities in order to be able to produce these products.
Got it. Okay, cool. I think I'll hop back in the queue. Thanks guys.
Thank you.
Your next question comes from the line of Brian Johnson with Barclays.
Hi. A couple of sets of questions. First, around the Innovation Council and the hybrid, In terms of managing the sales pipeline,
can you just give us a
sense about When you would we would start to be looking for orders for the hybrid truck as well, of course, it's going to be later for the hyper trucking. How much evaluation kick the tires? Are there things before orders in terms of selling test vehicles And potential customer fleets that are revenue creating, but sort of point the way to a sales funnel.
So what we found in the discussions with fleets is we're really kind of falling into their normal technology evaluation adoption cycle. And so Just a little background on kind of how fleets approach it. First, they want to get their hands on the technology, see it live. And then from there, they want deploying it in their operations in low volumes of units to be able to experience it, improve it out firsthand. And then from there, the goal would be to be kind of slotted into their normal truck purchasing that they're doing.
So for a fleet that's keeping trucks 4 years, 5 years, every year, they'll be turning over about 20% to 25% of their operations of their trucks. And Our goal would be that we can be spotting into that new truck purchase bill. But a fleet is not going to take a truck that's only 2 years old and just get rid of it to replace with a new technology. They're going to be getting rid of the ones that are at their end of their life and then cycling in new technology from there. So we're working with fleets both on the hybrid and on the hybrid truck discussions To really understand their adoption cycles.
So with hybrid, we've already got some fleets out running the solutions. We've already seen some of those fleets come back and place repeat orders with us. And as we go into launching the improved version of the hybrid, that'll be another process here we go through of getting it rolled out with more and more fleets they can experience it. And then with the Hyper Truck, the big thing with the Innovation Council is that those fleets have committed to run these trucks in their operations to And we really see that as one of the early stages of that adoption cycle. And then from there, once they've proven our goal is prove to them that We can hit those emissions numbers, we can hit those reduction in operating costs and then from there get slotted into their new truck purchasing That they're doing every year.
But the great news for us is some of these large fleets that operate thousands of vehicles, they can be turning over 1,000 trucks a year in their operations.
Okay. Second question, Dana was an early equity After the support of the agency manufacturing operations. So can you explain kind of the thinking in terms of Adding Merit for the Hyper Truck, does that display Dana? Will it be the traditional axle shorty spec We tapped between Adena and AmeriDvorSat with 1 standard and the other available.
Yes, absolutely. So with Adena, You're absolutely right. They were an early investor in Hylian, and we've recently decided to end our exclusive I deal with Dana, but we still have an ongoing relationship with Dana where we're able to supply storage components from them. It's really just the Exclusive aspect of it that has been terminated. And so with that, we've announced that we're going to be utilizing the Meritor eAxle solutions In the launch of the Hyper Truck, and so really what we went out and looked at is what solutions were available on market that would allow us to be able to really meet the Demands we're seeing from our customers and we saw that Meritor e axle solution, which Meritor has put hundreds of thousands of miles Testing on that axle and then we're actually going to be implementing it into our first demo truck that is going to be unveiled at the ACT Expo.
That's what we'll be going to market with from an axle supply standpoint for that product.
Okay. Thank you.
Your next question comes from the line of Bill Peterson with JPMorgan.
Yes. Hi. Good morning and thanks for taking my questions. I have And I guess first on the hybrid side, I understand limited or immaterial revenue this year, but would you say Just for clarification, is this more as a result of supply chain issues or would this be more of a result of just, I guess, not You know the milestones that your customers are looking for in time. I'm just curious on that point.
And then really what does the pipeline look for the hybrid trucks as we look into next year and beyond?
Yes. So on the hybrid truck, this year kind of the revenue generation not being material is really a factor of over past calls, We had expressed that we've experienced some delays in the development of the hybrid as well as some supply chain issues. So it's kind of a combination of both of those. And so from that standpoint, we are still on track to launching that product this year and starting to recognize revenue on it, which will be a huge milestone for the organization, But we just don't see it becoming a material amount of revenue. Then your second part of the question was Around hyper truck orders.
So we see one of the things that we announced this past quarter was the 300 unit reservation With Detmar, that's a huge indication towards fleet interest. And one of the things that's pretty interesting about Detmar here is They actually are looking at this technology as a way to expand the size of their fleet operations because they see that they can offer their customers A unique benefit of significant emission reductions for the oil and gas space. And so we're seeing a lot of customer interest in the Hyper Truck, the discussions are frankly exceeding my expectations of what we envisioned from fleet discussions. And overall, fleets are just viewing it as a really practical way in order to be able to adopt electrified Powertrains into their fleet operation. We break down many of the hurdles that they're often faced with like having to set up infrastructure, having costs That are more expensive than diesel.
Those are things that we're not faced with when we're looking at the value proposition of the hyper truck.
I might have misspoke. I was wondering the pipeline for the hybrid truck next year. But I'll go ahead and ask my second question as well. It's Related to the Hypertruck. I guess when you think about the trials that are going to be happening all throughout next year, what are the key criteria?
