Ladies and gentlemen, greetings, and welcome to Workhorse Group's Fourth Quarter and Full Year 2021 Investor Conference Call. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Workhorse Group's Vice President of Corporate Development and Communications, Stan March. Sir, you may begin.

Thank you, Darryl. Good morning, and welcome to all of you joining us on today's fourth quarter and full year 2021 results call. Before we begin, I'd like to note that we've posted our results for the fourth quarter and full year ended December 31st, 2021 via press release, as well as an accompanying presentation in the Investor Relations section of our website. We've also released our Form 10-K this morning. We'll be tracking with the posted presentation during the call, so please follow along either through the website directly or via download on your PC. And with that, let's get started. Turning to Slide 2. Joining me on today's call is Rick Dauch, our CEO; and Bob Ginnan, our new CFO, who joined us in January. Moving to Slide 3. We have a straightforward agenda today. Following my opening remarks, I'll hand it over to Rick, who will give you an update on our strategic priorities, including our new product portfolio roadmap. Bob will then walk us through the financial results for the quarter and the full year. And once Bob has finished with our outlook for the year ahead, Rick will provide a wrap up, and then we'll take your questions. Moving on to some housekeeping items. On our disclaimer, you'll find on Slide 4, some of the comments that will be made today are forward-looking and, therefore, are subject to certain provisions, as well as risks and uncertainties. You could find the full disclaimer statement in our 2021 Form 10-K, other filings that we make with the SEC, as well as in today's press release. And with these details out of the way, I'd like to turn the call over to Rick Dauch. Rick?

Thanks, Stan. I'm thrilled to welcome both you and Bob to your first earnings call here at Workhorse, and welcome to the team. Good morning, everyone. We appreciate you taking the time to join us today and for your patience, as we work to get our hands around the Company and develop a viable business plan for Workhorse. Turning to Slide 5. It's now been 7 months since I joined the Company. During that time, we have completed a deep dive review of every aspect of the business, taking significant action and made difficult decisions to strengthen both the team and business foundations of the Company. I am confident we are on the right path and believe strongly in our ability to pioneer the transition to 0 mission commercial vehicles. Let's just -- let's jump right into how we executed on our priorities in Q4 and then review our future plans for the Company. Turning to Slide 6. On last quarter's earnings call, we laid out clear priorities for the fourth quarter. I'm pleased to say we accomplished the majority of these objectives with a little bit more work to do on our 2023 and 2024 business plans. We accomplished a lot. One, we built out our executive leadership team; two, we significantly enhanced our engineering and technical expertise; three, we opened a new technical center in Wixom, Michigan; four, we stabilized and strengthened our financial position; and five, we finalized our 2022 budget. Most importantly, we have developed a revised and executable strategic product portfolio roadmap for our future electric power delivery van and truck offerings, which includes developing 2 new truck chassis platforms that we will lay out in today's presentation. Moving on to Slide 7. Each of the priorities we executed on in Q4 are a deliberate…

Thanks, Rick. Before I begin, thank you and stand for welcoming my first earnings call. I'm excited to work with the amazing team you have assembled and pleased to be here. With that, let's turn to Slide 15 regarding financial results for the quarter. Our financial results for the fourth quarter and full year reflect the C1000 recall as well as the important investments we are making across our business and our people, facilities and technology. We've taken steps to strengthen our financial position and are focused on operating efficiently. Let me provide some color on our results. Sales, net of returns and allowances for the fourth quarter of 2021 were recorded at a negative $2 million compared to $0.7 million in the fourth quarter of 2020. The decrease in sales was primarily due to a decrease in volume and an increase in vehicle returns and allowances in connection with the recall, the C1000 vehicles. Cost of sales increased to $100 million from $7 million in the same period last year as we took several non-cash charges, including a $63.6 million increase in the inventory reserve, a $23.9 million increase in the prepaid purchases reserve and a $6.8 million impairment to adjust the carrying amount of tooling and other assets related to the C1000. So a total of $94 million in impairment related non-cash charges. SG&A expenses increased to $15.7 million from $4.7 million in the same period last year. The increase in SG&A expense was primarily driven by a $4.1 million increase in selling costs, a $3.2 million increase in legal and professional fees and a $2.7 million increase in employee and labor-related expenses from increased headcount and the appointments of our new larger executive leadership team. R&D expenses decreased to $2 million compared to $4 million in the…

