Assembling The Mullen EV Is The Top Priority Right Now

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Battery Electric Car

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Investment Thesis

Last week, Mullen Automotive (NASDAQ:MULN) reported FQ1 2023 results for nan 3 months that ended December 31, 2022, signaling nary gross contempt anterior announcements of conveyance acquisition orders that were expected to beryllium delivered by nan 4th quarter. Net nonaccomplishment per stock stood astatine $0.28, pinch a important ramp-up successful operating expenses arsenic nan institution continues its efforts to commercialize its Electric Vehicles.

Our Sell standing connected MULN banal mirrors nan belief that nan institution cannot meet nan short-term gross targets. It is besides not well-managed, arsenic reflected successful nan company's deficiency of soul accounting controls, arsenic noted successful its SEC filings, and deficiency of operational attraction and profitability path. Finally, nan institution has important equilibrium expanse challenges, particularly arsenic it ventures to ramp up production. We expect important stock dilution. The stock value declined importantly successful nan past fewer months, and the institution will apt beryllium removed from nan Russell scale this year.

Revenue Trends

MULN is seeking to commercialize Chinese EV exertion into nan American marketplace by building accumulation lines that combine imported automotive parts, pinch tweaks to get regulatory clearances for nan vehicles to tally connected US roads, including air-bags, seat-belts, etc., that abide by section regulatory standards.

While it's existent that location are galore competitors successful nan EV market, there's a deficiency of exemplary options to meet nan varying needs of customers successful different markets. This is wherever MULN tin help, filling nan spread by offering various models pinch chopped value points. With a developed Chinese EV marketplace pinch a size aggregate that of nan US, MULN was capable to build partnerships beyond those that went sour pinch bully specs. For example, nan institution offers Mullen Van, Mullen Five SUV, I-Go last-mile delivery, and Bollinger off-road vehicles. The company's sports car is simply a rebranded exemplary of Qiantu's K50.

Mullen Automotive

Mullen Automotive


Mullen Automotive

However, though nan marketplace is large capable to accommodate caller marketplace entrants, occurrence successful rolling retired a merchandise that meets user tastes is simply a spot tricky, particularly for companies and guidance unit pinch nary acquisition successful nan market, specified arsenic Mullen and its CEO. The first statement of defense against these dynamics is offering value differentiation aliases discount, but this maneuver tin only get you truthful far.

Mullen besides has trouble building its assembly lines. In July 2022, nan institution announced a binding statement pinch DelPack for 600 Class 2 EV Cargo Vans, 300 of which were expected to beryllium delivered successful November. Yet, results for nan 3 months that ended December show nary gross recognition. The bid wasn't fulfilled.

This is not nan first clip nan institution has reneged connected its promises of deliveries from supposedly "binding" acquisition agreements. In 2020, nan institution announced a missive of intent from Unlimited Electrical Contractors for 10,000 Mullen Five, 1500 for first delivery, and 8500 to beryllium delivered by 2025. In November 2021, nan institution announced nan debut of Mullen Five, which implicitly intends that it tin nutrient nan vehicle, astatine slightest successful a definite capacity, fixed that nan institution was accepting reservations. In December 2021, nan institution announced nan following:

Mullen is presently connected way to present first vans to existing fleet bid customers starting successful Q2 2022

In January 2022, guidance stated:

The clip framework for nan first afloat functional and drivable vehicles, including nan FIVE RS, is presently connected way for Q3 2022

Various reports person besides formed uncertainty connected nan financial position and estimation of nan entities mentioned successful nan acquisition agreements, including Heights Dispensary, a mini cannabis shop (order: 1200 Mullen One Vans astatine $60 million), and Unlimited Electrical Contractors, an engineering contractor pinch less than $5 million gross (order: 10,000 Mullen Five worthy $500 million).

Multiple car dealers expressed liking successful showcasing Mullen's products connected their websites and showrooms, including Randy Marion and Newgate successful Ireland. There mightiness beryllium immoderate demand, but 1 can't thief but wonderment if a Chinese conveyance creation will lucifer nan tastes of Western customers. Uncertainty regarding nan expertise and timeline of transportation and gross nickname is besides a pressing issue.

Operating Expenses, Cash Burn, and Dilution

The institution consists of a cluster of grounded EV start-ups. Its Indiana manufacturing installation was bought from defunct ELMS successful October 2022. The institution bought its Missouri installation from Green Tech Automotive, which besides went bankrupt successful 2018. Its California artillery assembly was purchased from Coda, which, akin to MULN, relied connected Chinese EV creation and partnerships to proviso its assembly lines.

MULN's programs and acquired assets person different technology, production, and supply-chain modes. Management is utilizing nan thief of third-party master services to put these pieces together, specified as:

  • Hofer powertrain for EV powertrain
  • Comau for engineering
  • ARRK for manufacturing
  • Dürr for conveyance accumulation systems
  • DSA Systems for conveyance strategy diagnostics

These disperse technological and accumulation packs will make it difficult to streamline production, expanding operating and per-unit costs.

The institution burnt $33 cardinal during nan quarter, translating to a $130 cardinal rate burn. The astir caller report's rate reserves of $86 cardinal bespeak equilibrium expanse difficulties. I expect nan institution will activity backing done equity aliases indebtedness successful nan adjacent fewer months. Share dilution successful nan past fewer months was astronomical, arsenic shown below.

ChartData by YCharts

Upside Risk

There is simply a wide liking successful electrical vehicles, particularly commercialized vehicles, and trucks, and Mullen is well-positioned to capitalize connected that interest. Given this nationalist enthusiasm, nan institution could win successful raising superior to supplement operating expenses, acquisition equipment, build assembly lines, and put successful its facilities.

There are besides galore opportunities for MULN to beryllium pragmatic arsenic it attempts to standard production. Essentially, MULN imports a Chinese car earlier adjusting it for US roadworthy standards, and this could construe to a faster accumulation cycle, contrary to what we connote successful this article. An fierce operational readjustment could supply MULN nan intends to present commercialized vehicles much efficiently, and this is an area wherever MULN's suppliers tin thief with.


At this point, MULN should beryllium good driving preorders for its vehicles. The institution has a assortment of models pinch different applications, including commercialized vehicles, vans, and last-mile transportation vehicles.

However, bringing vehicles connected nan roadworthy is challenging. The institution assembles Chinese car components, which requires ramping up business capacity. This is simply a technically and financially tricky task, underpinning its nonaccomplishment to meet its conveyance transportation orders.

The company's equilibrium expanse is anemic and plagued pinch convertible notes that will mature soon. The number of shares outstanding will apt summation exponentially successful nan coming 12 months. Even if MULN succeeded successful commercializing its products, this stock dilution unsocial is capable to nonstop shares lower.

Editor's Note: This article covers 1 aliases much microcap stocks. Please beryllium alert of nan risks associated pinch these stocks.

This article was written by

Bashar Issa floor plan picture

Bashar is simply a contributing writer astatine Seeking Alpha, focusing connected Long/Short finance ideas, pinch a geographic attraction successful North America. Before that, Bashar worked astatine an Investment Fund successful nan United Kingdom. He has a Master's grade successful Finance from nan Queen Mary University of London and a Bachelor's grade successful Economics from Middlesex University.

Disclosure: I/we person nary stock, action aliases akin derivative position successful immoderate of nan companies mentioned, and nary plans to initiate immoderate specified positions wrong nan adjacent 72 hours. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.

Editor: Naga

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