What are they looking for? Like what makes the I guess, for example, even the Detmar unit go to full purchase agreements as opposed to just the reservations? So just clarification again on hybrid ramp next year and then what are these customers looking for It will be proved out next year.
Yes. So first on the hybrid side. So we're in that phase right now where we've already started seeding the market with some early units. As I mentioned, we are starting to see some customers coming back and placing repeat orders with the hybrid. So that's a big positive indicator And then we'll continue to see the market with the improved hybrid system in order to get ready for next year and starting to really hit stride with Commercializing that solution.
And then with the hyper truck, so some of the key things that the fleets are going to be looking for, I think it kind of comes down to 3 things. It's going to be, does it save them money? Does it have reliability? And are drivers So I'll walk through a little bit with each of them. One is the TCO side.
We see that that's actually one of our Biggest value propositions we're bringing to fleets and probably their number one pain point. Fleets view these vehicles as a tool and asset for their operations. And so they're going to make buying decisions based on TCO models and that's where we can bring a lot of value by actually having a cost model that is less than diesel. Then from a reliability standpoint, they want to make sure that this doesn't add a significant amount of maintenance headaches and hurdles in their operations because Uptime is critical for them in order to be able to move assets around the country or move goods around the country. And then 3rd, driver acceptance.
They want to make sure that the drivers like driving the vehicle and that it's a truck that works for them. And we see or we strongly believe that there's a Huge shift in kind of driver experience from going from a diesel truck to our hybrid truck solution. You have very smooth Very fast acceleration with an electric drivetrain and one where we think drivers from the drivers that have driven our HyperTrust Group is a concept vehicle. They love it. They love the experience and we actually think that's going to be a big selling point for fleets.
Your next question comes from the line of Noah Parks with Tuohy Brothers Investments.
Hey, good morning.
Good morning. Just a couple of questions. You mentioned the Mod Centers and how you'll be able to integrate them into the manufacturing process. I'm just wondering on the cost side, are the costs of working through the mod centers, Are those highly visible or are they more sort of a work in progress like
you need
to get up and running and sort of see how they settle
out. So we've actually already started using Mod Tenors to do some of the installs for us. Actually, the majority of the installs That's taking place thus far this year. Parts of the system have been updated by different mod centers. And so We are getting some clarity on kind of early units and then we're working on what that pricing is and then we're working with those out In order to look at what is going to be the long term installation cost.
Now one of the reasons that we haven't put As much clarity around it on units we've been installing to date is really because as we go into the improved hybrid system, One of the biggest shifts in that product is a much easier installation process. We spent a lot of time looking at how can we reduce installation time, make it easier For a Mod Center in order to be able to install it. And so we see that with rolling that product out, we'll be in a position where as we ramp volumes, We'll be able to have a strong cost model set up with those mod centers to do the installs.
Great. And just wondering if you could talk about maybe over the last, Say 6 months or so, how customer evaluation process has been going. Just wondering about the level of urgency that you're seeing among the fleet operators and curious as, are they at a point that they've done enough investigation of Different offerings out there that they're already actively ruling out vendors who sort of won't meet their requirements? Or should we think of this as being more still very much in its infancy?
Sure. So maybe just speaking about the industry as a whole first, think this is really important. There is so much attention being shifted towards electrification right now within fleets. From where we were a year ago, 2 years ago, the level of interest is skyrocketing and fleets know that electrification is coming and it's And they're now at a phase where they're trying to figure out what electrified solution is going to make sense for them. And to your comment in the question, They are really diving into those kind of nitpicky things like, well, how much is it going to cost to set up a station, rechargers or hydrogen station and Even getting down to examples like can the grid support rechargers?
We had a fleet share a story with us Not too long ago, they were saying that they went to their utility provider and they weren't even going to be able to operate 10 trucks off of the grid BEV trucks off of the grid Because of the electric demand that those would require. So fleets are really diving into those in the picky details. And that's where we're seeing our solution really shining, Especially with the hyper truck solution where you can use that existing infrastructure of natural gas out there, the costs are there today to make it have it make sense. It's not something that We need drastic cost reductions in the years ahead of the fuel cost in order to make it hit a cost parity of diesel. We're already at a point today where you can achieve a cost that's less than diesel.
So those are the level of details fleets are diving into. And I think every fleet is looking at this the same way. They want to experience the technology firsthand in their operations for a period Time determine what makes the most sense for their fleet and then they'll move forward with cycling that technology into the new vehicles they're adopting.
Great. Thanks a lot. Thank you.
Your next question comes from the line of Mark Delaney with Goldman Sachs.
Yes. Thanks very much for taking the questions. I just wanted to better understand the long range variant of the ERX and you guys talked 75 miles of capability, what are you guys changing that's leading to the longer range?
Is it just a bigger battery or are there
other changes you're making to the design of the ERX that's Allowing you for that longer range.
