As I’ve pointed out in the past, battery-electric trucks, like the C1000 by Workhorse Group (NASDAQ:WKHS), have multiple disadvantages compared to hydrogen-electric trucks. Since battery-electric trucks do not seem poised to be very popular, while the valuation of WKHS stock is quite high, I would recommend staying away from the shares of the battery-electric truck and van maker.
Specifically, in a March 2 column, I noted that battery-powered electric trucks require a great deal of electricity.
I also pointed out that these trucks require huge batteries to travel just 250 miles. Conversely, “Fuel cell-powered [hydrogen] trucks can travel a much longer distance than battery-powered trucks with a power source of the same weight.”
Meanwhile, truckers would need to devote “several hours” to charging a battery-electric truck with a range of around 230 miles, while 120 pounds of hydrogen, which would last for 300 miles, takes just 15 minutes to add.
And when it comes to infrastructure, Plug Power (NASDAQ:PLUG) already produces a significant amount of hydrogen, while Nikola (NASDAQ:NKLA) is developing plans to launch five hydrogen-charging stations.
Two large automakers with a tremendous amount of resources —Toyota (NYSE:TM) and Hyundai – are producing hydrogen vehicles and have the resources to quickly and easily launch hydrogen-refueling stations.
A Closer Look at WKHS Stock
By contrast, I haven’t found information about any company looking to develop the infrastructure that would be needed to charge a high number of commercial electric-battery trucks, and I haven’t heard about any large firms with a significant presence in the U.S. developing battery-electric trucks.
Workhorse’s electric vans and its delivery drones both have much more near-term potential than its electric-truck unit. But the van and drone businesses also face meaningful hurdles.
Delivery companies are looking to go green, and much less electricity is needed to power vans than trucks. Additionally, electric delivery vans, which do a great deal of local driving, could be cheaper than gasoline-powered delivery vans.
Further, vans have to carry much less cargo than trucks. Moreover, trucking giant Ryder (NYSE:R) is leasing and renting Workhorse’s vans. So, in theory, Workhorse could sell, lease, or rent many of its electric vans.
But on the other hand, Workhorse has a great deal of competition when it comes to electric vans. Amazon (NASDAQ:AMZN) has ordered 100,000 electric vans from another start-up, Rivian. Moreover, Ford (NYSE:F) is developing an electric van that can be used to haul cargo, and General Motors (NYSE:GM) appears to be developing an electric delivery van.
Finally, Workhorse’s delivery drone sounds very promising, but there are still significant problems that are preventing drones from being used for deliveries on a wide scale.
For example, the FAA has required that the operators of drones be able to see them at all times, that drones must always be able to yield to manned aerial vehicles, and that they avoid flying over people. Moreover, the agency makes it difficult for drones to fly in highly populated areas and near airports.
These issues have probably prevented Amazon from implementing widespread drone deliveries, even though the company has been working on the issue since at least 2016. It’s unclear if Workhorse will be able to overcome these hurdles
Workhorse’s Valuation
Analysts, on average, expect Workhorse to generate $147 million of sales in 2021, and its shares are trading at a market cap of $1.46 billion. Slightly less than ten times sales is a very steep price to pay for an auto company that’s just getting off the ground and is facing rather high hurdles.
Plug Power, which has a highly successful, rapidly growing material-handling business and is also leveraged to the “green truck” phenomenon, is expected to generate $412 million of sales next year.
The company, which is considered very overvalued by many commentators, has a market cap of about $3 billion, giving it a forward price-sales ratio of 7.5. I think that, for longer-term investors, Plug Power is a much better bet than Workhorse at this point.
As of this writing, the author owned shares of Plug Power.
