Electric vehicle stocks have nosedived in the past few weeks as concerns about the industry continues. Tesla shares have plunged by over 25% from the year-to-date high after the company’s margins contracted. Rivian (NASDAQ: RIVN)stock price has dropped to a record low, erasing over $140 billion in value. Similarly, MULN stock has dived by 97% from its all-time high.
MULN and Rivian are facing challenges
Rivian and Mullen Automotive are companies that are seeking to become leading players in the EV industry. They are both competing in an industry that is receiving huge subsidies by governments and one that is expected to be worth billions of dollars.
The two companies have made important milestones recently. Rivian has already started selling its pickup trucks and analysts expect its revenue will hit $4.4 billion in 2023 and $76 billion in 2032. Mullen has started shipping its vehicles through a partnership with Randy Automotive.
However, they are also facing existential challenges in its operations. As I wrote here, Mullen Automotive has limited resources, which could see it file for bankruptcy this year. For it to continue as a going concern, its new vehicles need to be flawless. As we have seen with other EV companies like Tesla and Rivian, recalls can be costly.
The most recent news is that Mullen announced that it will acquire B. & R. Eckel’s Transport, a company that makes $85 million a year. In a statement, the company said that the acquisition will help it complement its margins. B&R provides 400 power units and 950 trailers. It’s difficult to see the synergies between the two companies.
Rivian is also having challenges, which explains why investors believe that it is worthless. It has a market cap of over $12 billion against cash and short-term investments of over $11 billion. Analysts believe that the company is a niche player in the EV industry and that it will need to raise at least $4 billion to hit its target. In a note, an analyst told Bloomberg:
“Investors appear to recognize that this is likely a niche brand for now, until they can achieve more production and get better margins on sales. Rivian shouldn’t abandon its strategy, but until funding is addressed, we think Rivian will keep trading at book value.”
Rivian vs Mullen: better buy?
So, is there a better buy between Rivian and Mullen Automotive? I believe that the two companies are not good investments for now. For Mullen, the main challenge is its balance sheet and its growth prospects going forward.
Rivian has made good progress by having a large order book and a popular product. Most people who drive Rivian trucks have a good rating on it. However, the challenge is its cash burn and the need for more cash as it scales its business.
The other key challenge is competition considering that Ford and GM are building equally good trucks at a cheaper price. Rivian’s flagship R1T truck starts at $73,000 while the highly popular F1 truck starts at just $60,0000.
Therefore, in this case, I believe that Rivian is a better investment than Mullen even though I expect it to go through challenges in the future.
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