Thanks, Bob. This is an important and exciting time for us here at Workhorse. We recognize that there's a lot of work to do, and we are committed to getting it done. But as we come away from this call, there are a few things -- key things I want to emphasize. First, we're building a new foundation and getting back on the road to growth. Second, we have a clear and executable product roadmap going forward. And finally, we are confident that we have the right team and structure in place to execute on our plans, deliver new vehicles and create long-term value to our shareholders. Thank you again for your time this morning. We look forward to updating you on our progress again, and we're now ready to open the call for your questions. Darryl, please provide the appropriate instructions.

Operator Instructions. Our first question is coming from the line of Colin Rusch with Oppenheimer.

So with the adjustment in the designs and the supply chain to support that. Can you give us an update on where you're at in terms of full qualification of the supply chain and validation of the designs that you're planning to start ramping here in the second half?

Okay. Great. So we're working in parallel path really in 3 ways right now, right? We have the W750, which we're working with GreenPower. We've had their vehicle for a few months. We've gone through all their testing, all their certification, documentation, and we've tested ourselves, and we feel pretty good about that. We are going to modify that vehicle to make it a delivery step van. We're in the early stages of that. We are likely to choose our partner this week or next week for the back of the box and the cab. So I think we're in good stead there. On W56, we've gone back and looked at our old chassis, the W62, the W88, the EGEN and a few others and the C1000, and we've got a pretty good sense of what we're going to do there from a chassis standpoint and also from a battery management standpoint and also from a drivetrain standpoint. The guys will be coming to me in the next 2 weeks. We expect to source those parts with our supplier partners by March 15th. So I think we're in good shape. Those are the long -- we've laid out every component on the truck, Colin. And we know what the long lead times are in the industry right now. We've factored in some space there for any kind of supply chain disruptions we're doing thing overseas. And we feel like we're very comfortable right now with some float in there for our third quarter launch next year, so.

Perfect. And then the cash balance, gain from here to there, as you scale up $200 million is a great place to be. But I'm curious what the fully loaded anticipated cash need is going to be to get to an operational cash flow positive scenario?

This is Bob. So obviously, right now, we are burning cash, and we've talked about that and $200 million is we feel sufficient for the near term. But we will be looking longer term at raising capital as we go through the funding of working capital and these launches that are going to occur over the next couple of years. So we think once we get to the launches, then we can start talking about where we go from there.

Colin, I'd say the -- one thing we didn't get done in the quarter was we didn't get -- we got our hands around '22. First, we got hands around '21 in the C1000. We put together a solid plan. We built up from the ground up at both business units up to the Company. We factored in all the expenses we're going to have design and test these trucks and source the parts. We're mapping out all the working capital needs. We have that for '22. We need to finish that job for '23 and '24. We asked the Board to give us until May to do that. So you probably hear some about the second quarter, early third quarter this year.

That's incredibly helpful. And then just the last one for me. Obviously, you've augmented the management team in a pretty substantial way here in the past year. I'm just curious, are there other key roles that you guys are trying to fill at this point? Or do you feel like this is the team that you're going to carry forward and execute, advance the plan?

Yes. Just like a good sports team, you got to take a look at your existing roster sort it out, see what you got and we probably have 3 areas we need to fill. We need to get a CIO in here, who's gone through an ERP transition in the automotive space, either the OEM or Tier 1 side. We need to build now that we have a product plan, we need to start thinking about how we're going to go to market and be facing the customers. As you know, this is an interesting market. You've got the big delivery guys like UPS, Amazon, FedEx, U.S. Postal Service. But there's also a lot of independent fleets out there. From my days at Accuride, I know that more than 80% of the fleets here are less than 50 vehicles. And how do you cover them? Do you cover them through a regional team or through a national accounts team. And so we're sorting that out. So CIO, sales leadership team, both at the top and regional. And the third piece is because of all the parts we're going to have coming from across North America and across the world, we need to get the Director of logistics and supply chain inventory management here. Those are the 3 key priorities for us here, as we go into the Q2 pretty soon.

