What happened
The U.S. Postal Service has altered course a bit on its plans for replacing its aging fleet of delivery vehicles, and now says it plans to buy significantly more electric delivery vehicles in the years to come than it previously forecast. That news has shares of Workhorse Group (WKHS +0.00%), a one-time candidate to provide those vehicles, up more than 20% at one point on Wednesday.
Investors need to be careful not to get ahead of themselves.
So what
Workhorse is an electric vehicle start-up whose short history is tied closely to the Post Office's plans to revitalize its fleet. The company had initially hoped a big contract from the USPS would jump-start its business, but in February 2021, rival Oshkosh won that massive $6 billion contract.
The award caught some watchers off guard because at the time, Oshkosh was focused primarily on internal combustion engines, not electrics. Oshkosh said at the time that its vehicles for the Postal Service would be equipped with either fuel-efficient engines or battery electric powertrains.
NASDAQ: WKHS
Key Data Points
More than a year later, the Post Office is far more committed to going electric. The government agency said it intends for at least 25,000 of the delivery vehicles in its initial 50,000 Oshkosh order to be EVs, and said it intends for at least 40% of the 84,500 vehicles it will buy to be electric.
The main contract still belongs to Oshkosh, and there is no indication that's about to change. But investors are bidding up Workhorse as a result of the news, hoping the change in plans might provide a path for the start-up to get involved again.
Now what
Although some investors haven't given up on the Post Office deal, it should be noted that Workhorse appears to have moved on. The company is now under new leadership, and one of the first things new CEO Rick Dauch did after taking over was withdraw the company's legal challenge against the Post Office's decision.
Dauch has refocused Workhorse's energy on other products, including electric delivery vans for the private sector.
Although it isn't out of the question that Workhorse could get some part of a future Post Office deal or other government business, there is nothing in Wednesday's news to suggest anything is on the immediate horizon. The stock move therefore appears overdone.
