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Perspectives from the Detroit Auto Show
I spent last week at the Detroit Autoshow and although I have been to many car shows...this one was different. This show really signaled to me that after 120 years of refining the same beast.... that there is not much more that can be changed. All of the cars looked like each other. All of the SUVs seemed virtually identical. The pickup trucks all looked like pickup trucks. Universally, tailpipes stuck out the back of almost every car, SUV and truck.
I'm sure, because of my electric slant, I am looking through a bit of a different lens than the average show attendee. I think any business person looking at a multi-trillion dollar business whose 'core' hasn't changed in a hundred years, would sense that it is ripe for disruption. Around 98% (my estimate) of the vehicles at that show had an ICE engine, transmission and 4 wheels... same as the Model T.
Imagine the countless engineering/manufacturing hours across all of the OEMs and suppliers around the world that have refined the automobile system over the last 100 years. That global work effort and resulting product is mind boggling. The modern automobile has to be the most engineered and refined endeavor that the human race has ever tackled...times 10. The reliability and safety enhancements of todays cars are hard fought victories of courageous companies and their employees that risked billions of dollars to make them a reality and commonplace...However, the whole shebang is based the original basic architecture of the 1908 Model T.
My two major conclusions from the show:
1) Pickup Trucks should be electric or at least hybrid. There are almost 3 million sold in this country a year and they pollute our air more than their fair share. We need to double down on our W-15 efforts and get our truck on the road with fleets. More on this in the next blog entry.
2) We had a small SureFly booth in the far corner of the auto show and our booth was slammed with traffic. Everyone wanted to sit in the cockpit and have their picture taken. I would say that most of the show goer's did not even know about the electric VTOL revolution that is brewing, so seeing the SureFly in person was shocking. Personal flight has always been a dream and that dream is about to come true. If we are successful in our technological and regulatory efforts, we will have the new Model T of eVTOL.
- Commuters Avoid Traffic
- Emergency First Responders
- Fire Fighting
eVTOL is seen by many as a new method to transport people and cargo. And as expected, an exciting new method of transportation has been met with considerable investment going into the space. And not just Venture Capital investment, but companies like Daimler, Intel, Jet Blue and Boeing investing in eVTOL startups. There are companies around the globe developing eVTOL machines. However, like automotive, aerospace is a highly regulated industry and any aircraft that is going to enjoy widespread adoption is going to have to be certified by the appropriate regulatory agencies. In the U.S., that agency is the FAA.
The FAA has accepted SureFly's request to enter into the FAA Type Certification process. This is an extremely rigorous process and the FAA does not accept projects into this process lightly. Entering into Type Certification results in both FAA and SureFly committing serious resources toward the effort. Our goal is to be the first eVTOL to be receive type certification from the FAA. If we are successful in this goal, we will enjoy "First Mover" status in an emerging space that could change transportation as we know it.
How can SureFly possibly be the first in such a worldwide race to get to certified flight? We feel that our deep electric truck heritage has enabled us to apply our battery, software and lightweighting expertise to aircraft. We utilized the University of Cincinnati Aerospace Engineering Department early in the process and have now added considerable Aerospace engineers to our team of software, mechanical and electric engineers that work on the SureFly team. We are currently doing test flights with a pilot on board at Lunken Airport and are achieving results that are being watched by the worldwide eVTOL community.
In addition to the general aviation SureFly craft, we are also working on a military version prototype. We have met with the military several times and there is a tremendous appetite for a product like SureFly. The military prototype has less creature comforts than the regular SureFly, but it weighs less, can carry more cargo, goes faster and is designed to fly autonomously. We first learned to fly autonomously when we built our HorseFly delivery drone that is optionally matted to our electric delivery trucks. Actually, by reusing and leveraging much of the software and hardware innovations that we have created for HorseFly and SureFly over the last 5 years, we are able to build the military prototype extremely quickly and inexpensively. As one can imagine, an autonomous eVTOL could be used in many military applications, such as Rescue and Supply Chain.
I was at the CES show this week and Bell had a very large booth showing a full size mockup of the air taxi they are building and expect to be flying in 2025. the Bell craft is a hybrid electric, like our SureFly. The machine was quite breathtaking and even in a show as immense as CES, the Bell Air Taxis booth was jammed packed. I think it is the first time most folks at the show have ever heard-of, or seen, an eVTOL. I think that when presented with an eVTOL craft, and it instantly resonates with people, that it is a natural progression from what drones did for video, eVTOL will do for moving people and cargo.
If you are going to the Detroit Autoshow on Monday, Tuesday, Wed or Thursday (Industry and Press Days) please stop by our booth and see the SureFly and meet some members of the team. I assure you, your first glance at SureFly will be memorable. Our SureFly motto is:
"Sometimes to Break Ground...You Have to Leave It."