Thank you. Our next question is coming from the line of Greg Lewis with BTIG.

Rick, I wanted to think through a little bit more on the strategic partnership with GreenPower. And really, I guess my first question around that is, do you think there's opportunities to do similar type structures or supply agreements with other providers beyond GreenPower?

Look that's a good question. I won't tip our hand off too much. But we do have a factory up in Union City. We've expanded that factory by buying a warehouse up there and buying another facility that we can use for battery storage. We have a very capable workforce there. There's ability to hire more people in the area. There are other people in the EV space today, who are talking about building a factory. In my experience, and I built about 10 factories around the world, that takes minimally 18 months to 24 months. So if they haven't broken ground or got the permits or secure the steel or the contractors are 2 years out. So there are some people, who've reached out to us about considering can we go and do some things for them from a production standpoint. So I think with the W750 of GreenPower, as I said, it bridges the gap based on our decision to only do limited production on C1000, and we needed minimally 18 months to get to the W56. This plugs in and fills that gap from a revenue standpoint. When we hired Josh Anderson, he knew most of the key EV players in the industry and consulting with them. I met the GreenPower team out at the ACT show back in August, a month into the job, basically early September, and we've had those discussions and it led to this partnership. And we felt like, based on our assessment, that was the best chassis -- cab chassis system that we get our hands on as quick as we could, so. Does that help?

And then just around Union City, I want to say in a previous version of Workhorse, I believe that the throughput at that facility was around 10,000 units, realizing you're -- things change, you're adjusting, you're expanding, you're building out. Any kind of sense for what the throughput of that facility could be medium or longer term?

Yes. That's a great question. I remember, I used to be a supplier to Workhorse custom chassis. I remember that, that build the axles for them as far as axle and wheels. We haven't finalized that number. We know we can mill at least 10,000. That's if we -- what we need to look at that running the plant 3 shifts a day, 7 days a week, not 5 days a week, 1.5 shifts too, so I'll let you use some rough math there. A lot will depend on exactly what we build there, both ourselves, we'll do the W750 there, the W56 and W34. We just added an additional 67,000 square foot warehouse, which could be expanded to put a second line in there, if we're awarded some contract manufacturing. So we think that in the heart of automotive alley here basically between Michigan down to Tennessee, Ohio, we're right in the nice sweet spot, and we actually already met with the Mayor. We've met with the state government there about getting some support, and we're talking to the federal government about some of the grant money that's available for transitioning old factories over to EV-powered systems. So we're pretty excited about the work -- the ranch.

Thank you. Our next question is coming from the line of Jeff Osborne with Cowen.

This is Jeff Rossetti on for Jeff Osborne. Just wanted to see if you might be able to provide any details just around the pricing and gross margins you might expect for the 750, the 56 and 34?

Yes. We have those. We've mapped them out. It's built into our '22 budget, but we're not going to tip our hands to our competitors out there right now. So good question, though, Jeff. I can say this, it will be a profitable vehicle for us. How is that?

Any -- anything that would -- with the GreenPower arrangement that would differ the economics on the -- versus the 56 and 34?

No, I don't think so. Solid vehicle. We've gone out and we've benchmarked all of our competitors in the space on what their payload is, what their cubic space is, what the range is. And we think we can -- we have a very competitive product, and we can be in the market yes, this year with that product, both in the cab chassis design and a full delivery van, step van by the end of the fourth quarter this year, so. Thank you. Our next question is coming from the line of Craig Irwin with Roth Capital Partners.

So Rick, lot of changes in the last 6 months. Congratulations on the progress there. I wanted to start off asking about the W750. It's probably the -- that the most important thing right now given the revenue outlook. 1,500 units is a very specific number and you have so-called contracts that would require units higher than that if we expect actual deliveries to those customers to materialize in the near term. Can you talk about whether or not this truck is for a new customer, whether or not there are committed orders already for this truck, and whether or not, you need to actually go out and capture customers for the W750 to -- in order to take delivery of the 200 units a quarter.

