Mullen Automotive shares gain ground, can it reverse course?

The share price of Mullen Automotive NASDAQ: MULN is gaining ground and may be on its way to a turnaround, but the market has given no signs of doing so. At this point, investors holding securities since 2022 have effectively lost 100% of their position, creating a significant overhang for the market compounded by still high short interest at 16%. As it stands, Mullen’s stock price is in a downward trend driven by decreasing shareholder value from short selling, despite its continued progress.

Mullen is a pioneer in the electric vehicle space, focusing on Class 1-5 delivery vans and trucks. The passenger electric vehicle market is in crisis, but demand for commercial vehicles continues to be strong, particularly in the last mile and short haul. The latest updates include IRS certification for the Bollinger B4, which qualifies it for thousands of dollars in federal and state electric vehicle tax credits to help it boost sales later this year.

Mullen Automotive expands addressable market

The IRS has approved Bollinger as a qualified electric vehicle manufacturer. The designation opens the door to up to $40,000 in buyer credits, and the B4 qualifies for the full amount. Mullen announced earlier this year that he had secured the batteries and vehicle assembly, which he is expected to begin soon. Deliveries are scheduled for the 2nd semester.

The California Air Resources Board, or CARB, also qualified Mullen’s Class 1 and Class 3 vehicles. CARB qualification is a higher standard than federal regulations and is followed by fourteen states and the District of Columbia. Now, Mullen Class 1 and Class 3 vehicles are currently available and can be sold in all 50 states, and sales are increasing.

Randy Marion Group is the company’s distributor of Class 1 vehicles. The company was invoiced for 230 Mullen Campus vans for more than $7 million, bringing the total invoiced by Mullen to more than $17 million. This is a small figure, but it is expected to increase significantly in 2024 as van production and deliveries increase.

The addressable market for commercial vans is huge. The global cargo van market is estimated to exceed $112 billion in 2023, growing at a CAGR of 8%. Demand is driven by fleet expansion linked to consumer demands, with ICE accounting for over 95% of the market. By being a first mover into the arena, Mullen is poised to gain significant market share, although Rivian is also a solid player. He is ending his exclusivity clause with Amazon and will soon deliver his electric vans to the mass market.

Mullen Automotive to report earnings; it won’t be enough to move the market

The next major catalyst for Mullen Automotive will be the fourth quarter release in late February. There are no estimates on the results, but the company could still surprise the market. It will produce the first significant revenues and cash flows in years and could paint a favorable picture for the current year. Critical details will involve the company’s cash position and delivery prospects, which may not be sufficient to sustain operations without additional capital.

The 2023 annual report included significant language to the effect that there are doubts about the company’s ability to continue as a going concern and that substantial additional financing will be required. Even if the company is able to sustain operations, it has accumulated a significant deficit of more than $1.8 billion as of September 2023, which must be overcome to create shareholder value.

The technical outlook: Mullen might be at the bottom, but he’s a risky buy

The price action suggests that Mullen has bottomed, but this market has already bottomed and collapsed. Without a significant increase in orders and production, liquidity is likely to continue to burn and the stock price to wallow. If the company is able to produce growing orders and deliver them, and the vans are considered reliable, we could see a rise in Mullen’s share price.

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