Following a remarkable month of tremendous upside, shares of electric vehicle upstart Mullen Automotive (NASDAQ:MULN) cooled off on Thursday afternoon. Late last month, Mullen announced that it would deliver its urban commercial delivery vehicle to the European market. Although the move presents potential upside opportunities for MULN stock, it also carries risks amid an uncertain economic environment.
On Dec. 22, Mullen disclosed in its press announcement that I-GO Commercial Urban Delivery EV arrived in Europe. Further, management stated that sample vehicles were en route to Newgate Motor Group in Ireland, with delivery expected early this month. Previously, Mullen anticipated that the commercial vehicles would arrive at Newgate on Dec. 20. Unfortunately, coronavirus-related shutdown issues in China impacted the schedule.
The China narrative is important because the I-GO is not actually a Mullen product, per Insideevs.com. Rather, it’s licensed from another manufacturer, one that Mullen did not disclose. However, the EV publication reported that “…a quick search online reveals that the manufacturer is China’s Henan Henrey Shiying Vehicle.”
“The vehicle is listed on a wholesale Chinese website for $9,385 per vehicle or $9,080 per vehicle for orders of 50 or more. Mullen will sell it in Europe for a base price of $11,999 plus VAT and local transportation,” continued Insideevs.com.
On the surface, the parties involved appear enthused about the I-GO, and by deduction, the potential impact on MULN stock. Jim Ring, general manager for Newgate Motor Group, stated that the company received a “significant uptick in interest and inquiries” about the I-GO.
On Mullen’s side, CEO David Michery stated that the I-GO is a “great alternative vehicle for delivery in dense metro European cities.”
Potential Upside for MULN Stock
Additionally, Michery chimed in on an important point regarding the EV platform’s relevance in the European market. “The small size is perfect for maneuverability on tight euro streets and the zero emissions and lower cost of ownership is a great combination for our potential commercial customers.”
In fact, the European Automobile Manufacturers’ Association (going by the acronym ACEA) reported the following:
“[In 2021], sales of new electrically-chargeable vehicles (ECV) – which include both battery electric vans and plug-in hybrids – grew by 63.2% across the EU to reach 46,853 vans sold. This strong double-digit growth resulted in an increase of market share from 2.0% in 2020 to 3.0% in 2021. ECV sales went up by 237.8% in Italy, 55.5% in Spain, 44.9% in Germany and 39.8% in France.”
Essentially, Mullen can tap into a possibly viable segment of the European EV ecosystem through a branded third-party vehicle. Theoretically, this move frees up corporate resources so Mullen can focus on delivering its core products to the U.S. market. On paper, the strategy appears to be a win for MULN stock.
As well, research on light EVs in last-mile deliveries published by ScienceDirect revealed that “…many a time the [tested] vehicle was able to complete the work tasks stipulated for two working days before the battery needed recharging. What is more, the long travel range after returning to the warehouse convinced the drivers of the EV reliability and allowed them to work with no doubts about EV mobility, despite previously reported concerns.”
Therefore, viability concerns about EV integration in commercial applications may be fading away, a net positive for MULN stock.
Not Completely Risk-Free
Although Mullen’s last-mile initiative seems a no-brainer given Michery’s observation about European metro density, it’s not a risk-free endeavor. One factor to watch out for regarding heavy exposure to MULN stock centers on wider integration.
Per the ACEA, combustion-powered delivery vehicles still dominate the European market. What’s more, this segment saw increased demand in 2021. Therefore, Mullen may face both a product evangelism challenge along with competitive concerns.
As well, the I-GO is small with a curb weight of 1,753 pounds. In comparison, Mullen’s Class 1 commercial vehicle tips the scale at 5,732 pounds. In other words, it’s possible that commercial fleet operators may eventually prefer larger-capacity vans for efficiency’s sake, particularly amid regional recession fears. Therefore, investors will still want to be extra careful about MULN stock.
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.