Thanks, Mark. So maybe just first, one of the things that we've received a lot of feedback From yourself, from other sell side analysts, from the OEMs and even fleet has been this focus around ZEV credits and Being able to really achieve the mandates that are coming out from CARB and others. And this was one of the main drivers behind implementing this shift In the variant of the product where with extending the range, the BEV only range of the truck, We are now enabling the OEMs to qualify for the EV credits for any truck they ship with our powertrain in it. So that means they're getting the same credits that A full electric plug in truck would be getting as those are being shipped. And so we see that as a huge enabler for the OEMs because As they are getting mandated, as we mentioned in the call, like in 2024, 5% of their fleets need to get VV credit And then it's going to grow up to 40% in the years ahead.
That power technology can go after those same credits and with 75 miles, DEB range, we're able to qualify for 75% of a DEB credit. And so that was the main driver to the other part of your question of how are we doing it. It is increasing the kilowatt hours of the battery pack to enable us to have that longer range. That's helpful. And then just
in terms of The timeline for the long range version, maybe you can talk about that in a bit more depth. Is it similar to what you were already discussing for the ERX overall? Is there a different timeline for the long range version? Thank you.
So because of such a strong focus on the credit I'm wanting us wanting to make sure we're working with the government agencies to really achieve their targets that they're putting out there. We've actually pulled that in as our initial product that we're going to be launching. We'll have that larger battery pack and that will be what we go to market with first. So all the timing that we've discussed, That's actually coinciding with the timing or that is the timing of the long range model and then we will be releasing a shorter range model after The long range model is already out there.
Got it. Thank you.
Your next question is a follow-up from Bill Peterson with JPMorgan.
Yes. Hi. This is somewhat more of a longer term question and I clearly understand the focus on hybrid and well, hybrid truck really with the RNG and so forth. But the infrastructure bill just passed this kind of obviously there's more work to go in the House. But if we think about there's clearly a lot of focus on hydrogen.
How would this potentially, let's say, change your longer term 3 year, let's say, timeline on implementing hydrogen as a direct Fuel cell version, just kind of your thoughts on the infrastructure bill in general. And I realize there are some components related to gas in there, but just any thoughts on the infrastructure bill in
So first off, all the push and focus that's coming from the Biden administration towards electrification is And we're seeing that help with that customer interest and demand and ability for fleets to be able to adopt if some of these Technologies are being subsidized, so it's all really positive. But going back to your question, one of the things we announced a couple of earnings calls ago was our path To a hydrogen based future and evolving the hyper truck powertrain to make sure that we evolve with the production and build out of hydrogen fueling stations. So we're starting with natural gas today because that's what's logical for today. With renewable natural gas, you can get to net carbon negative. You've got The costs that are there, the stations that are there, but as hydrogen gets built out, we will evolve the generator that we use on the truck to evolve to be able to use hydrogen.
So starting with natural gas, then we're actually going to go to a fuel agnostic generator that can run on either natural gas or And then eventually moving to hydrogen fuel style, which would only be able to run on hydrogen. And so we see that as we roll the hyper truck out, It's not a monumental or massive shift in order to change out that generator to move to differing solutions to accommodate different fuels. So we'll have millions of miles already deployed on our powertrain using natural gas and then we'll be able to evolve that into a hydrogen generator. So We think we're positioned really well to take advantage of this shift to hydrogen. And whenever those stations are built out and the Cost of hydrogen come down and the transportation of hydrogen is figured out, we'll be well positioned with our power drain to be able to offer fleets a solution to run on hydrogen.
Yes, thanks for that. Just the last one is more of just a housekeeping. You gave the Color on the operating expense for the year implying kind of a big step up here in the 3rd quarter. But I guess conceptually, how should we think about that into next year given What you need to do to the Hyper Truck validation and so forth. And then the other Part of the cash use is CapEx.
I know you obviously have the new buildings, but how should we think about CapEx for the remainder of the year and into next year?
Yes, great questions. And I'll actually take them in reverse order. So a really key differentiator for us is we are an asset light model. So CapEx for us is actually not a significant cash outlay. This year, we expect cash to be most likely in the $10,000,000 to $20,000,000 range.
That's really comprised mostly of operations in our facility expansion. So depending on the speed at which we are able to complete The phases of that facility renovation that will depend on where we come up in that range, but it's just important to note that CapEx for us is not a significant amount compared to maybe Some others in the space. And then from an expense perspective, we're actually in the process right now of starting our 2022 planning cycle. So one thing that we're doing is we've been implementing Various portions of NetSuite as an ERPM, we're also tacking on a forecasting and planning module that is an industry leader that will allow us to actually build API driven that will tie directly to our commercialization phases. So as we're moving throughout the year and completing that process, we'll be able to give you better visibility into what That expense looks like, but as it sits right now, we feel like we are very well capitalized and we have ample liquidity to
Ladies and gentlemen, we've reached the allotted time for questions. I would now like to turn the floor back to Mr. Healy for any additional for closing remarks.
Well, thank you. I appreciate everyone joining the call today. Hopefully, you can see there's so much going on within A lot of exciting developments taking place right now and a lot of big milestones that are coming up as we get towards the end of this year. So Please be following the journey with us as we get hyper truck units out on the road and showcasing them at trade shows here and a lot of Fun and exciting things coming up here. We look forward to chatting again next quarter, and I hope you have a great rest of your day.
Thank you.
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