I’m Sorry, But Mullen Automotive Makes Little Sense
In a business world dominated by toxic positivity, it’s dangerous for anyone to publicly criticize an investment, even one as flawed as electric vehicle (EV) manufacturer Mullen Automotive (NASDAQ:MULN). Although it has noble aspirations — to deliver attractive, high-performance EVs armed with groundbreaking solid-state batteries (SSBs) — almost everyone has big dreams. It’s executing the vision that separates the viable from the also-rans, which is why you should steer clear of MULN stock.
Outside of its snazzy marketing literature, nothing really stands out to suggest that Mullen is a credible EV disrupter. InvestorPlace contributor Will Ashworth said it best when he compared the financial outlays that the company made relative to its peers. “Mullen spent just $3.1 million on research and development in 2021, just 2% of what QuantumScape (NYSE:QS), a leading developer of solid-state lithium batteries, spent. Yet, Mullen’s market capitalization is almost 6% of QuantumScape’s $5.06 billion valuation.”
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Therefore, if you’re bullish on MULN stock, you’ve got to suspend disbelief and assume that with far fewer research and development dollars — and with arguably lower engineering acumen — that Mullen can nevertheless beat its far better capitalized and established rivals. Granted, it’s not an impossible circumstance, but I would consider it highly improbable.
But it’s not just about raw spending power — or lack thereof — that worries me about MULN stock. There’s the other component that advanced, potentially game-changing technologies like SSBs require time to finetune their nuances and complexities. For instance, recent research suggests that SSBs may not be necessarily safer than their conventional lithium-ion counterparts. Such findings, if proven legitimate, could negate one of the key benefits of SSB integration.
Aside from this enormous challenge, Mullen would also have to overcome the unique struggles associated with the automotive supply chain disruption. Combined with inflationary pressures, the price of EVs have continued to swing higher and higher, far outside the reach of median-income households. Should Mullen be forced to compete in the premium space, it then faces the prospect of going up against heavy hitters like Tesla (NASDAQ:TSLA) and Lucid (NASDAQ:LCID).
With so many question marks surrounding Mullen, it’s best to sit on the sidelines regarding MULN stock. It has little going right for it and way more things that can go wrong.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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