Electric vehicle (EV) manufacturer Mullen Automotive (NASDAQ:MULN) is seeing shares decline today amid broader market pressures, but some hope has sprouted for the embattled company. Specifically, Mullen just filed for foreign trade zone (FTZ) status. This could give it some key benefits, which could in turn potentially give MULN stock a much-needed boost.
According to a press release, Mullen recently filed the FTZ application with the U.S. Department of Commerce seeking coverage for its manufacturing and assembly center in Tunica, Mississippi. Management reportedly filed the application on March 25 and “expects final determination within 30 to 90 days.”
Upon approval as a designated FTZ site, Mullen would qualify for a range of benefits. These include deferment of payments on “duties owed related to import fees.” Other benefits include “duty exemption on re-exports” and duty elimination on waste, scrap and yield loss.
Mullen further noted the potential benefits in the press release:
“With FTZ approval the Company would be able to align duty payment to vehicles sold so the pressure on cash flow would be dramatically inverted from the current model of paying duty at time of import. Upon approval, Mullen estimates that resulting deferred working capital on domestic sales could result in deferred capital outlays of $10 million for the remainder of FY 2024.”
MULN Stock Has a Rival as an Encouraging Benchmark
Another notable tailwind regarding FTZ status is the facilitation of international sales. Per the release, Mullen “would be exempt from duties and taxes owed on vehicles sold” which could deliver a “bottom line pickup of 27% of the import cost associated with both Class 1 EV cargo vans and Class 3 EV trucks.” That could be huge for MULN stock amid an incredibly competitive ecosystem.
Nevertheless, the very same competition provides a framework for possible upside for Mullen. Last month, EV rival Canoo (NASDAQ:GOEV) received FTZ status for its manufacturing facility in Oklahoma City. At the time, Canoo said that the status would help lower manufacturing costs by 5% on imported parts. Approximately 70% of the parts Canoo uses come from North America, so the benefits could add up quickly for the enterprise.
Notably, GOEV stock popped higher following this announcement. That fact is likely not lost on Mullen, which is seeking positive momentum for MULN.
Avoiding paying duties upfront should mean more cash on hand for Mullen compared to some rivals. That could be significant, as cash burn represents a major dilemma for the EV manufacturer.
Why It Matters
No analysts cover MULN stock, which isn’t surprising. Since the start of the year, shares have lost nearly 64%. What’s more, over the past 12 months, the stock has cratered 99.8%.
While an FTZ status could help Mullen, investors should know that in the fiscal year ended September 2023, Mullen’s free cash flow came in at a loss of $287.1 million, per Gurufocus.
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On the date of publication, Josh Enomoto did not hold (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.