It's a great question, okay? So when I got here, we had 8,032 orders basically from 3 customers, UPS, Pritchard Family and Pride, okay? So we had customers out there. We've met with those customers. I think I was very clear with you when you -- I talked to UPS when I first got here, I said, until you can meet our payload requirements, we're not going to fulfill those orders. You have those orders. When you have a truck that can be built and carry that payload at the right cost, we'll convert those orders into real trucks. We've met with the other 2 customers up at Union City like we talked about, we've driven the vehicles. We've given the target prices that we think we can build those for in the market. They're going back to assess the mix that they had on their original orders between the C1000, the C650 and see how they want to apply those orders to some C1000s we talked about, and we think we can sell all those even with the limited -- payload capacity. And they're making a decision, they asked for a few more weeks to figure out whether they want to do W750s, or they want to do wait to W56 and W34. So that's our hard work we need to do in the next 90 days, so.

So where do you stand on the pipeline for these products? I mean you're very specific about when you expect deliveries to begin, right? And you say that there's a deposit. So I assume you're giving some cash to GreenPower to facilitate those, those initial deliveries, which probably has to be given some time around right now given their supply chain. But can you maybe frame up for us what the -- what the pipeline looks like? I mean, again, 1,500 units is a very specific number, either a bunch of utilities sort of lined up and ready to go? Or is this something, where you're really just hitting the ground and running now?

Two things. Like, first, our priority is to take the customer orders we have and see how many of those we can fulfill with the payload. It carries 5,000 pounds. It's a Class 4 vehicle, not a Class 3 vehicle. It's got a range up to 150 miles. It's got DC fast. It's a very capable vehicle. It's already in the market in a couple of places, overseas were being used, okay? So that's one. Two is, okay, now that we have the vehicle, we've announced it publicly today, now when you go out and talk to the current customers we have and other customers, who've approached us and see if we can give -- convert some of those in orders as well. So again, we're able to give them a test drive of the vehicle. We're able to share all the bill of materials with them and show how it's built, and they feel -- we show them all of the test data. So it's a matter of them making some decision right now, but we've got to get out on the road, right? So I feel comfortable now that I can pivot a little bit and be out in the road both to -- talk to investors and also talk to customers, where before I wasn't confident in the plans that I inherited that I could go out there and sell that so.

And do you expect to actually take delivery of all 1,500 units, roughly 200 units a quarter? Or is this really just a capacity and actual deliveries will be a function of success on the sell-through.

We've secured capacity at the supplier, who builds that cab chassis. We're up to 1,500 vehicles. We have ability to adjust that up or down every quarter based on our success in the market, and that's what we're going to do. So I'm confident that we can get to the vehicles. We're confident we've got the key suppliers lined up, they are going to come in and partner with us here. Both of those -- 2 of the key ones are local sources and here in the U.S. So that's good. We're not dealing with the supply chain disruptions overseas on those components we need for the vans. And now it's a matter of going out and figure out, first and foremost, the customers, who have been very patient with us, how many orders do they want to convert to W750 or hold off the W56 or -- and then, we got to go and find some new customers, so. That's why we will hire some sales people.

So last question, if I may. You're a pretty conservative guy, and I think most people that follow Workhorse like that, right? But in the past, the Company has been sort of willing to share targets or goals, as far as units that they'd like to see sold in a certain time line. I mean, can you share with us some color on what you would hope would be achievable for '22?

