Mullen Technologies faces tough odds in EV market
Tiny firm faces an army of big-league electric car rivals
Not too long ago he helped make music in Los Angeles.
Now he talks of making cars in Memphis. He’s David Michery, 54, a former music label owner who has joined the ranks of fortune hunters, dreamers, climate-change fighters and actual carmakers keen on America’s new investment kick: electric cars.
His company, Mullen Technologies Inc., recently was awarded a $40 million property tax break by the Economic Development Growth Engine for Memphis and Shelby County. Mullen would assemble a $55,000 sport-utility vehicle in Memphis powered by batteries.
Years ago, his biography says, he worked with top musicians including the late Nate Dogg, an L.A. rap and hip-hop star. Now he’s trying to make a mark in cars, apparently relying on a notable pair on the Mullen periphery:
h Chinese entrepreneur Lu Qun opened Beijing Ch-auto Technology Co. Ltd. five years ago in China and would supply vehicle designs including the MX-05 model bound for Memphis. Chauto has no U.S. track record and limited sales experience in China.
h Michery plans to merge Mullen into Net Element
Inc., which would be renamed Mullen Technologies, a deal that could open way for the carmaker to bring in money by selling stock to the public. Oleg Firer, who made headlines for his “close proximity” to ex-soviet racketeers in Miami, heads Net Element.
Investors pour cash into electric cars
It is good timing for Michery. President Joe Biden just proposed spending $174 billion to spur electric cars including a national battery recharging network. Yet, tiny Mullen faces an army of big-league rivals.
Sixteen electric car models run on U.S. roads,
and the big automakers have dozens more coming. Tough competition faces upstarts. Just the other day, Canoo Inc. said it would retrench, while Lordstown Motors Inc. revealed costs surged. But Michery hasn’t backed off. Why? He didn’t tell me. Calls to his office in March were not returned.
When I asked industry analysts about Mullen Technologies’ prospects for electric vehicles – EVS for short – the talk turned to money.
“There’s a lot of money being thrown around right now,” said technology researcher Michael Barnard, chief strategist of the consulting firm TFIE Strategy Inc. “The market is betting on a green recovery.’’
Worldwide, “some 250 startups involved in some aspect of (automotive) electrification have attracted more than $20 billion in venture capital,” Reuters news service estimated.
Some investors are gambling on the next Tesla Motors, also once obscure, now a Palo Alto, California-based fixture whose shares of stock are worth more in total than all General Motors’ stock. Tesla’s meteoric rise inspired new EV ventures including named Alpha, Karma and Rivian.
“I’ve never heard of Mullen,” said electric car industry analyst Gordon Johnson, funder of the Manhattan investment research firm GLJ Research Inc. “You say he was in music. That should tell you all you need to know. The car business is a really hard business to survive in. But we’re in this period where the Fed (Federal Reserve) has made money really cheap. These guys (investors) are just throwing money into electric vehicles.”
Why merge with Net Element?
Michery would equip an empty former Nike warehouse east of Memphis International Airport and offset costs partly by paying less property tax.
If Mullens sell well, that could be a good deal for Memphis. It’s also a big if. For one new car model, major automakers
spend more than $1 billion on precise engineering and another $1 billion tooling the plant. EV startups face similar pressures, Barnard said.
In 2012, Michery bought Mullen Motors, a tiny custom sports-car business in Los Angeles he renamed Mullen Technologies. Nine years later, he’s angling for a merger that could open the way for cash from investors.
Mullen’s merger candidate: a moneylosing digital payments company named Net Element Inc. It is headed by Oleg Firer of North Miami Beach, Florida, a colorful entrepreneur born in the Ukraine, raised in Brooklyn, New York, visible on the Russian social scene on the Caribbean island of Grenada, and listed by the South Florida Business Journal among the Miami area’s 150 “power leaders” in 2017.
Profiled by the Miami Herald newspaper in 2019, Firer was described as a “classic Miami success story” despite seven lawsuits for breach of contract, an expunged mortgage fraud arrest and, according to the Herald, brushing “up in close proximity to a rogue’s gallery of South Florida’s most infamous financial fraudsters from the former Soviet Union, without ever getting in trouble with the law himself – save for the (mortgage fraud) arrest that was wiped clean.”
