May 16, 2023

Workhorse loss grows in Q1 but makeover on track


Workhorse Group reported a larger loss in the first quarter and is short on cash. But it made progress toward ramping up Class 4 electric stepvans and chassis cabs.

The Cincinnati-based company is slowly emerging from an extensive and expensive overhaul led by CEO Rick Dauch. Since he joined the company in August 2021, he has:

  • Fired several top executives, replacing them with automotive industry veterans and veteran automotive engineers.
  • Used company shares to pay off a hedge fund, leaving the company debt free.
  • Canceled the C-1000 electric stepvan program found to be insufficiently durable to last the 15-20 years required of delivery vans.
  • Arranged to purchase 1,800 Class 4 chassis from Canada’s GreenPower Motor Co. as a stopgap product to generate revenue. The new Workhorse W56 Class 5 van will be ready n Q3. A Class 4 homemade product arrives in 2025.
  • Spent $50 million to makeover Workhorse’s shabby plant in Union City, Indiana.

Early buds of progress from these and other moves showed up in the first quarter despite Workhorse posting a net loss of $25 million compared to $22.1 million in the same period last year. Workhorse delivered 10 upgraded GreenPower-based W4 CC chassis cabs to a customer. It expects 40 more vehicles to be delivered this quarter.

“After almost two years of hard work, Workhorse is ready to run,” Dauch told analysts on an earnings call Monday. 

Investors seemed less sure. Workhorse shares closed at 88 cents Monday, a few pennies above its 52-week low.

Workhorse revenues rose in 1st quarter

Not counting returns and allowances, Q1 sales rose to $1.7 million compared to $14,300 in the same period last year as the company was in the midst of halting production of the C-1000 vans, which it tried to improve before ultimately canceling the project. Expenses rose this year in part because Workhorse did not furlough hourly workers as it halted production.

Workhorse had $79.1 million in cash at the end of March, including $18.6 million raised from an at-the-market direct sales arrangement. Workhorse will continue to tap the ATM as needed but has enough cash to get through 2023. The company maintains projected revenue of $75 million to $125 million this year with a profitable margin on every truck sold.

“On all fronts we are pushing the boundaries and overcoming the challenges as we create a commercially successful OEM,” Dauch said. “We will have the types of vehicles they need across the Class 4-6 segment.”

Another shot at a 1st-mover advantage

Workhorse, founded in 2007, squandered two first-mover advantages to make electric vans. Thanks to federal and state incentives, it is getting a third try to get its products into the market ahead of other newcomers, several of them startups.

“This company has a history of designing some pretty unique trucks and selling them for about half what they put into them,” Dauch said. “So we put an edict out when we got here that we’re going to design, test and build trucks that can make money. Just designing, building and selling cool trucks at a loss puts you out of business long term.”

The bill of materials on the C-1000 was $178,000 compared to a selling price of about $80,000, Dauch told FreightWavesTV in a Truck Tech interview.

Workhouse thinks it can carve out niche as 3rd player

The stepvan chassis market is dominated by Ford Motor Co. and Freightliner Custom Chassis Corp., a subsidiary of Daimler Truck North America. Utilimaster, part of the Shyft Group, and Morgan Olson make most van bodies. Workhorse thinks the growing demand for electric vans creates room for it to become the third major player.

The California Air Resources Board’s mandate that 9% of new Class 4-8 trucks be electric by 2024 is a major reason for Dauch’s optimism.

“This is exactly the segment where our products are targeted,” Dauch said. “This is the definition of a target-rich environment for an EV industry pioneer.”

Workhorse could scale to 5,000 vans by 2025 and 10,000 by 2026 if sufficient demand exists to add a second shift, Dauch said.

Workhorse building a dealer network

The W56, which has a few test builds completed, attracted significant interest at recent industry events. The ground-up vehicle went from concept to production in less than two years with fewer than 50 engineers and technicians assigned.

Most of the 8,000 reservations in place when Dauch arrived have gone away because of the C-1000s inadequacies, such as cargo-carrying capability and price. The Pritchard Group doubled down, increasing its order from 500 to 1,000 units.

Workhorse is now trying to build a dealer network for the 22 states where it plans to sell its products. Dauch said 13 manufacturing licenses are in place. Eight more are expected to sign on this year. He mentioned New York and New Jersey, Texas and, of course, California as early markets. Eastern ports in Florida and South Carolina also hold promise.

“We want a handful of dealers so we don’t get into an allocation-type situation,” he said.

Workhorse dealers typically will be required to order 10 vehicles for stock. The plant is currently building five W4 CC units a day.

Workhorse narrows loss but misses on Q4 revenue and earnings

Workhorse avoids SEC enforcement, scraps C1000 electric delivery van

Stock deal clears Workhorse Group’s debt

Click for more FreightWaves articles by Alan Adler.

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