Yes. We said today, we expect to sell over 250 vehicles and generate around $25 million of revenue. That's going to be a combination of our C1000 and some W750s, okay? And you're right, I am -- I tend to be a little conservative, and I've surrounded myself with very conservative people, who make me even more conservative, which is probably the right thing. There's been a lot of sizzle in the EV space over the last 3 years or 4 years, not just from Workhorse. You can go look at all the stock prices of some SPACs, et cetera, typically are down somewhere between 60% and 85%. So doing something on a PowerPoint and doing something in a factory, it's 2 different worlds. Putting a -- a rendering of a drawing of a vehicle up there and actually doing the design, the sourcing and the testing, where you PPAP all your parts, you homologate your vehicle, you crash test it, winter testing, summer testing, dynamometer testing, that's hard work. I almost had a bad age, my Chief Counsel is looking at me, don't say that word. So just like the boys over in Eastern Europe are realizing what's on paper and one thing is easy to draw maps on a line -- lines on the map and actually doing it is different, right? So hard work in the automotive industry. Hard work in the auto industry. And I used the quote last time from Elon Musk, who said, prototypes are easy, production is hard. Take a look at all the C-suite departures across the EV industry in the last 6 months, CEO, COOs, CFOs because people didn't deliver on their commitments. What we've built here is a team that has a proven track record of executing hardcore engineering, supply chain operations. What I now need to put on there, I need to put the sales team out in front of them. There's nothing sell, if you don't have a vehicle that doesn't pass testing, right? So that's what we're doing now.

Thank you. Our next question is coming from the line of Chris Souther with B. Riley.

Any update on where the backlog stands today from a dollar standpoint? I believe there are a few covenants related to the dollar value. So I just want to see if we can get any clarity there. You called out 2 of the key customers seemed to have good feedback on the W750. So I wanted to get a sense of where we are in the process of converting orders from the C1000 to 750 and kind of the other next-gen stuff.

This is Bob. So the backlog, we are, as you said, in the process of converting to the C1000 and then the 750 here and it's a process. We're going to go through the process. But we're confident that we will be able to get everything in place to meet those covenants.

And then I'm curious with the W750, you talked about it as a stop gap to get to the W56 and the W34. I'm curious what are the puts and takes around continuing to use someone else's chassis versus developing your own with the -- with 34 in particular, which seems to probably more aligned from a class standpoint.

Yes. Great. Good. It's not a stop gap, it's kind of a bridge is what I said, but you can use stop gap I guess, right? It plugs the gap we had in revenue. So you're right. This is a steel rail chassis for a Class 4 vehicle. It's proven. It's tested. It's already certified both in Canada and the U.S. So that gives us something we can go to production in this year rather than wait for 2 years. The W56 is similar to what we've built in the past in terms of a chassis standpoint. The W34 is the step forward. It's kind of what we've -- the lessons learned, we've learned on the C1000 and the EGEN. That's going to take a little bit more, marketing work to make sure the customers really want some of the things they talked about, and then it's got to do some sourcing work, all right? One of the challenges on the C1000s, we had one customer give us specs, we try to build at those specs. Some of those specs were realistic and some of them were unrealistic. And you've got to build a truck that you can actually make money. It doesn't do you any good to have a great working prototype if the costs are double what the customer wants, right? And if the bill of materials is double or triple the cost of the vehicle -- the sales price of the vehicle, that's not a good business model. So we're balancing all the balls there. What do the customer want, they need, not just the -- both the end customers and the big fleets, but also small guys. A typical Class 5, 6 truck, Class 4 trucks sell somewhere between $60,000 to $80,000, if it's ICE-powered, it burns through fuel, and the ICE vehicle doesn't cost $60,000 to $80,000. You got the batteries on there. You've got electric axles on there. You've got inverters on there. You've got some different components. Yes, you have wheels and tires. Yes, you have chassis. Yes, you have suspension. That's pretty straightforward. We can do a bill of material side by side and tell the differences. But the batteries say cost a hell of a lot more than an ICE system of engines and transmissions. The axles cost double or triple what a normal actual cost. So those are the kind of things we've been working on very quietly for the last 4 months or 5 months, right? So we've been purposely quiet, nose to the grindstone, doing the grunt work, that is no one is drinking dishwater here, so.

And just last one for me. Maybe you give kind of CapEx target for this year. Anything you can provide on R&D, which kind of ticked down last quarter and where kind of the OpEx should -- should trend throughout the year, I think, would be helpful.

