[Updated 10/12/17, 4:53 pm, with CEO comments.] XL Hybrids, a maker of hybrid electric powertrains for commercial and municipal vehicles, is stepping on the gas pedal after pulling in $22 million in fresh venture capital.
Furniture retailer Ikea Group and Constellation Technology Ventures—the venture capital arm of energy company Exelon—were among the investors in XL’s Series D funding round announced Thursday. The funding brings Boston-based XL’s total venture capital haul to more than $50 million, according to a press release.
The deal signals that investors still see a strong business case for hybrid vehicle technology, despite low oil prices and recent advances in fully electric vehicles. Ikea’s investment might seem unusual at first glance, but it has been investing in wind energy farms, solar panel installations, recycling companies, and other sustainability efforts.
XL was founded by MIT grads in 2009. The idea was to convert commercial and municipal vehicle fleets to hybrids, first by retrofitting older vehicles and then by installing the equipment on new-model vans, trucks, and shuttle buses. The goal is to reduce fossil fuel consumption and carbon emissions.
The company’s hybrid electric and plug-in hybrid drive systems work with vehicles made by Ford, GM, and Isuzu. XL also installs data-collection devices in vehicles to help it improve its products and enable customers to better track the performance of the hybrid systems. XL says its customers include Coca-Cola, DTE Energy, Harvard and Yale universities, the city of Boston, and the state of Massachusetts.
“We’ve seen a lot of big companies that put a target in place saying they want to reduce their CO2 by 20 percent or start electrifying their fleet,” says XL founder and CEO Tod Hynes. “We are a very easy and low-cost way of achieving a lot of those targets.”
Improvements in advanced vehicle battery performance and a reduction in battery prices have helped XL lower its costs, “so the value proposition is improving” for XL’s customers, Hynes says.
XL is now producing over 100 of its systems per month, Hynes says. He declined to share specific revenue figures, but he says sales have roughly doubled each year since 2013, except for 2015, after oil prices started tanking the previous year.
“It gave people some pause,” Hynes says of falling oil prices. XL’s “customers wanted to see how things would shake out. A number of our competitors didn’t make it through that $20 to $40-barrel time period. Now that prices have settled, people are definitely buying again.” (Oil prices are currently over $50 per barrel.)
XL plans to double the size of its 25-person team and expand its facilities, which include a Boston office and a supply chain facility in Quincy, IL, Hynes says.
Four years ago, Hynes told Xconomy he projected the company could reach profitability after raising about $20 million from investors. (It had raised $10 million at the time.) Things didn’t play out that way, but Hynes says he thinks the latest investment will be the last outside capital XL needs to reach profitability.
“It definitely is a little more capital-intensive than we thought, but in the grand scheme of things, not much,” Hynes says. “We’ve been able to establish a leadership position and get well on the way to profitability.”
