The electric vehicle sector is hot right now. But that doesn't mean that you can generate windfall returns simply by investing in any electric vehicle (EV) stock. You must do a thorough analysis before investing your money in any stock, including EV stocks.
While many EV stocks skyrocketed in the last couple of years, there are several others that bit the dust. One such stock is Workhorse Group (WKHS 5.84%), which fell 78% last year and is now trading close to $4.
Let's discuss how the company, and its stock, may fare in 2022 and beyond.
Why Workhorse stock is falling
Workhorse is surely facing several challenges. Falling behind on its delivery plans, losing a key order from the U.S. Postal Service, a change in management, issues with delivered vehicles resulting in a recall -- the list of Workhorse's troubles is long. What's more, Workhorse isn't new to these challenges.
Workhorse's history can be traced back to 2013, when AMP Electric Vehicles acquired Workhorse brand and its assembly plant in Union City, California. AMP changed its name to Workhorse Group in 2015. The company started selling electric and range-extended medium-duty trucks. By the end of 2018, the company had delivered around 360 such trucks. That number remained unchanged in 2019, when Workhorse didn't deliver any trucks. This gets reflected in the company's quarterly revenue as well as its stock's price in the chart above.
In 2017, Workhorse announced its plan to develop C-series electric delivery trucks. In the years 2020 and 2021, the company delivered some of these trucks, but it fell well short of its delivery targets. The troubles didn't stop there. Workhorse lost a potential order from the U.S. Postal Service. Moreover, it recalled all 41 of its C1000 delivery vans due to the model being not compliant with Federal Motor Vehicle Safety Standards. The company has suspended further deliveries of this model.
It does not have any model in production right now and will announce its plans for new models in the first quarter of this year. The company expects that these potential models may come to market in 2023. Workhorse stock's steep fall last year reflects the above concerns.
Image source: Getty Images.
What may work for Workhorse
Two things can work in Workhorse's favor. First, the company's new CEO, Rick Dauch, has more than 25 years of auto sector experience. He is trying to overhaul the company's operations and is working with all the stakeholders in a systematic manner. He plans to announce the company's future models and production roadmap in the first quarter this year.
Second, Workhorse operates in a market segment that is underserved right now. There is a robust demand for electric commercial vehicles, and it is expected to remain that way in the coming several years.
What may not work for Workhorse
On the flip side, Workhorse doesn't expect to have something in the market before 2023. Competition in the segment is already heating up. General Motors' (GM -0.17%) BrightDrop already delivered its first electric delivery vans to FedEx in December. Meanwhile, Ford's (F 0.66%) E-Transit van got record reservations, even before the start of its production.
Rivian and Stellantis are among other companies that are already ahead of Workhorse in the electric commercial vans race. In short, Workhorse's delay and its past troubles might have already killed its chances of success in this competitive market.
Is Workhorse stock a buy?
Workhorse's management is trying to drive the company in the right direction. However, intense competition in the electric commercial vehicles segment may restrict Workhorse's growth. There is no announced model in production right now, and we don't know if any future model will be able to meet the required safety and regulatory standards.
Even though Workhorse stock's price looks attractive, it seems best to avoid this stock right now. Irrespective of where the stock's price may move in 2022, the company's fundamentals and long-term prospects don't look very bright as of now.