Yes. This is a heavy CapEx year for us as we get the plant up to speed. It doesn't make sense to design and build world-class products out of a factory that's been not invested in for a couple of decades. So we're making the right investments there to make sure that plant is a showcase with the right tools and safety features to protect our workforce. It's heavy this year. I think our CapEx spending goes down next year depending on what other products we bring forward, some comes available to us. I don't have a real good number for you right now in R&D. I'd say this one high-level thought is that we are transitioning from a Company that was highly, highly relying on outside costly consultants to bring in our in-house our own talent. I've mentioned 270 years of experience in the custom chassis and designs. We're hiring up at Wixom. We-- -- when I got here, we had 11 outside consultants helping with our manufacturing quality. That's now down to 2. We're adding the right resources. We want to be a self-sufficient OEM here at Workhorse, both from a design, test and manufacturing quality. As needed for special testing purposes, one of the reason we pick Wixom site is, there is a lot of testing centers up in the greater Metro Detroit area, we can put our vehicles on a full chassis dynos or partial -- part chassis dynos, so.

Thank you. Our next question is coming from the line of Mike Shlisky with D.A. Davidson.

I wanted to maybe first touch Bob, I might have miss -- I may have misinterpreted something, did you said you had a $4.1 million increase in selling costs over the prior year and I guess that's true. Is that correct?

That is correct. That was primarily a long-standing contractual settlement that we took care of to move us forward to the future and get it behind us. So yes, negative revenue selling expense that doesn't seem logical. But that's what that was for.

Yes. I was going to ask you kind of what were you selling during the quarter there wasn't much out in the road. So maybe excluding that, was it more in line with the prior year or the prior quarter? Can you give us some color as to what the more normalized run rate might be going forward?

Yes. That was the predominant total of that amount. So it's pretty normal outside of that.

And then I also wanted to ask a little bit about how the GreenPower agreement came to be. I mean, there are several other Class 4 providers out there. I'd be curious how you developed the relationship with that company as opposed to a few others that might be in the market today with their own Class 4 EVs and they also [indiscernible] yourself.

Yes. Great, great question. So I was quite fortunate from a timing standpoint, who joined the Company in early August and then the ACT show was out in Long Beach about a month later. So in about a 3-day period, my team here was able to introduce me to almost all of our competitors, whether that's SEA Electric, Bollinger, everybody out there, right? Remember, I also came from another company, where I was in the Board, so I'm familiar with the industry, right. A personal friend of mine, who I've worked with for 20 years gave me the resume of Josh Anderson, our Chief Technology Officer. I interviewed him at the Trade Show, and we had a handshake agreement by the time we left L.A., that he would join the Workhorse team. He's got 22-plus years in the commercial electric vehicle powertrain systems with 12 patents. He then sat down with my team and I who went through and identified all the different potential partners we could use. Once we -- we kind of start early on knowing that the C1000, we need to get back and test, and we had some questions about it. So hey, where can we pivot quickly if we can build our own chassis, great. That's going to take a little longer than we thought. So who can we go get? He brought GreenPower in. Their President came into here in Ohio and gave us a presentation on their product portfolio. We went and looked at their vehicles, then we had a subsequent meeting with their CEO, and we forged a deal over the last 2 months basically. So that included all of my leadership team taking the vehicle, loading it, fully loading it, driving it around myself included around Greater Ohio and looking for all the documentation. So we've done our diligence. We think they are good partner. We think we forged an agreement that's beneficial for both companies. They get the sales. We got to do some down payments. They get that. We get the cab chassis. And we can be in the market here in '22 and not get to the market in '23, okay? That's kind of it, so.

And then -- for one last question here on the aerospace side. And I look back in the last year or 2 of talking about this business, it's always been, it's a patented product that, that can take off from a crew vehicle, make a delivery and come back to base and help that driver be more efficient. On this call, you're talking a little bit more about uses in ag, land mapping potentially even in the medical world. Are any of those use cases backed by any of your intellectual property? Or are they just kind of additions to what you can already do anyway? And what I -- can I get a feel for -- is there a very heavy environment competitively for some of those other use cases, especially in the ag and the med space?

