Shares of the nascent electric vehicle (EV) company Mullen Automotive (NASDAQ:MULN) briefly surged Tuesday in response to news of its recent designation as a “qualified manufacturer” for commercial EVs. Such recognition paves the way for federal tax credits, thus representing a significant development — however, viability concerns still dog MULN stock.
From the company’s perspective, this is a significant endorsement. As per a recent press release, Mullen’s offerings, including the Mullen ONE — a Class 1 EV Cargo Van — and the Mullen THREE, a Class 3 EV Cab Chassis Truck, now stand to benefit from EV federal tax credits of up to $7,500 for each qualified vehicle. Taking it up a notch, vehicles with gross vehicle weight ratings (GVWR) exceeding 14,000 pounds could qualify for a $40,000 federal EV tax credit.
The granting of this “qualified manufacturer” status was made official on Sept. 14, 2023. Addressing the development, Mullen’s Chief Commercial Officer, John Schwegman, underscored its significance, stating the following:
“Total cost of ownership is critically important to commercial customers. Tax credits such as these, along with lower fuel and maintenance costs, show a clear advantage for Mullen’s commercial offerings compared to traditional internal combustion vehicles.”
However, as with any burgeoning industry, challenges loom large. The trajectory of MULN stock has been anything but steady this year, casting a shadow on its future potential. Unsurprisingly then, MULN stock has since dropped into the red by about 1.5% in afternoon trading.
MULN Stock Still Faces a Credibility Crisis
Investors might feel a sense of optimism given Mullen’s recent strides, seeing them as markers of the company’s progress. CEO and Chairman David Michery noted the potential impact on consumer sentiment, stating, “[t]his is part of fulfilling our commitment to customers. This presents a great opportunity to purchase a commercial vehicle while optimizing all available federal incentives.”
Yet this tax credit isn’t Mullen’s alone to tout. Other automotive giants, including Tesla (NASDAQ:TSLA) and General Motors (NYSE:GM), also have vehicles qualifying for the full $7,500 tax credit, as highlighted by CNET.
Additionally, several vehicles can claim a $3,750 tax credit. Intriguingly, certain qualifying EVs may even entitle customers to claim a tax credit on a second-hand EV, adding to MULN’s mounting competitive pressures.
Mullen’s journey hasn’t been without financial turbulence either. Persistent concerns about the company’s financial footing, exacerbated by the ongoing issuance of new debt, continue to plague the firm, leading many to wonder about the long-term sustainability of MULN stock.
Why It Matters
To be fair to the bulls, MULN stock has been a strong performer. Over the past five trading sessions, shares gained double-digit percentage points. Also, the EV maker continues to attract speculative interest, specifically regarding short squeezes. Still, the company hemorrhaged over 99% of equity value since the beginning of the year, posing massive anxieties.
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.
