Workhorse May Have a Texas-Sized ‘Bitcoin Problem’

I can appreciate why many folks consider Workhorse (NASDAQ:WKHS) a shoo-in for the U.S. Postal Service contract. Yes, USPS has delayed the search multiple times. However, WKHS stock stands out because its underlying business offers the only all-electric solution.

Image of a Workhorse (WKHS) logo and drone on the side of a truck.
Source: Photo from

As you know, electric vehicles (EVs) are the future. With zero emissions, EV proponents argue that the net impact of the platform — including its use of grid electricity for charging — is pound-for-pound superior to internal combustion engines (ICEs). Furthermore, EVs have simpler architecture. That makes them inherently more reliable.

Plus, with the cost of gasoline these days, just the fuel savings alone could tilt things in favor of Workhorse. Its competiton for the contract — Karsan (OTCMKTS:KRSOF) (partnered with Morgan Olson) and Oshkosh (NYSE:OSK) (partnered with Ford (NYSE:F)) — are proposing a hybrid and an ICE solution, respectively.

With rivals like that, WKHS is a no-brainer, right? Well, this is where it gets tricky.

In the past, I’ve praised Workhorse for its solutions to the last-mile problem. Obviously, in an ICE vehicle, stop-and-go driving makes the platform even more inefficient. With EVs, innovations like regenerative braking make them much better at city driving.

However, those benefits now have a question mark hanging over them. Again, EVs are the future. But when is that future? Frankly, the current mail trucks have done their job — albeit clunkily. Can electric transportation offer the same resilience?

Before the huge winter storm in Texas, the answer was probably yes. But now, the paradigm may have shifted for WKHS.

WKHS Stock Is Nothing Close to a Foregone Conclusion

The longer it takes USPS to make a decision, the more I believe shareholders of WKHS stock should be concerned. Of course, that’s just my opinion — don’t get too worked up about it. However, let’s rehash some points that make EVs look great for the contract:

  • EVs have zero emissions and are arguably better for the environment
  • EVs are more reliable than ICEs, lowering overhead and maintenance costs
  • EVs are more efficient in stop-and-go traffic, what mail trucks do everywhere
  • EV batteries are constantly improving, lowering costs and raising accessibility
  • Being electric, EVs have lower “fueling” costs, especially because gas prices can vary wildly between states

These are all great advantages. But they bring up a question: if that’s the case, why hasn’t USPS already selected Workhorse? Again, this is just my perspective, but I believe the government is now considering resilience as a pivotal attribute.

Of course, there have been some bad takes about the storm in Texas — namely, that Mother Nature has repudiated green energy. That’s just partisan nonsense. The storm took down the entire grid in afflicted regions and renewable energy is not the state’s main source of power.

But the critical takeaway for WKHS stock is that the grid did go down. If using EVs, that would leave USPS mail carriers stranded and without a robust backup system.

So, the disruption in Texas gives a lifeline to Workhorse’s competitors. This is because, fundamentally, it’s easier to mitigate such disasters for ICE vehicles.

Cost Is Also a Problem

On top of this, WKHS has other problems in store. For example, the declining costs of EV batteries — while a benefit on paper — is actually a distraction at best and a source of concern at worst.

Because EVs are a nascent technology, it’s difficult to predict when the tech will peak. Therefore, ordering up tons of next-gen mail trucks now may lead to buyer’s remorse in the following year.

Think of it this way: WKHS stock has a Bitcoin (CCC:BTC-USD) problem. One moment, you can pay for a cup of coffee with Bitcoin. The next, you can buy a car from Ferrari (NYSE:RACE).

Of course, I’m being somewhat hyperbolic here. But you get the idea. Chances are — with a hybrid or combustion-based platform — the technology is mostly fleshed out. So, USPS would not incur substantive opportunity costs (within this context) by going in now versus a year or two later.

With EVs, you’re almost guaranteed to incur those opportunity costs. As I said, the technology is still improving, which means the costs are still declining.

Bottom Line

Combine still-declining with the resiliency argument and I’m not sure if Workhorse is locked in for takeoff.

Of course, I’m not saying that it won’t get the contract. It very well might. However, I wouldn’t leverage up on WKHS stock and just assume a win is guaranteed.

Believe me, there’s a reason why the other two competitors are still in the running.

On the date of publication, Josh Enomoto held long positions in F and BTC.

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.

Article printed from InvestorPlace Media,

©2022 InvestorPlace Media, LLC