Workhorse Group: A Turnaround Play or a Terminal Decline in the EV Logistics Sector?

Workhorse Group (NASDAQ: WKHS) has long been a symbol of the electric vehicle (EV) revolution's turbulence. For long-term investors, the company's recent financial performance and strategic moves present a critical question: Are its current losses and low revenue a temporary hurdle in a broader turnaround, or a terminal decline in a sector where competitors are accelerating ahead?

Financial Performance: A Mixed Bag of Progress and Pain

Workhorse's Q2 2025 results reflect a fragile but improving trajectory. Revenue surged to $5.7 million, up from $0.8 million in Q2 2024, driven by record deliveries of 32 W56 step vans. This marks a 613% year-over-year increase in revenue, a rare bright spot for a company that reported just $6.6 million in total sales for all of 2024. However, the gross margin remains deeply negative at -130%, though this is an improvement from the -812% margin in Q2 2024.

Cost-cutting measures have been aggressive: SG&A expenses fell by 52% ($6.3 million) and R&D by 35% ($0.7 million) year-over-year. These reductions helped extend the company's financial runway, but Workhorse still ended Q2 with just $2.2 million in cash and cash equivalents and $84.09 million in liabilities. The company's liquidity strategy—$20 million from a sale-leaseback of its Union City plant and a $5 million convertible note—buys time but does not address the root issue: sustained profitability remains elusive.

Strategic Merger: A High-Stakes Gamble

The proposed merger with Motiv Electric Trucks, expected to close in Q4 2025, is Workhorse's most significant strategic move. The combined entity, valued at $105 million, aims to create a dominant player in the North American medium-duty EV truck market. Motiv's controlling investor will own 62.5% of the new company, while Workhorse shareholders retain 26.5%.

The merger's potential synergies are substantial: $20 million in cost savings by 2026 through R&D and G&A consolidation, plus access to Motiv's established fleet relationships and Workhorse's 5,000-unit annual production capacity. Post-merger financing—$20 million in new capital—will replace Workhorse's existing debt and provide liquidity for manufacturing confirmed orders.

However, the merger's success hinges on execution. Workhorse's current leadership is transitioning to an advisory role, with Motiv's CEO Scott Griffith taking the helm. This shift raises questions about cultural alignment and operational continuity. Additionally, the combined company must navigate supply chain bottlenecks and competition from established players like Rivian and Tesla, whose electric delivery vans are already gaining traction.

Market Context: A Sector in Transition

The North American medium-duty EV truck market is experiencing rapid growth. In Q2 2025, 20% of new medium-duty truck sales were electric, up from negligible levels in 2022. Over 30% of large fleets (100+ vehicles) have integrated electric trucks, driven by regulatory mandates and incentives like the Inflation Reduction Act's $40,000 tax credits per vehicle.

Yet, the market is highly competitive. Rivian's electric delivery vans, for instance, have secured contracts with Amazon, while Tesla's Semi is gaining attention from logistics giants like PepsiCo. Workhorse's W56, with its 140 kWh battery and real-world 2,400-mile cross-country test, is technically competitive. But without consistent production and customer retention, the company risks being overshadowed.

Risk vs. Reward: A Calculated Bet

For long-term investors, the key question is whether Workhorse's current challenges are a temporary inflection point or a terminal decline. The company's financials remain precarious: $32.8 million in inventory and $10.8 million in accounts payable highlight operational inefficiencies. Meanwhile, its stockholders' equity has fallen from $44.29 million in late 2024 to $31.39 million by March 2025, signaling eroding confidence.

However, the merger with Motiv could be a game-changer. If successful, the combined entity would leverage Workhorse's manufacturing scale and Motiv's fleet relationships to capture a larger share of the $23 billion medium-duty truck market. The $20 million in projected cost savings by 2026 would also improve margins, assuming the company can maintain production momentum.

Investment Thesis: A High-Risk, High-Reward Scenario

Workhorse's story is one of resilience and reinvention. The company has shown it can cut costs and secure short-term liquidity, but long-term success depends on the merger's execution and its ability to scale production. For investors with a high risk tolerance, the potential upside—a dominant position in the electrification of logistics—could justify the current volatility.

Key metrics to watch post-merger:
1. Cash flow from operations in Q4 2025 and beyond.
2. Order growth for the W56 and extended 208-inch wheelbase model.
3. Debt reduction and capital structure simplification.

In the EV logistics sector, patience is a virtue. Workhorse's current losses may be a necessary investment in a future where electric trucks dominate. But if the merger falters or production bottlenecks persist, the company could face a terminal decline. For now, the line between turning point and terminal decline remains razor-thin.