Lightning Systems CEO expects company to hit $50M in revenue by 2021

LOVELAND  — Lightning Systems CEO Tim Reeser believes his company can more than quintuple its revenue over the next two years as states offer grants to electrify commercial fleet vehicles and its scale increases.

Speaking to BizWest during the company’s annual Lightning Day event Thursday, Reeser said the company is currently able to electrify seven Ford and General Motors vans and trucks, along with city buses. It recently hired 14 new staffers to reach about 60 people in its headcount, and debuted its “Lightning On Tap” charging stations for customers to add into their own buildings.

Lightning Systems, formally known as Lightning Hybrids Inc., builds all-electric powertrains for commercial vehicles such as cargo vans, moving trucks and buses. Buyers can either retrofit their existing gas or diesel fleet with a Lightning Systems drivetrain, or an aftermarket mechanic can install the electric system onto a brand-new vehicle purchased straight from a dealer.

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The company’s main clients are large fleet owners making the switch to electric either because of the cost savings from using less fuel and having less maintenance, or because they operate in a jurisdiction that’s trying to become carbon-free.

As California, Colorado and New York offer large grants for companies to electrify their fleets, Reeser views those programs as a catalyst for the commercial-electric-vehicle industry. If Lightning Systems can get a large slice of those grant dollars from customers, he said, the company should be able to ride the increase in sales volume to eventually reach manufacturing scale and lower prices.

In Colorado, the grant program can cover 70 percent to 110 percent of the cost of a powertrain conversion for grant winners, even if they have only one truck.

Reeser believes market forces will push down the cost of leasing an electric vehicle by about 30 percent in the next three years to about the same price as a gas-powered equivalent.

“When you look at it apples to apples over the total cost of ownership, it will become more and more compelling,” he said.

Reeser also thinks Lightning Systems is in a strong position in the electric-vehicle market because it’s small enough right now to be able to customize powertrains to a commercial vehicle’s specific needs, while a large car manufacturer is more likely to offer a single powertrain model that can fit the needs of the general public in a passenger car such as the Tesla Model 3 or the Nissan Leaf.

“You can’t do that in the commercial vehicle market [as a carmaker]; the market is too segmented, but we can,” he said.

While the cost savings over the life of a vehicle are attractive, Lightning Systems positioned itself as a premium seller in the market. Its batteries alone can cost as much as 30 percent more than the competition due to a higher expected lifespan.

That initial cost of entry can ward away small businesses that only have one or a small fleet of trucks, and don’t have the upfront cash to make the switch. Reeser said even though the cost of electrification should fall with time and scale, Lightning is working with financing companies to flip the model on fleet ownership from buying electric vehicles to leasing them.

“Some people refer to it as vehicle-as-a-service, because the other aspect of it is as long as you’re financing it, why not throw in the maintenance for free,” he said. “We very much see the market going to vehicles as a service.”

Lightning Systems is currently a break-even company, Reeser said, and he expects the company to make between $6 million and $8 million in sales through the year. However, Lightning is projecting to hit $20 million in sales by the end of 2020 and potentially $50 million by 2021 as its current customers add more electric vehicles to their fleets.

It’s possible that Lightning Systems can scale so quickly that it falls into the same size trap and loses the customization advantage it has over carmaker giants, but Reeser believes the company can grow production by hundreds or thousands of units over the next two years at a far slower lead time than one would expect compared with a lead time for a passenger car.

“We feel we’re well-positioned to go with the kind of slower ramp that market’s taking,” he said. “Slow is a relative term, since 1,000 units for us in two years will be huge growth for us and that’ll take us to a $250 million company … but that’s not fast enough for an OEM.”