Executive Summary / Key Takeaways

• Workhorse Group is undergoing a critical transformation, merging with Motiv Electric Trucks to create a leading North American medium-duty electric truck OEM, aiming to achieve greater scale, a broader product portfolio, and significant cost synergies.
• The company's proprietary W56 step van, manufactured in-house, demonstrates strong operational performance with high uptime and compelling total cost of ownership advantages, positioning it as a differentiated solution in the evolving commercial EV market.
• Despite a challenging market characterized by slower EV adoption, regulatory uncertainty, and intense competition, Workhorse has implemented aggressive cost-saving measures and secured crucial interim financing to extend its operational runway.
• The proposed merger with Motiv, expected to close in Q4 2025, is pivotal for addressing Workhorse's "going concern" risk, simplifying its capital structure, and providing access to additional debt financing to fuel future growth and product development.
• Investors should closely monitor the successful integration of Workhorse and Motiv, the realization of projected synergies, and the combined entity's ability to secure large fleet orders amidst a dynamic and competitive commercial EV landscape.

A New Horizon for Commercial EVs: Workhorse's Strategic Re-engineering

Workhorse Group Inc. (NASDAQ:WKHS), an American technology company founded in 2007, is pioneering the transition to zero-emission commercial trucks, primarily targeting the last-mile delivery market. The company's core vision revolves around providing robust, sustainable, and cost-effective solutions to the commercial transportation sector. Workhorse's journey has been one of significant re-engineering, particularly under CEO Rick Dauch, who took the helm around 2021 when the company faced challenges with outdated facilities and underperforming products. This period marked a fundamental shift, transforming Workhorse into a streamlined, process-driven organization focused on rigorous design, engineering, and testing, alongside the cultivation of strong partnerships.

The commercial electric vehicle (EV) market, while promising, has been characterized by slower-than-anticipated adoption rates, regulatory shifts, and a lack of consistent government subsidies. These external factors have created substantial headwinds, delaying fleet customer adoption and impacting revenue momentum across the industry. In response, Workhorse has strategically focused on its core strengths: its people, products, processes, and partners, aiming to build dependable, capable electric trucks that prove their performance in real-world conditions.

Technological Edge and Operational Excellence

Workhorse's competitive differentiation is rooted in its proprietary technology and unique manufacturing capabilities. The company is the only North American OEM producing complete electric step vans in-house, encompassing both the body and chassis under one roof. This vertical integration provides Workhorse with greater control over quality, lead times, and customization, enabling faster response times to customer needs and offering a significant competitive advantage in a market where many rivals rely entirely on third-party manufacturing. This capability has translated into 3 to 6 months shorter lead times from purchase order to customer delivery compared to competitors.

The flagship W56 step van platform exemplifies Workhorse's technological prowess. Designed for the demanding last-mile delivery segment, the W56 offers a range of 150-plus miles and a cargo capacity of up to 1,200 cubic feet. Real-world operational data from customer fleets and Workhorse's own "Stables by Workhorse" initiative (operating FedEx Ground (FDX) routes) consistently demonstrate impressive performance. The W56 has achieved 93% to 97% uptime during peak holiday seasons, a critical differentiator against competitor EV products and older internal combustion engine (ICE) commercial vehicles. Furthermore, the W56 delivers an average of 27 miles per gallon equivalent at highway speeds, nearly three times the fuel efficiency of a typical ICE step van. This translates to approximately 53% lower fuel costs and 40% lower scheduled maintenance, resulting in a compelling total cost of ownership (TCO) that can offer a payback period of just four to five years without relying on government subsidies. With incentives, this payback can be even shorter, at three to four years.

Workhorse continues to innovate its product portfolio. The W56 208-inch wheelbase model has received full regulatory approval and successfully completed 250,000 highway equivalent miles in durability testing, with deliveries commencing in Q2 2025. The company is also developing a reduced-range 140-kilowatt W56 variant, slated for Q3 2025 production launch, which will offer a 120-mile range and an estimated 10% lower acquisition price, directly addressing demand from large last-mile fleets seeking more affordable options. In March 2025, Workhorse integrated Geotab's industry-leading telematics into the W56, providing fleet operators with advanced technology for optimized routes, real-world efficiency gains, and better operating decisions.

Competitive Landscape and Strategic Positioning

Workhorse operates in a dynamic commercial EV market alongside a diverse set of competitors, ranging from established automotive giants to other EV startups. Larger players like Tesla (TSLA) and Ford (F) possess significant scale, broader product portfolios, and extensive brand recognition. Tesla, with its focus on large-scale trucks like the Semi, and Ford, with its growing EV commercial vehicle division, benefit from robust manufacturing capabilities and deeper financial resources. Other EV startups such as Rivian (RIVN) and Nikola (NKLA) also compete, with Rivian leveraging strong investor backing and partnerships (e.g., Amazon (AMZN)) for its electric vans and trucks, and Nikola focusing on hydrogen fuel cell technology for heavy-duty applications.

Workhorse's strategic positioning emphasizes its niche in medium-duty electric step vans and its unique in-house manufacturing. While it may lack the sheer scale and brand recognition of a Tesla or Ford, its purpose-built W56 platform and integrated drone technology (though the Aero manufacturing business was divested, the focus on integrated delivery solutions remains a strategic differentiator) offer specialized solutions for urban and commercial logistics. Workhorse's proven uptime and TCO advantages directly challenge competitors, some of whom have faced "quality concerns and product returns" or whose vehicles "don't last more than 90 to 120 days" in the field. The company has observed "rows of competitor EV steps sitting idle" at FedEx terminals, highlighting its operational reliability as a key competitive edge.

