Mullen Files for Foreign Trade Zone Status in Tunica, Mississippi
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Insights
The application for Foreign Trade Zone (FTZ) status by Mullen Automotive represents a strategic financial maneuver that could significantly impact the company's cash flow and cost structure. The potential for deferring $10 million in capital outlays for FY 2024 presents an opportunity to reallocate resources towards growth or debt reduction. Additionally, the exemption from duties and taxes on international sales could enhance Mullen's profit margins by up to 27% of the import cost for specific vehicle classes. This is a substantial margin enhancement, especially for a sector with traditionally thin margins like automotive manufacturing.
Moreover, the FTZ status may provide Mullen with increased flexibility in supply chain management, which is critical in the current global trade environment characterized by volatility and disruptions. The ability to align duty payments with actual vehicle sales rather than at the time of import is a cash flow optimization strategy that can provide a buffer against liquidity constraints. Investors should monitor the final determination on the FTZ status, as approval could serve as a catalyst for stock performance, reflecting the anticipated operational efficiencies and cost savings.
From a supply chain perspective, the pursuit of FTZ status by Mullen Automotive is a move towards operational excellence. The benefits extend beyond mere cost savings; they include increased logistics flexibility and improved global supply chain performance. In an industry where just-in-time delivery is paramount, the ability to defer duties until products are sold can help avoid bottlenecks and reduce inventory carrying costs.
Additionally, the relief from inverted tariffs and duty exemption on re-exports can incentivize Mullen to optimize their production and distribution strategies for both domestic and international markets. This could lead to a more resilient supply chain capable of adapting to changes in trade policies or market demands. Such strategic positioning not only supports Mullen's bottom line but also enhances its competitive edge in the global EV market, which is becoming increasingly crowded.
An analysis of the electric vehicle (EV) market indicates that competitive advantages are often secured outside the showroom—through supply chain and cost management. Mullen Automotive's FTZ application signals an understanding of this dynamic. The potential duty savings and cash flow improvements could allow Mullen to invest in market expansion or in research and development, which is important for staying relevant in the rapidly evolving EV landscape.
The strategic initiative to strengthen supply chain management through FTZ status could also be perceived as a proactive measure in anticipation of increased international competition. With the EV market expected to grow significantly, Mullen's ability to mitigate duties and streamline logistics could be a compelling narrative for investors, especially when evaluating long-term growth potential and market positioning.
On Monday, March 25, 2024, Company filed FTZ application and expects final determination within 30 to 90 days
FTZ status and benefits would include opportunity for improving Company cash flow through reduction of taxes, fees and deferment of import duties
Mullen estimates that resulting deferred working capital on domestic sales could result in deferred capital outlays of
BREA, Calif., April 01, 2024 (GLOBE NEWSWIRE) -- via IBN -- Mullen Automotive, Inc. (NASDAQ: MULN) (“Mullen” or the “Company”), an electric vehicle (“EV”) manufacturer, announces today the Company has filed for Foreign Trade Zone (“FTZ”) status with the U.S. Department of Commerce at its commercial vehicle manufacturing and assembly center located in Tunica, Mississippi. Mullen filed its application on March 25, 2024, and expects final determination within 30 to 90 days.
Upon approval as a designated FTZ site, Mullen would qualify for a variety of benefits including deferment of payments on duties owed related to import fees. 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
For international sales, the Company would be exempt from duties and taxes owed on vehicles sold, potentially delivering a bottom line pickup of
“Achieving FTZ approval status is an important strategic initiative to further strengthen Mullen’s supply chain management and deliver significant cash flow savings,” said David Michery, CEO and chairman of Mullen Automotive. “As we continue to expand our distribution internationally, the FTZ would provide a competitive advantage with no duties or tariffs paid on sales outside of the U.S.”
Potential FTZ benefits include:
- Enhanced global competitiveness
- Reduction of taxes and fees
- Increase logistics flexibility
- Relief from inverted tariffs
- Duty exemption on re-exports
- Duty elimination on waste, scrap and yield loss
- Weekly entry savings
- Duty deferral
- Improve global supply chain performance
What is a Foreign-Trade Zone?
A Foreign-Trade Zone (FTZ or Zone) is a secure area within the United States where foreign and domestic merchandise is generally considered to be in international commerce and outside of U.S. Customs territory for duty and tariff purposes. Companies that operate in foreign-trade zones can defer, reduce or eliminate Customs duties. FTZs were created by Congress in 1934 to encourage international trade and capital investment in the United States. Zones offer a competitive advantage for U.S.-based operations and attract foreign investment to America by encouraging multinational firms to establish operations in the U.S.
About Mullen
Mullen Automotive (NASDAQ: MULN) is a Southern California-based automotive company building the next generation of commercial electric vehicles (“EVs”) with two United States-based vehicle plants located in Tunica, Mississippi, (120,000 square feet) and Mishawaka, Indiana (650,000 square feet). In August 2023, Mullen began commercial vehicle production in Tunica. In September 2023, Mullen received IRS approval for federal EV tax credits on its commercial vehicles with a Qualified Manufacturer designation that offers eligible customers up to
To learn more about the Company, visit www.MullenUSA.com.
Forward-Looking Statements
Certain statements in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1934, as amended. Any statements contained in this press release that are not statements of historical fact may be deemed forward-looking statements. Words such as "continue," "will," "may," "could," "should," "expect," "expected," "plans," "intend," "anticipate," "believe," "estimate," "predict," "potential" and similar expressions are intended to identify such forward-looking statements. All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, many of which are generally outside the control of Mullen and are difficult to predict. Examples of such risks and uncertainties include, but are not limited to, when the Company will hear back from the U.S. Department of Commerce, whether the application will be successful, if the Company will achieve Foreign Trade Zone status and if so, what, if any benefits the Company will receive from such status. Additional examples of such risks and uncertainties include but are not limited to: (i) Mullen’s ability (or inability) to obtain additional financing in sufficient amounts or on acceptable terms when needed; (ii) Mullen's ability to maintain existing, and secure additional, contracts with manufacturers, parts and other service providers relating to its business; (iii) Mullen’s ability to successfully expand in existing markets and enter new markets; (iv) Mullen’s ability to successfully manage and integrate any acquisitions of businesses, solutions or technologies; (v) unanticipated operating costs, transaction costs and actual or contingent liabilities; (vi) the ability to attract and retain qualified employees and key personnel; (vii) adverse effects of increased competition on Mullen’s business; (viii) changes in government licensing and regulation that may adversely affect Mullen’s business; (ix) the risk that changes in consumer behavior could adversely affect Mullen’s business; (x) Mullen’s ability to protect its intellectual property; and (xi) local, industry and general business and economic conditions. Additional factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements can be found in the most recent annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K filed by Mullen with the Securities and Exchange Commission. Mullen anticipates that subsequent events and developments may cause its plans, intentions and expectations to change. Mullen assumes no obligation, and it specifically disclaims any intention or obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by law. Forward-looking statements speak only as of the date they are made and should not be relied upon as representing Mullen’s plans and expectations as of any subsequent date.
Contact:
Mullen Automotive, Inc.
+1 (714) 613-1900
www.MullenUSA.com
Corporate Communications:
InvestorBrandNetwork (IBN)
Los Angeles, California
www.InvestorBrandNetwork.com
310.299.1717 Office
Editor@InvestorBrandNetwork.com
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