GE GE Aerospace

LAS VEGAS—Hyperloop technology this week is accelerating toward becoming a reality.

On Wednesday in the desert north of Las Vegas, Hyperloop One Inc. was planning the first test of the propulsion system that is essential to the high-speed transportation invention.

On the eve of the test, the company announced it has formed ties with more traditional transportation companies and raised fresh capital.

All are milestones in the company's plan to create a fully operational hyperloop system by 2020.

"The hyperloop is real. It's happening now," said Chief Executive Rob Lloyd, during an interview in Las Vegas. The company on Tuesday changed its name from Hyperloop Technologies, to help distinguish it from its main rival.

Hyperloop One is one of the startups aiming to commercialize the idea that billionaire inventor Elon Musk floated in a 2013 paper: transporting people in low-pressure tubes at 760 miles an hour, nearly the speed of sound. Mr. Musk envisioned it as pods powered by propulsion motors that use magnets to hover on a sliver of air in near-vacuum tubes. The lack of air resistance and friction of traditional transportation are what would allow it to achieve such high speeds.

Hyperloop One is jockeying with Hyperloop Transportation Technologies Inc. to be the first to bring Mr. Musk's idea to life. On Monday, Hyperloop Transportation said it created a way to elevate hyperloop pods using permanent magnets, a new technique that is cheaper and conserves more energy than previous methods. It hasn't yet demonstrated its propulsion technology. Hyperloop One said it also is experimenting with permanent magnets.

The hyperloop idea has faced significant skepticism, pertaining more to its cost than its technology. Mr. Musk has said that a San Francisco-to-Los Angeles hyperloop would cost $6 billion. Experts expect it could be much more expensive.

"We will reduce the cost of the hyperloop until it is two-thirds the cost of a high-speed rail system at three times the speed," Mr. Lloyd said.

Established in 2014, Hyperloop One raised an initial $37 million in funding and set up an office in Los Angeles. Last December, the company started building its test site north of Las Vegas, including a half-mile-long open-air track that was to be used Wednesday.

To reduce costs, the company is breaking down its design into different parts such as levitation, propulsion and tube design, and then learning to build each with less expensive materials.

The propulsion mechanism that Hyperloop One was due to test Wednesday is the first segment of the project. If all goes according to plan, a roughly 10-foot sled containing the propulsion motor will zip forward on tracks, for about two seconds, at 116 miles an hour. It should crash into a pile of sand because the company hasn't yet built brakes for the contraption. The sled won't carry any passengers.

The focus of the test will be more on the propulsion technology—whether it can actually move the sled—than the speed. The track is shorter and there will be air resistance, two slowing factors which will be eliminated in future tests.

Hyperloop One also is trying to prove that its technology will be worth deploying. The company said Tuesday that it is participating in private-feasibility studies to examine a potential hyperloop route between Stockholm and Helsinki, as well as networks to transport cargo from the ports of Los Angeles and Long Beach, Calif., and throughout Switzerland.

In March, Hyperloop Transportation Technologies signed an agreement with the Slovak government to explore building a hyperloop in the European country.

Hyperloop One's latest funding comes from new investors that have transportation expertise. The $80 million Series B financing investors include France's national rail company, SNCF, and GE Ventures, the venture arm of General Electric Co., whose transportation unit makes locomotives.

By the end of this year, Hyperloop One plans to build and test a complete hyperloop, including the tube, pod and the computer that pilots the pod, Mr. Lloyd said. That pod should travel about 700 miles an hour, he said. "We think we will be able to demonstrate full Kitty Hawk capabilities by the end of this year," Mr. Lloyd added.

Write to Georgia Wells at Georgia.Wells@wsj.com

(END) Dow Jones Newswires

May 11, 2016 14:55 ET (18:55 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.