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Workhorse Is in Danger of Being Blindsided in the USPS Battle

I don’t always check the investment blogosphere. Many times, it ends up being a rambling mess of personal attacks and excretory contests, to put it politely. Still, I was curious about the sentiment toward Workhorse Group (NASDAQ:WKHS). As you’ve probably heard, the U.S. Postal Service (USPS) will take additional time to decide which finalist (or finalists) will take home its postal-delivery-truck contract. Naturally, WKHS stock tumbled on the news.

Image of a Workhorse (WKHS) logo and drone on the side of a truck.

Source: Photo from

For one thing, the contract itself is huge, to the order of more than $6 billion. That would lend a measure of credibility to the lesser-known firms that are still in the running. Second, and more importantly, many experts considered Workhorse as the organization with the highest probability of taking the win. On the surface, this assessment makes perfect sense.

The USPS Next Generation Delivery Vehicle (NGDV) contract will primarily replace the Grumman Long Life Vehicle (LLV), which went out of production in 1994. According to, the USPS has managed to keep it running, but at severe maintenance costs. Now, it’s no longer tenable to continue pouring money into this “zombie” platform, hence the opportunity for Workhorse’s all-electric proposal and the upside potential for WKHS stock.

Indeed, Workhorse’s proposal is the only one that is 100% electric-vehicle based. And that’s not an advantage based purely on politics, with the incoming administration’s net-zero emissions goal. Rather, the science also supports WKHS stock. And what are we supposed to do in 2020? That’s right, listen to the science.

Given that the vast majority of LLVs drive under 40 miles a day in city conditions rife with last-mile problems, EVs have the massive advantage of regenerative braking. Long story short, the constant stop-go commuting of city driving that is the bane of combustion vehicles translates to usable kinetic energy for EVs.

Plus, the USPS has a history of attempting to swap their LLVs for electric versions. However, the technology has failed to deliver in the past. This time it’s different — or so we think.

Can Karsan Shock WKHS Stock?

From my purely anecdotal observation, most people (well, pretty much everyone, save for a few bears) believe that Workhorse has the USPS contract in the bag. At worst, Workhorse will take part of the contract, if the USPS splits the reward. Theoretically, this makes WKHS stock a resounding buy.

But those who are negative on Workhorse’s chances — because of USPS’s delay — fancy the proposal by Oshkosh (NYSE:OSK) and Ford (NYSE:F). Though this combustion candidate can run a diesel engine (yuck!), this is the only platform that has been modified from an existing production vehicle. This is huge because aside from environmental concerns, predictability (from a proven track record) carries a premium.

After all, the USPS isn’t in this business to lose money … wait, check that. It’s trying to reverse its money-losing image. And if the Oshkosh/Ford proposal wins out, you’d have to imagine that’d be a slap in the face to WKHS stock.

However, it seems like the blogosphere is forgetting that Turkish automotive firm Karsan is also one of the finalists. Maybe it’s because we prefer binary thinking (good guys versus bad guys, Democrats versus Republicans). Or maybe U.S. society at large has some lingering doubts about Muslim countries. Whatever the case, Karsan doesn’t seem to figure in many, perhaps most, people’s minds.

But I think you’ll agree, this is what makes Karsan “dangerous,” especially if you’re betting the farm on WKHS stock. Karsan offers a hybrid solution, which nicely splits the combustion proposal from Oshkosh/Ford and Workhorse’s all-electric platform.

Further, hybrid has advantages in that it offers lower emissions than combustion engines, while mitigating energy disruptions. For instance, if the grid goes down — a totally not unreasonable circumstance — the USPS can keep on running. That has got to appeal to the decision makers.

Remember, the unofficial motto of the USPS is “Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds.”

A Dark Horse Beckons

I’m not even going to pretend that I’m an expert on federal government contracts. But if they’re anything like Washington politics, you can rest assured that there’s a lot of BS going on. Therefore, I’m afraid that while it makes logical sense, Workhorse may not be the victor.

You know this is a possibility from your own experiences. How many times have you witnessed more-than-qualified workers get passed up for promotion? Though hardly guaranteed, a similar thing could happen here.

Because another factor to consider is domestic politics. Sure, President-elect Joe Biden won, and the Democrats may sweep Congress. But big oil remains a powerful lobby. And you’ve got to wonder if the USPS will just go all-electric, creating friction within the government. Because guess what? The oil industry hires people too.

Nevertheless, WKHS stock is more than just the USPS contract. Therefore, I think it’s a mitigated buy. This is something to take a modest shot at, but keep the powder keg dry. Very dry. Workhorse is not guaranteed to win the USPS contract.

On the date of publication, Josh Enomoto is long F stock.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. 

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