Shares of electric vehicle maker (EV) Workhorse Group Inc. (NASDAQ: WKHS) dropped nearly 50% on Tuesday and traded down by another 9% in Wednesday’s premarket session following an announcement by the U.S. Postal Service (USPS) that the contract for its next-generation delivery vehicle had been awarded to Oshkosh Defense, a wholly owned subsidiary of Oshkosh Corp. (NYSE: OSK).
In a statement posted on the company’s website Wednesday morning, Workhorse said it had requested additional information from the USPS and is waiting to hear back:
[Workhorse] intends to explore all avenues that are available to non-awarded finalists in a government bidding process. As further updates are provided, Workhorse intends to share that information through appropriate communications channels to the extent that [it] is permitted to do so.
The contract has no specific quantity or time frame but has been estimated to be valued at more than $6 billion over a number of years. The USPS announcement noted that the delivery vehicles would be either “fuel-efficient” internal combustion vehicles or battery electric vehicles and that all “can be retrofitted to keep pace with advances in electric vehicle technologies.”
The USPS is expected to take delivery of some 50,000 to 165,000 of the vehicles over a 10-year period. This contract is the first in more than 30 years for postal delivery vehicles, and Oshkosh will receive an initial payment of $482 million to begin final design and tooling work before production of the vehicles begins.
In 2015, Oshkosh beat Humvee maker AMC General and Lockheed Martin to win a $6.7 billion contract for a joint light tactical vehicle to replace the venerable Hummer. According to a report last year by the Congressional Research Service, the U.S. Army plans to open bidding in fiscal 2022 to split this contract between Oshkosh and a second vendor “in order to drive down costs.”
The contract award to Oshkosh was a severe blow to Workhorse, but the deal will not be sealed until Workhorse either chooses not to contest the award or loses on appeal. While the USPS contract would have been the company’s biggest by far, the firm also touts deals with FedEx, DHL, UPS, Amazon and Walmart for its delivery vehicles.
Still, Workhorse stock traded down about 55% from its level at Friday’s closing bell, with most of that loss occurring since Tuesday afternoon. Shares traded down to near $13.50 early Wednesday and traded down more than 13% at $14.25 later in the morning. The stock’s 52-week range is $1.32 to $42.96, and the consensus price target on the shares is $25.33.