The proposed merger with Motiv Electric Trucks is a transformative move to enhance Workhorse's competitive standing. Motiv brings a diverse product portfolio, including school buses and shuttles, and strong fleet relationships, complementing Workhorse's proven vehicles, manufacturing capabilities, and national dealer network. This combination is expected to create a "full range of Class 4 through 6 trucks" and enable the combined entity to compete more effectively with both pure-play electric and legacy OEMs by achieving greater scale and operational efficiency. The synergy opportunity is projected to be at least $20 million by the end of 2026.

Financial Performance and Liquidity Challenges

Workhorse's financial performance reflects the challenging market conditions and the significant investments required for an EV startup. For the nine months ended September 30, 2025, the company reported net sales of $8.70 million, a notable increase from $4.69 million in the same period of 2024, primarily driven by increased W56 truck deliveries. However, for the three months ended September 30, 2025, net sales slightly decreased to $2.38 million from $2.51 million year-over-year, due to fewer truck deliveries partially offset by deferred revenue recognition. The cost of sales for the nine months ended September 30, 2025, was $28.31 million, resulting in a gross loss of $19.61 million. This includes a significant increase in inventory excess and obsolescence reserves, which rose by $3.3 million in Q3 2025 alone.

Operating expenses have seen substantial reductions as part of management's aggressive cost-saving initiatives. Selling, general, and administrative (SG&A) expenses decreased to $20.40 million for the nine months ended September 30, 2025, from $33.88 million in the prior year, largely due to lower employee compensation and reduced consulting and legal fees. Research and development (R&D) expenses also decreased to $3.85 million from $7.83 million, reflecting lower headcount and the successful completion of initial W56 design and production. Despite these efforts, Workhorse incurred a net loss of $43.25 million for the nine months ended September 30, 2025, and used $25.01 million in cash from operating activities.

Liquidity remains a critical concern for Workhorse, with management explicitly stating that "substantial doubt exists regarding our ability to continue as a going concern within one year after the issuance date of the accompanying Condensed Consolidated Financial Statements." The company's ability to continue operations is contingent upon increasing sales, reducing expenses, and securing additional capital. As of September 30, 2025, Workhorse had $12.73 million in cash and cash equivalents and $25.48 million in restricted cash, with positive working capital of $12.50 million.

To address these liquidity needs, Workhorse has undertaken several financing initiatives. The company issued a Tenth Additional 2024 Note for $35 million, with $17 million of proceeds remaining in a lockbox account as of November 7, 2025, contingent on certain conditions. The terms of existing financing arrangements, including the ATM Agreement, impose substantial restrictions on obtaining additional funding, leading to a risk of bankruptcy if sufficient proceeds are not secured. The recent sale-leaseback of the Union City facility for $20 million generated a $13.8 million gain and provided crucial proceeds, alongside a $5 million secured convertible note from Motiv's investor, to bolster near-term liquidity and repay existing debt.

Outlook and Risks

Workhorse's outlook is fundamentally tied to the successful execution of the Motiv merger and the broader adoption of commercial EVs. The merger, expected to close in Q4 2025, is anticipated to provide up to $20 million in additional debt financing post-close from Motiv's controlling investor, split between a revolving credit facility and an asset-backed lending facility for vehicle manufacturing. This capital, combined with projected synergies, is crucial for the combined entity's go-forward strategic execution and ability to raise further capital.

However, significant risks persist. The "going concern" warning underscores the precarious financial position. The uncertainty surrounding the release of funds from the Tenth Additional 2024 Note's lockbox account and the limitations on obtaining additional financing pose ongoing liquidity challenges. The company is also facing a legal dispute with a battery supplier, Coulomb Solutions Inc., which has resulted in a $2.95 million summary judgment against Workhorse, with $1 million accrued for the dispute. Material weaknesses in internal control over financial reporting, related to third-party valuation deliverables and insufficient accounting resources, also present operational risks.

Broader market risks include continued slower-than-anticipated EV adoption rates, regulatory uncertainty (e.g., potential negative impacts from changes to California's HVIP or removal of federal tax rebates), volatile commodity prices (e.g., lithium, cobalt, steel), supply chain disruptions, and inflationary pressures. Geopolitical events and shifts in the political environment could further impact government support and tariffs.

Conclusion

Workhorse Group stands at a pivotal juncture, with its future inextricably linked to the successful integration with Motiv Electric Trucks. The company has demonstrated a clear commitment to operational excellence and technological differentiation, particularly with its W56 step van, which has proven its reliability and cost-effectiveness in real-world applications. The strategic merger offers a compelling pathway to address critical liquidity challenges, achieve necessary scale, and expand its product offerings to better compete in the evolving commercial EV market.

While the "going concern" warning and the inherent uncertainties of a nascent industry present significant risks, the combined entity's strengthened financial position, broader portfolio, and projected synergies offer a credible narrative for long-term value creation. Investors should closely monitor the execution of the merger, the realization of anticipated cost savings and revenue growth from a diversified product line, and the ability of the new leadership to navigate the dynamic regulatory and competitive landscape. The success of this transformative merger will ultimately determine if Workhorse can convert its proven product performance into sustainable financial viability and capture a leading share in the accelerating transition to zero-emission commercial transportation.