Our Core Business
I am often asked why Workhorse has so many products. Delivery Vans, Pickup Trucks, Drones and SureFly. Seems like a lot for a small company, especially given that trucks and aviation are typically highly regulated and capital intensive businesses.
First, I want to be clear that our core business is the creation and production of electric delivery vans. We cater to fleets that use their vans for work. Our new "Work Ahead" designation is designed to attract fleets that want to be ahead of the curve and use vehicles that work better than the previous generation of vehicles. Customers and potential customers are the likes of UPS, FedEx, DHL, Amazon, Bakeries and the US Post Office. The bulk of our time and resources go toward this singular objective. To our knowledge we are the only U.S. based OEM (Original Equipment Manufacturer) of commercial electric delivery vans. Quite a statement if you think about it. We believe strongly that local delivery vans should be, and will be, electrically driven. If our premise is valid, i.e. local or "Last Mile" delivery vans will be electric, and if we are the current market leader with years of experience with millions of electric customer miles under our belt, it stands to reason that our first mover status should enable us to dominate the emerging market for electric delivery vehicles in the U.S. Furthermore, the long gestation period for cars and trucks tells us that we should enjoy a open lane as the market leader as the other major van OEM's don't seem to have any serious efforts underway to enter this market.
The other products, the W-15 Pickup Truck, the SureFly and the HorseFly are all "Leveraged" electric products for moving around people and/or cargo. I use the word Leveraged because these vehicles utilize much of the technology we have developed over the last 10 years. All of our vehicles, weather ground or air vehicles, utilize common elements such as Battery Packs and Sophisticated Control Software. By leveraging and re-purposing existing people and technology (and sometimes customers), we have been able to dramatically reduce the engineering and production expenditures that are typically required to enter these new markets. Some of these new products may stay under the Workhrse umbrella, and some, like SureFly, may spin out of Mothership...either way...all of our products are designed to bring value to our shareholders.
Over the next few entries of this Blog, I would like to go into some depth on each of our product lines.
Monday, December 31st, 2018 was a very important day at Workhorse. We accomplished something we have been seeking for several years. The $35 million debt financing that we announced on January 2, 2019 will be used to pay off historical debt and, most importantly, we will use it to buy parts for vehicle production. This enables us to shift away from our historical method of buying parts with capital raised through the sale of equity by replacing it with a revolving facility that further enables us to improve cash flow and improve our core business. Our focus in 2019 is to build and deliver trucks at a profit while satisfying our debt obligations. We feel the best way to reward our shareholders is to deliver on this objective while changing the face of local delivery trucks in the United States. In addition, this financing gives us the ability to continue our quest to find a partner or buyer for our eVTOL aircraft, SureFly without being obligated to sell SureFly by January 6, 2019. Finally, this financing is the accumulation of years of creating and engineering our next generation NGEN electric delivery vehicle. Successfully building an incredibly efficient electric delivery truck at a profit is not just engineering but a tightly choreographed dance between engineering, production, regulatory and purchasing. We intend to use our NGEN platform, as well as, our Union City assembly facility and our engineering and purchasing teams to achieve our objectives.
Dear Shareholders and All Those who Follow our Company,
With the fresh new year upon us, I thought it might be helpful if I started a blog on our website where I could convey to you my thoughts and goals for Workhorse. The thoughts expressed in this blog will be my own opinions and do not represent official company statements. I thought about communicating to you via a social media mechanism, such as twitter, but I am not really a social media guy and I hope to take on subjects that require more than 128 characters to convey my thoughts. So, let's treat this is an experiment. If it works , we'll keep it going....if it looks like it is doing more harm than good...then we will probably discontinue the blog. Goal is to help you understand our company better, but to also stay within the bounds set forth by the SEC and our attorney as to what a CEO of a public firm can openly discuss. My feeling is that there is a tremendous amount of public information available about Workhorse and our activities from our SEC filings and our official press releases...but the nature of our business is sometimes complex and therefore may need more commentary in order to fully understand our goals. We are an Electric Mobility Company that moves people and cargo around via electric propulsion, sometimes with wheels and sometimes with rotors. These are serious endeavors that are usually undertaken by much larger companies. I think one of my biggest challenges in this blog will be to explain and instill confidence that a smaller nimble company is exactly the type of company required to make changes to the transportation status quo. Rarely does radical change come from large incumbents in any industry. However, the inherently serious nature of the automotive and aviation business don't usually lend themselves to smaller companies....so where will innovation come from? We believe it will be mid sized companies like Workhorse. I suspect I will do a lot of entries in the first few days of this blog, just to get everyone up to speed, and then settle into a regular cadence of weekly or monthly posts.