- A wild new player in the EV market, Mullen (MULN) stock lit up the leaderboard.
- However, should Mullen succeed, it would raise serious questions about the EV market.
- Investors should proceed with skepticism.
With electric vehicles representing one of the most dramatic paradigm shifts if implemented at scale, the industry has attracted a broad spectrum of opinions. But arguably few have generated as much buzz and controversy as Mullen Automotive (NASDAQ:MULN). The latest player to throw its hat in the ring, MULN stock seemingly has the right stuff to be successful — and that’s where the problems lie.
Of course, a soaring valuation for MULN stock wouldn’t be a problem for Mullen — at least not right away. However, that an upstart EV maker could dramatically disrupt the automotive sector would raise serious questions about the long-term viability of the market. While folks probably weren’t paying much attention earlier, they’re doing so now.
Sure, a year-to-date loss of nearly 53% through the March 28 session is the dominant theme here. However, just over the trailing month, MULN stock has gained nearly 260%. Yeah, that’s right, 260%. I had to double-check the numbers to make sure I wasn’t hallucinating.
It makes you wonder about this Dr. Jekyll and Mr. Hyde investment: which one is the real deal?
On Paper, MULN Stock Is Incredible
If you talk about EVs to any investment expert, chances are, most of them will say that this sector is the future. The issue with this pronouncement is that there’s always a risk that excessive hype could affect the outcome of a particular investment.
I think that’s part of what InvestorPlace contributor GS Early was getting at when describing “how ridiculously overpriced most EV stocks are.” In the words of my colleague, “it takes more than selling a cool car to make it in the automotive business long term.”
However, Early likes the idea of MULN stock as a speculative but smart wager:
“Mullen has factories to build its electric SUV crossover, the Mullen Five, with deliveries expected to begin in the second quarter of 2024. The Five has a 325-mile range and a limited top speed of 155 mph. With a $55,000 starting price, it’s competitively priced yet costly enough that high-income buyers won’t be put off by the price.”
For me, what really stands out is the Mullen Five’s performance statistic, hitting 60 miles per hour from standstill in only 3.2 seconds. I mean, 3.2 seconds is wickedly fast, which would have put you in supercar zone just a few years ago.
All that in a $55,000 package that’s sleek as all heck? Sign me up, am I right?
The Double-Edged Sword of Going Electric
My colleague made it clear that Mullen is about focusing on the fundamentals. “What sets Mullen apart, though, is that it hasn’t been trying to capture headlines. It has quietly gone about finding factories to build its cars.”
Still, the remarkable balance between styling, performance and cost raises an uncomfortable question: Are EVs this easy to make? More pointedly, can upstarts simply pump out quality EVs like the Five with drive, focus and perhaps some luck?
Technically, I can answer that question with a yes. As you probably know, EVs are popular because they have fewer moving parts than their combustion counterparts. So in addition to fewer maintenance items, they should be a lot easier to manufacture.
But this ease of manufacturing isn’t necessarily an attribute for MULN stock over the long run. Because look — if EVs really are this easy to build, then the industry would succumb quickly to commoditization. Winners and losers will be determined by who could pump out the most vehicles. Presumably, the legacy automakers can fill that role.
However, I don’t think automakers want the EV industry to succumb to commoditization. You’d want a higher barrier to entry for such an expensive underlying product class. Therefore, automakers may be rooting against MULN stock.
Because if Mullen is successful, it could lead to unwanted changes in the auto industry.
MULN Stock Is an Awkward Investment
I want to be clear — because this is the internet after all — that I’m not negative on MULN stock. On the contrary, I’m impressed with the issuing firm. If it churns out a $55,000 SUV that can scoot to 60 in 3.2 seconds, it would be a shot across the bow to the entire auto segment.
But such an incredible offering also draws skepticism. What’s more, if Mullen delivers everything that it claims it can, it would imply that legacy automakers only need to make some transitions in their existing infrastructure to bombard the market. I doubt that Mullen could compete with its multi-billion-dollar rivals, which would then create a most awkward situation for MULN stock.
The success of the EV maker could possibly lead to its erosion. About the only thing you can say firmly about MULN is that it absolutely requires considerable due diligence.
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.