Hyliion Holdings Corp. (HYLN): 5 FORCES Analysis [Nov-2025 Updated]

You're assessing Hyliion Holdings Corp. right now, late in 2025, as the company stands at a critical inflection point: the pivot to the KARNO Power Module is complete, but full product revenue isn't slated until 2026, leaving them to fund operations-with expected 2025 cash outlays of about $65 million-on just $4 million in service revenue.

Still, the demand signals are strong, with nearly 500 KARNO Cores under non-binding Letters of Intent from powerful customers like the U.S. Navy and data center developers, especially with the 30% Investment Tax Credit kicking in next year to sweeten the deal.

My job, as your analyst, is to cut through the noise and map out the competitive reality: can this unique, fuel-agnostic technology truly challenge established players like Cummins while managing the high capital barrier of its in-house additive manufacturing?

Let's dive into Michael Porter's Five Forces to see exactly what Hyliion is up against.

Hyliion Holdings Corp. (HYLN) - Porter's Five Forces: Bargaining power of suppliers

When you look at Hyliion Holdings Corp.'s (HYLN) supplier power, you see a company actively wrestling with the realities of scaling a highly complex, novel technology. The bargaining power of their suppliers is a dynamic factor, shifting based on Hyliion Holdings Corp.'s strategic decisions to internalize production and the inherent complexity of the components needed for the KARNO™ generator platform.

Reliance on specialized additive manufacturing equipment and materials is high, which typically gives suppliers leverage. The nature of the KARNO system, especially components like the heat exchanger's complex mesh-like structures, requires specialized processes. Hyliion Holdings Corp. has been actively addressing this by validating new designs and processes to improve powder removal from these intricate parts. Capital expenditures year-to-date through Q3 2025 totaled $22 million, largely dedicated to additive printing machines and facility upgrades to bring more of this specialized capability in-house.

However, Hyliion Holdings Corp. has made a significant move to reduce reliance on external parties for a critical piece of the puzzle. The company successfully transitioned all linear electric motor (LEM) production in-house. This was a direct response to prior issues, specifically LEM supply constraints tied to the slow ramp-up with a contract manufacturing partner. By bringing this key component production internally, Hyliion Holdings Corp. has improved throughput and better supported its 2025 deployment targets, even passing UL testing for the LEM on the first attempt.

Still, the supply chain remains a point of tension as Hyliion Holdings Corp. scales production of complex parts. Demand indicators are strong, with non-binding letters of intent representing nearly 500 KARNO Cores across diverse applications. Management has openly stated they anticipate being supply constrained for the years ahead as they work to scale capacity to meet this interest. Initial customer deployments were previously impacted by supply chain sourcing and part processing challenges, highlighting the fragility when relying on external vendors for new technology.

The financial impact of external supply chain pressures, particularly from global trade dynamics, is also evident in their 2025 outlook. Tariff impacts have been a noted headwind, contributing to an upward revision in expected spending. Here's a quick look at the key 2025 supply-chain and cost-related financial figures:

The company's strategy to internalize key manufacturing steps, like the LEM, directly counters supplier power in that specific area. However, the overall constraint on scaling production, evidenced by the shift of full product commercialization to 2026, shows that supplier/component availability remains a limiting factor for Hyliion Holdings Corp.'s revenue recognition.

The bargaining power of suppliers for Hyliion Holdings Corp. is characterized by:

• High reliance on specialized additive manufacturing inputs.
• Reduced power for the LEM supplier due to insourcing.
• Anticipated supply constraints due to high customer interest (nearly 500 Cores under LOIs).
• Direct financial pressure from tariffs, contributing to the $65 million 2025 cash outlay forecast.

Finance: draft 13-week cash view by Friday.

Hyliion Holdings Corp. (HYLN) - Porter's Five Forces: Bargaining power of customers

You're looking at the customer side of the equation for Hyliion Holdings Corp. (HYLN) as they push the KARNO Power Module into the market. When dealing with large entities, their size inherently grants them leverage, but Hyliion's unique technology and regulatory tailwinds are starting to shift that balance.

Major customers like the U.S. Navy and data centers are large, powerful entities. The U.S. Navy is an early adopter customer, having an initial definitive agreement in place, and Hyliion secured a $1.5 million contract from the U.S. Navy for Phase II SBIR work to refine the multi-KARNO Core architecture. For data centers, the power demand is immense; CEO Thomas Healy noted that one modern data center can draw 100 times the power of charging ten electric trucks. The Environmental Protection Agency (EPA) has acknowledged that the KARNO Power Module can power data centers and military installations, signaling these sectors are key targets.

The demand pipeline, even in this pre-commercial stage, suggests customers are eager to lock in supply, which constrains their immediate bargaining power by creating scarcity. Hyliion Holdings Corp. has executed nonbinding letters of intent representing nearly 500 KARNO Cores and anticipates being supply constrained in the years ahead. This backlog is a mix of various customer types, showing broad interest across sectors.

