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Mullen Automotive (NASDAQ:MULN), an electric vehicle manufacturer bearing a tiny market capitalization, continues to receive outsized interest from retail investors amid a seemingly unending quest to unearth the next “Tesla Killer” stock.
This growing interest around Mullen Automotive is now patently visible on Reddit, the platform most synonymous with the WallStreetBets mania of 2021 (read some of the Reddit posts here and here). As is evident from the following chart, the microcap stock’s volume began soaring toward the end of February, with this trend showing no sign of slowing down or abating. Of course, with gains of 375 percent during the past month, a period when the broader market was experiencing vicious volatility-induced price swings, retail investors appear to be betting on Mullen Automotive as a relatively inexpensive method of generating some much-needed alpha – returns that exceed those of the wider market.
So, what are the factors behind this seemingly mad dash for Mullen Automotive shares? The answer: Mullen FIVE and an upcoming solid-state battery.
An EV That Will Launch in 2024 and Expectations Around a Much-hyped Solid-state Battery Appear To Be Powering Retail Interest Around Mullen Automotive (NASDAQ: MULN)
In a market seemingly filled to the brim with new EV players, Mullen Automotive has certainly played its cards shrewdly. The company is over two decades old now. And with age comes experience, if not success. First, Mullen Automotive bought an existing electric vehicle manufacturing facility in Tunica, Mississippi, for a fairly low price. Crucially, this facility offers quite a lot of room for expansion, thereby limiting the requisite capital outlay that Mullen would need to increase its production capacity.
Second, retail investors appear to be banking on the solid reviews that the Mullen FIVE EV has been receiving lately. Expected to launch in late 2024, the EV will offer a range of 325 miles on a 95-kWh battery pack, all for an estimated MSRP of $55,000 before the application of tax credits. Of course, the company also plans to launch a high-performance electric racing car, dubbed the Mullen DragonFly, as well as the Mullen ONE – commercial electric vans that will offer a range of between 160 and over 200 miles, depending on the variant.
Third, and perhaps most importantly, Mullen Automotive is promising exciting new developments on the battery front. The EV player has partnered with NexTech to produce the much cheaper lithium-sulfur (Li-S) battery pouches that will power the company’s estimated production volume of 100,000 electric cars over the next five years. Apart from being a lot less expensive than comparable lithium-ion cells due to the relative ubiquity of elemental sulfur, these battery packs are also 60 percent lighter, boosting the overall range efficiency of Mullen Automotive’s EVs.
But this is not all. The company is conducting fairly promising research on the solid-state battery tech front as well. Unlike most of its competitors, who have not been able to scale up this tech beyond the confines of the laboratory environment, Mullen Automotive recently tested a 300Ah solid-state battery cell that offered results comparable to an EV range of over 600 miles on a 150-kWh battery pack. Moreover, such a battery pack can theoretically yield over 300 miles of range via DC fast charging of just 18 minutes.
Despite these promising developments, there is an urgent need for caution around Mullen Automotive’s prospects.
Why Investors Should Tread With Care
Mullen Automotive has not begun commercial production yet. As we saw from the experiences of Tesla, Lucid Group, and Rivian, the prototype stage is a literal walk in the park, while the commercial ramp-up is the true challenge.
As far as the battery tech is concerned, we are quite confident that Mullen Automotive will be able to successfully deploy its lithium-sulfur cells. However, the solid-state tech still entails outsized risk. The fact that, unlike many other companies, Mullen Automotive is now testing a 300Ah cell in a real-world setting is laudable. However, as we came to know from the controversy around QuantumScape’s (NASDAQ:QS) solid-state cell testing, the evaluation parameters are of the utmost importance, with quite a lot of room for goal-seeking. Consequently, we would like to reserve our judgment on this frontier until the company is able to afford its investors a lot more clarity on the commercialization ramp for this nascent tech.
Finally, Mullen Automotive EVs are expected to support a Level 2.5 ADAS capability on launch. For comparison, Tesla’s Autopilot system is already a Level 3 ADAS, with a clearly illustrated ramp toward Level 5 autonomy by the end of this decade. This is something that investors should not discount.