Yes. Great. John Graber and the team and I, we went back and dusted off some old UAV market data, and we got updated for this year. The growth in this segment is phenomenal. I've never seen in my entire career CAGRs that, they are being projected by the big economic forecast by some of the banks. And primarily, the UAVs have come out of the military, obviously. You read about printers and reefers and drones and stuff like that. Now they're taking some of that technology and bringing to the commercial space. Explosion of growth on small drones for cameras and photography and that kind of stuff like that and now we're going through the transition, how we actually apply that technology in the commercial space, okay? So we still feel like we're in lead, and our customer told us that. We're the only ones they're working with for a vehicle launch drone. They have given us specific engineering specifications. We got a sheet of almost 3 pages in the first month I was here, and we think we're on track to have those design specifications met under testing by sometime this third quarter or fourth quarter this year. If so, then we can break that, that not there and go forward. And as part of our discussion, as we read all the data, hey, where else can we use our drone technology, the controls logic, the stability. It's a very robust drone. I think it weighs less than 25 pounds, so we can carry a 10-pound package and deliver a 10-pound package. And we can put it on a tether down and tether it back up. Not -- nobody else is doing that right now, so that we know of right now, right? So we think that's an opportunity for us to differentiate ourselves. So we've thrown a couple of camera systems and LiDAR systems underneath the drones and gone out and done some work and got some nice grants from the government. And guess what? The feedback we have from the customer after our first test were very positive. They want to do some more. So we've got a second grant now. So that's good. There's a need out there. If you think about national parks, large ranches, waterways, agricultural areas, where farmers have to take a 4x4 ATV or a horse to go check things, you can now do with a drone at 100 miles an hour with the radar detection type -- type systems, they can look at things on the ground. So that -- it's a real opportunity for us.

Thank you. Our next question is coming from the line of Jaime Perez with R.F. Lafferty.

Just for a clarification. You mentioned last quarter that the summer vehicles are going to have steel body -- steel chassis and aluminum chassis, I see the W6 -- W56 is steel. What about the W34, is that the aluminum chassis?

W56 will definitely be a steel rail chassis. The W750 is a steel rail chassis and the W34 is TBD. We learned some great lessons about aluminum, both good and bad on the C1000. If you -- but if you put too much aluminum, it weighs as much of steel, right? So where our team is -- that's why we pushed the W34 out a little bit, even though it's a bigger addressable TAM. We want to go through and not pin down our design yet whether we're going to use aluminum or steel chassis. We're looking at both. So okay? So it's really about how the chassis is built, and how do we protect the batteries along that chassis. If you go out and look at in lot of the passenger cars, you see the chassis and the batteries are all built around each other. So we've got to think about the same thing here on the truck side, so.

Now with the heavier load capacity, any change, how are you going to handle the performance with the torque through inverter or additional battery or motors, I'm just curious?

We've gone through assessment of the 5 or 6 of the major Tier 1s, who manage the -- what I'll call the electric drivetrain or so you're talking to people like BorgWarner, Dana, Linamar, Axle, Omnitech, a bunch of people, and we've identified -- we're down to 2 that we're negotiating with, and we'll choose one of them. We're very confident. In fact, back on our summer EGENs, we have some of the original data axles that were converted for E-powertrain sitting in our warehouse right now. So we've had a lot of experience here in this building over the last 3 years or 4 years on how to do this, so.

And one final question. Last quarter, you mentioned you had inventory half of 500 units, and you're not going to build any vehicles in the first half of 2020. You have a -- so that means -- does that imply you have enough inventory for the second half production and maybe go out and get -- acquire new inventory for the 2020? Any color would be appreciated.

Yes. C1000 that's what we said last quarter, about the 500. We've gone through and done a deeper dive. When you get into different design revisions, we don't think we have 500, so that's part of the inventory and reserve we took this quarter. We have enough inventory. As we said today, we're going to build somewhere between 50 to 75 additional C1000s. And we think we have 98% of that inventory is probably a few part numbers we got to go and buy a few more parts. That's it. But we're very confident. So -- so we are not exposed today, as we speak today. We're not exposed on the C1000 to any of the supply chain issues that I see out there with other customers, okay? So that's a good issue.

Thank you. There are no further questions at this time. I would like to turn the call back over to management for any closing comments.

No, thanks, Darryl. We appreciate your patience. We appreciate your questions. We appreciate your interest and investment in Workhorse. We're committed to get this Company across the finish line. Go from a plough horse to a workhorse. All right. Thanks. Have a great day.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.