Here's a quick look at the stated customer interest captured in these non-binding agreements:

Still, the financial incentives available to customers significantly lower their effective adoption cost, thereby increasing their leverage. Energy projects that begin in 2026 or later and use Hyliion's KARNO technology will qualify for a 30% Investment Tax Credit (ITC) under the One Big Beautiful Bill Act (OBBBA). This 30% credit covers both the generator system and supporting infrastructure, and the legislation allows customers to sell or transfer these federal tax credits, giving them a direct monetization path.

Finally, the inherent technical features of the KARNO system directly mitigate a major customer risk: fuel price volatility. The KARNO Power Module is designed to operate on more than twenty fuel types with comparable efficiency and performance. Hyliion successfully demonstrated dynamic fuel switching between natural gas and propane while under load, without any interruption or hardware changes. This fuel agnosticism, covering fuels like natural gas, propane, diesel, hydrogen, and ammonia, gives customers the freedom to choose the most affordable or available energy source, which is a powerful risk-reduction feature.

Hyliion Holdings Corp. (HYLN) - Porter's Five Forces: Competitive rivalry

You're looking at a technology firm, Hyliion Holdings Corp., trying to carve out space in a market dominated by giants. The competitive rivalry here is definitely intense, but Hyliion Holdings Corp.'s strategy leans heavily on differentiation to manage that pressure.

Rivalry is intense with established, well-capitalized generator manufacturers like Cummins and Caterpillar. These players command significant market share in the broader power generation space. For context, the global Industrial Generator Market size was calculated at $22.53 billion in 2025. Caterpillar, for instance, recently increased its manufacturing capacity for data center engines by a staggering 125% compared to two years ago, and their product line includes sets like the 1.5 MW Cat D1500. Cummins offers a power range spanning from 15 kVA - 3750 kVA. Hyliion Holdings Corp.'s Year-to-Date 2025 revenue, primarily from R&D services, was only $2.8 million, with a full-year forecast around $4 million, showing the scale difference. Still, Hyliion Holdings Corp. has non-binding letters of intent representing nearly 500 KARNO Cores, suggesting initial market traction against these incumbents.

Hyliion's technology is differentiated by its unique linear generator architecture. The KARNO Power Module is a 200-kilowatt unit, with larger variants up to 2 MW in development. A key technical differentiator is its efficiency, designed for up to 50% fuel-to-electric (DC) efficiency. Furthermore, internal testing showed the system achieving less than 2.5 PPM of nitrogen oxides (NOx) and low single-digit PPM levels of carbon monoxide (CO) without any aftertreatment system, which is a >95% reduction in NOx and CO emissions compared to conventional engines. The system has also proven durability, completing over 100 days of operational testing on a customer unit with no unplanned hardware-related downtime.

The focus on high-growth sectors like data centers and EV charging infrastructure lessens direct competition with the incumbents' traditional markets, though these sectors are growing rapidly. The Data Center Generator Market was valued at $1.3 billion in 2025. The Electric Vehicle Charging Infrastructure Market size was over $40.26 billion in 2025. Hyliion Holdings Corp. is aligning with the shift toward 800-volt DC architectures for AI data centers, reinforcing the KARNO Power Module's native 800-volt DC integration advantage.

The KARNO module is not classified as an Internal Combustion Engine (ICE), easing regulatory competition. The U.S. Environmental Protection Agency (EPA) issued a determination confirming the KARNO™ Power Module is not regulated as an ICE under existing federal law. This means the technology will be governed solely by local air-quality standards, simplifying the path to deployment compared to traditional generators subject to federal engine permitting. This regulatory clarity supports the module's qualification for a 30% Investment Tax Credit (ITC) under the One Big Beautiful Bill Act (OBBBA).

Here's a quick look at the competitive positioning data:

The operational validation is key for you to track. The company reported a third quarter net loss of $13.3 million, ending Q3 with $164.7 million in cash and investments, expecting to end 2025 around $155 million. They are targeting breakeven gross margins on a cash basis by the end of 2026.

The differentiation strategy is further supported by the module's ability to operate on more than 20 different fuels, including natural gas, hydrogen, and ammonia, and switch between them seamlessly while under load. This fuel agnosticism is a significant advantage over traditional engine platforms. You should definitely watch the transition from R&D revenue to commercial delivery, as initial KARNO Core installations for the U.S. Navy are expected in 2026 on a multi-megawatt vessel.

The competitive landscape is defined by these key technological and regulatory advantages Hyliion Holdings Corp. is trying to exploit:

• KARNO Power Module achieved >95% reduction in NOx/CO emissions.
• Module is not federally regulated as an ICE.
• Qualifies for 30% Investment Tax Credit (ITC).
• Completed over 100 days of testing with no unplanned downtime.
• Targeting 2026 for commercialization.

