Workhorse: Resolving Concerns And Gearing Up For Production (NASDAQ:WKHS)


Company Overview

Workhorse Group Inc. (NASDAQ:WKHS) is an American electric vehicle (EV) designer and manufacturer of high-performance commercial-grade medium-duty last-mile delivery trucks. Moreover, the company has developed a cloud-based, real-time telematics performance monitoring system for managing commercial transportation fleets. Besides BEVs, the company has developed its Horsefly UAV (unman aviation vehicle) delivery system, which offers last-mile package delivery via drone.

During the last three years 2019-21, Workhorse reported net sales of approximately $0.4 million, $1.4 million and $(0.9) million. The company’s automotive business segment has been the main revenue contributor, with the sales of C1000 delivery trucks bringing in the majority of the revenue for the segment.

The company reported a negative revenue figure during 2021 as the company suspended deliveries of its C1000 vehicles after the management paused the production of C1000 vehicles and recalled the previously delivered ones as the electric truck required additional testing and modifications in order to comply with the laid standards out in the Federal Motor Vehicle Safety Standards (FMVSS). In connection with the recall, the company agreed to refund customers for all C1000 vehicles previously purchased by them. Workhorse has now complied with the concerns raised by the FMVSS and plans to resume production in the second half of 2022 with a plan to manufacture 50-75 C1000s by year-end.

Investment Thesis

Workhorse Group Inc. shares are trading at almost 90% below its price a year ago, from a peak valuation of around 5 billion to its current valuation of under 700 million. The stock has nose-dived as the company came under investigation by federal authorities over safety concerns related to the company’s C1000 electric van. The company has now complied with the safety requirements laid out by the FMVSS, and the company plans on progressively ramping up its production and expects to manufacture and sell at least 250 vehicles in 2022 and generate at least $25 million in revenue.

Workhorse vs SPY in returns

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Workhorse stock performance

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Workhorse is in the process of solidifying its position as a leading US commercial electric vehicle manufacturer. Battery electric vehicles are in huge demand as oil prices remain elevated and sustainability becoming a key priority of stakeholders around the world. I have recently laid out a framework to phase out gas-powered engines by 2035. The industrial landscape is rapidly evolving towards the use of cleaner energy, and Workhorse is positioned to benefit from the ongoing secular transition.

The new management has taken significant steps to stabilize and strengthen the financial position of the company and has a strong vision for the company, with several products in line to transition Workhorse from an advanced technology startup to an efficient manufacturing company.

First Quarter 2022 Results: New Management Spells Out the Roadmap

On 10th May 2022, the company announced the first quarter results. The company sales remained almost negligible, which was expected as the production of the company’s C1000 electric delivery vans remained halted. The management noted that the company has completed its work in compliance with the Federal Motor Vehicle Safety Standards, and production is set to begin during the second half of 2022. As of March 31, 2021, Workhorse had a cash balance of $167 million with a debt-free balance sheet resulting from a debt exchange agreement announced in April 2022.

During the first quarter, the company continued to execute its strategic plans to bring its EVs to production. Management added several high-level positions to its staff, including CIO, Corporate Counsel, Director of Quality, and Director of Production Control and Logistics. In addition, the company has consolidated and relocated its Corporate Headquarters to Ohio and opened a technical and testing center in Michigan. Further, the Union City Plant has been upgraded to a World Class manufacturing facility.

WKHS financial statements


Products Roadmap

The company has complied with the changes proposed by the FMVSS for its C1000s, one of which was the redesign of the front suspension as well as corrective action in other components. Workhorse is also in the process of completing the repair of 161 C1000 vehicles, alongside manufacturing around 50-75 additional C1000s by year-end. Moreover, the company is expecting to begin the production of W750 vehicles in the third quarter of 2022. The company is positive about the demand for the vehicle and has received its first purchase orders for this vehicle family. Last but not least, the company is also set to launch W56 and W34 in 2023 and 2024, respectively, which means that the company is moving towards an expansion in the delivery van and truck segment, and hence the company’s growth seems to come soon.

Workhorse roadmap


Strategic Relationships

Workhorse has a strong base of strategic relationships, and the latest addition occurred on Feb 28, 2022, as Workhorse and GreenPower Motor Company entered into a strategic vehicle purchase and supply agreement enabling the company to enable accelerate time-to-market for customers seeking delivery of electric vehicles. The two-year agreement will ensure base vehicle supply for Workhorse for manufacturing at the site in Union City, Indiana. Workhorse will begin accepting deliveries of the base vehicles in the second half of 2022. Workhorse’s other strategic partners include strategic partnerships with Mitsubishi HC Capital Inc. (OTCPK:MIUFF) (OTCPK:MIUFY), Amerit Fleet Solutions (“Amerit”), Ryder System, Inc. (R) and Moog Inc. (MOG.A) (MOG.B).

Downside Risk

Workhorse’s product roadmap is full of new vehicle launches and the start of their production, which suggests a huge capital investment. The development and launch of new products may result in a significant cash burn, which may require the company to raise funds from the equity markets, which could be detrimental to existing shareholders. As of March 31, 2022, Workhorse KHS had $167.0 million in cash and cash equivalents, compared to approximately $201.6 million as of December 31, 2021. This implies a cash burn of $34.6 million during the last quarter.

At the current burn rate, the company has sufficient liquidity available for the next five quarters, after which it would have to look for external sources of funding to run the operations. The company has provided liquidity guidance in the last quarter’s statements, and the management is confident that the existing capital resources are sufficient to support the current and projected funding requirements of Workhorse for at least the next twelve months, after which time additional funding may be required .


The global electric truck market is expected to grow at a CAGR of 26.3% from 2022-2030, reaching $15.6 billion by 2030. We believe that Workhorse is well-positioned to benefit from this secular transition to EVs. The company has a new management team with automotive manufacturing experience and continues to execute strategic plans to bring EVs to production. The management has also confirmed purchase orders for the upcoming projects, and the company is set to start ramping up production in 2023.

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