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Can Workhorse Maintain its Winning Streak at the Market?

22 Jan Can Workhorse Maintain its Winning Streak at the Market?

Workhorse Group, (NASDAQ: WKHS) a maker of electric delivery vans and UAV’s gained nearly 655% in 2020, Can it repeat its success in 2021 too? Let’s Find Out!

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In January 2021, Workhorse Group, Inc (NASDAQ: WKHS) received its largest individual order to-date of 6,320 C-Series all-electric delivery vehicles from Pride Group Enterprises, a privately held company with interests in transportation equipment retail, wholesale, rental, leasing and logistics. The order will be split between its C-1000 and C-650 models and the initial delivery of the vehicles will start in July 2021 and extend through 2026. As part of the company’s strategic collaboration with Hitachi Capital America, HCA will provide inventory financing.

Duane Hughes, CEO of Workhorse commented

“Our new agreement with Pride marks our largest individual order to-date and expands our sales channel internationally into Canada for the first time. Our ongoing partnership with HCA continues to bear fruit as we gear up for scaled production in 2021. This large order solidifies our first-mover advantage and indicates the heightened interest in our last mile delivery products.”

The Company is the only U.S.-based electric OEM, which has been selected to develop and complete prototype testing of the United States Postal Service’s (USPS) Next Generation Delivery Vehicle (NGDV), a contract that is roughly worth over $6.3 billion and presents a 165,000-vehicle opportunity. The Company is partnering with Lordstown Motors Corp for the project.

Workhorse Group, (NASDAQ: WKHS)

Market Cap: $2.75B; Current Share Price: 22.85 USDChart
Data by YCharts

Industry
The International Energy Agency predicts that the Electronic Vehicles which stand at 3 million today will grow to 125 million by 2030. The Global Electric Vehicle market is all set to compete with the internal combustion engine (ICE) vehicles in the next five year, accounting for one out of every five cars sold by 2030, according to Seth Goldstein, an analyst and chair of Morningstar’s electric vehicle committee. The growth of this industry is a result of the initiatives by governments around the world, in the form of tax rebates, grants, and subsidies for adoption of renewable and more environment friendly options for transportation. Unlike conventional vehicle which can only replenish their fuel at specific public locations, Electric vehicles can be charged at home or commercial charging stations.

However, the limitation of sufficient charging capacity to cover long distances discourages the use of these vehicles. There is an increased focus on research and development activities, especially in the passenger car sector, to improve infrastructure and supply equipment and establish EV chargers at easily accessible public places, to allow long distance travel as well. Range anxiety which acts as the biggest impediment for the market at present, will soon be a thing of the past, with Companies racing to develop connectivity modules.

The demand for electric vehicles will also bolster the demand for ancillary industries such as engine components, electronics for propulsion systems, battery optimization and torque transfer devices. In fact the demand for lithium, which is a crucial component of energy storage in transportation batteries, is likely to quadruple over the next decade according to Seth Goldstein.

A report by McKinsey estimates that by 2025, there will be more than 350 EV models introduced into the market, with ranges of 200 miles. However a lack of charging infrastructure could hamper the growth in the market. The report also highlights the fact that besides price and driving range, lack of access to charging stations is the third most serious barrier to EV. However there have been a gradual decline in prices and improvement in driving range and companies are making a concerted effort to provide the requisite charging infrastructure. Furthermore the total energy demand for electric vehicles in China, United States and European Union alone will reach 280 billion kilowatt-hours by 2030.

Image Source: Mckinsey

There has been an increasing interest in EV’s owing to environmental concerns, which has prompted leading automobile makers such as BMW, Daimler, Ford (NYSE: F), and Volkswagen (OTCPINK: VWAGY) to announce an investment plan for deployment of 400 charging sites across Europe, in addition to investing approximately $90 billion in electric vehicles, according to a report by Reuters.

Company
Workhorse group is a leading manufacturer of electric delivery vans, drones and telematics that address the need for energy efficient and reliable last-mile delivery solution. The Company, formerly known as AMP Electric Vehicles, was established in 2007 and started by adding battery-electric power to two-seat roadster named SKY. This was followed by its foray into electrification packages capable of powering larger vehicles, which found place in Chevrolet Equinox SUV, the Jeep Grand Cherokee and the Mercedes Benz ML350.

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The Company refocused its efforts on electrifying commercial vehicles and created the first vehicle for Navistar, a U.S. truck OEM, however a change of management shelved further progress. Subsequently the Company started working directly with TRC, Inc. In March 2015, the Company acquired the Workhorse brand and the Workhorse Custom Chassis assembly plant in Union City, and became an OEM capable of manufacturing truck chassis in the 14,500 to 23,500 GVW class.

Workhorse has an exclusive agreement with UpTime Parts, Inc. to handle logistics and provide spare parts support, besides having a robust network of over 400+ dealers that offer nationwide support to their vehicles.

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The Company’s product offerings include next generation C-Series delivery vans that are all electric and have a 100 mile range. E-100 and E-GEN, its previous offerings are used by some of the most prominent packaging delivery companies in the world. In addition, the Company also manufactures the Horsefly drones that are designed to connect through the Aeres App and function either autonomously or in combination with its delivery vans. Workhorse also provides an integrated system named Metron, a mobile application which can monitor the performance of the fleet in terms of location, optimal delivery route, last charge data etc.

Key Remarks

  • Workhorse has the first mover advantage in the medium duty electrification for last-mile delivery, a market that is poised to be worth over $18B according to the Company. The segment is witnessing increasing demand for electric vehicles owing to increased stimulus and support for non-emission vehicles by the government, availability of more efficient charging solutions and rising environmental awareness. The Company has already established a solid partnership with UPS (NYSE: UPS) and has received 6 orders totaling 1,345 vehicles till date.
  • The Company has built a robust network of supplier relationships which ensures the delivery of best-in-class components for its products. Its partnership with Duke Energy (NYSE: DUK)  ensures a reliable charging infrastructure, while ENERDEL is its strategic supplier of Li-on energy storage and battery solution. Furthermore Workhorse is working in collaboration with MOOG for the development and manufacturing of HorseFly, while Ryder is its service, maintenance and fleet management partner.
  • The Company has conducted multiple last-mile delivery projects for its Horsefly UAV system that can reduce last mile package costs by 95 percent, with partners such as UPS, StockX and most recently with the CDC for delivery of healthcare solutions amid social distancing protocols in wake of COVID-19.
  • Workhorse has built a strong intellectual property rights portfolio of 7 granted and 4 patents pending, for its Proprietary platform technologies that covers battery, drive train, chassis, software and telematics.
  • The Company is likely to face increased competition in the future with more and more Companies jumping onto the electric vehicles bandwagon. U.K based Arrival, Rivian and Ford are some of its competitors that are eyeing the same niche market as Workhorse.
  • Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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    References

    https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/electrifying-insights-how-automakers-can-drive-electrified-vehicle-sales-and-profitability

    https://www.globenewswire.com/news-release/2021/01/04/2152627/0/en/Workhorse-Receives-Purchase-Order-from-Pride-Group-Enterprises-for-6-320-C-Series-All-Electric-Delivery-Vehicles.html

    https://ir.workhorse.com/

    https://www.pressroom.ups.com/pressroom/ContentDetailsViewer.page?ConceptType=PressReleases&id=1587471397741-835

    https://d1io3yog0oux5.cloudfront.net/_2e539d23d1befe2f4943382e28f786b6/workhorse/db/481/4055/pdf/WKHS+Investor+Presentation+January+2021+v3.pdf

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