Finance: draft 13-week cash view by Friday.

Hyliion Holdings Corp. (HYLN) - Porter\'s Five Forces: Threat of substitutes

The threat of substitutes for Hyliion Holdings Corp. is substantial, stemming from established, lower-capital-cost alternatives and rapidly advancing clean energy solutions, particularly in the commercial vehicle and stationary power generation markets.

Traditional grid power is the cheapest, most common substitute for Hyliion\'s stationary power generation focus with the KARNO generator. While specific 2025 grid power cost data for all relevant regions isn\'t universally standardized, the principle remains: established, grid-supplied electricity often presents the lowest marginal cost for end-users compared to deploying a new generator system.

Diesel and natural gas generators offer lower upfront capital costs compared to Hyliion\'s electrified powertrain solutions. For instance, the Hyliion Hypertruck ERX, which uses an onboard natural gas generator to charge batteries, was quoted with an upfront cost in the high $300,000s. This high initial outlay is a key barrier against immediate substitution by conventional diesel trucks, though Hyliion projected a three-year ROI based on operating expense savings. Furthermore, in April 2025, the national average retail price for diesel was reported, and CNG was approximately $0.17/DGE less than diesel on a national average basis, indicating the incumbent fuel\'s cost competitiveness.

Fuel cells and large-scale battery storage are emerging clean energy substitutes. The broader Alternative Fuel Vehicle (AFV) market, which includes these technologies, was estimated to be valued at USD 761.3 Mn in 2025, with Electric Vehicles (EVs) holding the highest share at 35.0%. For stationary power, while specific 2025 cost data is evolving, older projections for heavy-duty vehicle (HDV) fuel cell stack costs indicated a potential durability-adjusted cost as low as $185/kWnet at production volumes of 100,000 units/year. This signals aggressive cost-down curves for direct fuel cell competitors.

The following table compares the fuel cost dynamics relevant to Hyliion\'s natural gas-based powertrain substitute threat as of early-to-mid 2025 data:

Hyliion\'s KARNO generator technology is specifically designed to mitigate the threat of single-fuel substitutes by offering fuel-agnostic operation. This adaptability allows customers to future-proof their energy systems against supply chain volatility or regulatory shifts impacting one specific fuel source.

• KARNO demonstrated successful, uninterrupted switching between fuels including natural gas, nitrogen-rich syngas, and hydrogen-natural gas blends.
• The system is capable of firing more than 20 fuels, such as natural gas, hydrogen, propane, diesel, and ammonia.
• Initial Early Adopter customer units expected to deploy in the second half of 2025, with each unit capable of generating approximately 200 kW.
• The collective capacity of the initial five units slated for H2 Energy Group (H2EG) deployment is 1 MW.
• Using renewable natural gas (RNG) can allow for a net carbon-negative emissions profile for the truck, a strong counterpoint to pure battery-electric zero-emission claims.

Hyliion Holdings Corp. (HYLN) - Porter's Five Forces: Threat of new entrants

You're looking at the barriers to entry for a new competitor trying to replicate Hyliion Holdings Corp.'s position in the distributed power generation space as of late 2025. The capital required to even start is substantial, reflecting the deep engineering and manufacturing investment already made.

The initial cost to secure the core technology and the necessary production assets sets a high hurdle. Consider the sunk cost Hyliion Holdings Corp. already absorbed to build this foundation:

The reliance on in-house additive manufacturing capability creates a significant capital barrier, as this is not just about buying off-the-shelf components. Hyliion Holdings Corp. has committed to building out this specialized production footprint.

• Hyliion Holdings Corp. owns over a dozen Additive Manufacturing machines across its Austin and Ohio facilities.
• New Colibrium Additive M Line printers are being deployed, capable of producing two to four times more parts per machine compared to older printers.
• The initial acquisition of the KARNO system included the intellectual property portfolio and the metal additive manufacturing equipment itself.

Securing the regulatory pathway for a novel power generation technology is another major deterrent. Hyliion Holdings Corp. has already navigated complex federal determinations.

• The U.S. Environmental Protection Agency (EPA) determined the KARNO technology is not regulated as an internal combustion engine under existing federal law.
• The KARNO Power Module achieved internal emissions test results of less than 2.5 parts per million (PPM) of nitrogen oxides (NOx).
• The system recorded low single-digit PPM levels of carbon monoxide (CO), significantly below the 12 PPM CO limit set by SCAQMD Rule 1110.3.

The current revenue profile clearly shows Hyliion Holdings Corp. is still in the early, capital-intensive phase, which means a new entrant faces a long, cash-burning runway before meaningful top-line returns materialize. You see this reflected in the revised expectations for the year.

The projected 2025 revenue is only approximately $4 million, which is a reduction from the earlier guidance of $10 to $15 million. For context, the year-to-date revenue through the third quarter of 2025 stands at $2.8 million, all derived from research and development services.