Balthazar, who's pretty savvy about Europan history for a little guy, tells Agatha some of Stev's backstory. Balthazar's dad, who appears in the story but hasn't been named yet, was formerly a smith in the employ of the "Gilded Duke" -- apparently the Duke D'Omas. (Whether this was pre-Balthazar isn't clear.) This worthy ran afoul of Baron Klaus Wulfenbach and was vanquished, at which time Balthazar's dad accepted (or absconded with) Smilin' Stev in lieu of back pay. The two of them then joined the circus. According to Balthazar, Stev is used for pulling carts and carrying heavy loads and not much else. This doesn't sound right to Agatha's Sparkish instincts, as she notes his mechanical sophistication (masked by the dumb grin) and suspects there's more to the story.
And so there is. When the Monster Horse Beastie attacks the camp, the , and the mouth beyond produces a whirling buzz-saw-like engine of death and destruction. So Stev is a war clank as well as a load lugger! The Monster Horse Beastie gets the better of the exchange with Stev, but he buys time first for Zeetha to take a crack at the horse via good old-fashioned sword hack and slash, and then for Agatha to finish it off with her trademark death ray. This whole exchange leads Agatha to the realization that the Circus is, among other things, a front: many (she says "all," but that's not quite accurate) of the members are minor Sparks, who are able to use Circus hocus-pocus to stay out of notice of the Baron. This gives her an idea...
Smilin' Stev appears to be visible in the background after the battle at the bridge near Passholdt, indicating that he has been at least partially repaired.
There is no evidence of Smilin' Stev being air evacced with the members of Master Payne's Circus of Adventure after the Battle of Sturmhalten, nor any logical opportunity for his escape to take place. We must assume, therefore, that this gallant little battle clank has been scrapped or captured.