You may have heard the phrase “going public.” That’s a way to get rich – sell
stock to the public. There’s a way to do this where you don’t have to hedge even fanciful boasts to prospective stock buyers. It is folding your business into a company already listed on a stock exchange. That’s Michery’s plan. Net Element would take the name Mullen Technologies and senior Net Element officials except Firer would step down after the merger.
The deal was announced in the summer and originally set to close last autumn, but has been delayed for unexplained reasons. During that time, Mullen flashed signs of vigor. On Dec. 30, the firm announced a letter of intent for orders of 10,000 MX-05 sport-utility vehicles including 1,500 orders from Unlimited Electrical Contractors Corp. of Pompano Beach, Florida.
Net Element shareholders seem to favor a merger. Shares of stock have lost half their value since 2016. In its most recent quarterly profit report, the publicly-traded company revealed it lost $2.3 million, up from $1 million lost in the same quarter a year earlier. But some observers balked early on at the proposed merger’s complexity.
Posting an opinion on the Real Money financial website last August under the headline “What’s the Deal With Net Element?”, a blogger identified as Timothy Collins described as baffling the “many moving pieces and ratios of ownership” contemplated in the merger.
“When a company makes something overly complex,” the blogger says, “it will scare away buyers. Maybe management tried to bury a few details that would make the stock less appealing in the $15 to $20 range. Maybe not. But I’ve asked 10 people about the deal and received 10 different answers.”
Besides the Net Element merger proposal, Michery has been active on other key tasks. Mullen applied for a $450 million U.S. Department of Energy loan, allied with Nextech Batteries and hired former Nissan and Hyundai systems engineer Frank Mcmahon as chief technology officer. At the same time, Mullen has:
h Launched a factory near Los Angeles in Monrovia.
h Sought the 100,000-square-foot former Green Tech Automotive plant in Robinsonville, Mississippi.
h Sought the tax break on the 817,000-square-foot former Nike warehouse in Memphis.
h Proposed a 1.3 million-square-foot factory at Spokane, Washington.
Mullen eyes Memphis, Tunica
That’s a whirlwind of activity, though you have to ask: Four plants, why?
A week ago, the trade journal Assembly reported the 800-employee Memphis plant would be sized to make 100,000 vehicles over five years, while the Robinsonville plant in Tunica County would house engineering and pilot production – a common auto industry term for making early models to learn the best way to put vehicles together. That pilot task formerly was assigned to the Monrovia plant.
The magazine quoted a Michery statement: “Our pilot facility in Monrovia, CA, has now been moved to Tunica, [which is] more cost-effective and efficient, [with] close proximity to Memphis.”
Still unclear, at least publicly, are the Spokane plans. Nearly five years ago, Michery disclosed dramatic ideas in Spokane, generating excited news coverage about assembling imported Chinese components into a sleek electric sports car labeled the Dragonfly K50 by
Ch-auto.
No plant has been built, but Mullen never scrapped the idea, even after seeking Memphis tax cuts. Asked if the Mullen project remains intact, an official at Spokane economic developer S3R3 Solutions declined comment after saying, “Mullen Technologies is free to choose” its industrial sites.
What happens next
Here’s why battery-powered automobiles never took hold in America. The cost, weight and complexity of storing energy in a battery made EVS unaffordable. Then the 2010 decade ushered in three important changes:
h Well-off Californians alarmed by signs of global warning liked Tesla’s stylish electric luxury car, powered by a cache of lithium-ion batteries. Americans noticed EVS like they never had before.
h The cost of battery systems, which could account for half the price of a $28,000 electric vehicle in 2010, started to fall.
h In famously smoggy Beijing, the national government spent lavishly on a new goal – lead the world in electric vehicle technology by 2025.
Chinese entrepreneurs raced into the new field, including an unheralded automotive engineer in mid career named Lu Qun. He founded Beijing Changcheng Huaguan Automotive Technology Development Co. Ltd. – Ch-auto. It formed car brand Qiantu (pronounced jon-too) and designed the Dragonfly K50 and MX-05.
“Across China, government officials, corporate executives, private investors and newcomers like Mr. Lu are in a headlong rush to develop a domestic electric car industry,” the New York
Times reported in 2017.
Qiantu has yet to make its mark in China’s car market. Yet, Michael Barnard, the tech analyst at TFIE Strategies, sounds optimistic. He doesn’t know Mullen but says some upstarts’ style and innovation could draw Americans away from established automakers.
Gordon Johnson, the skeptical tech analyst on Wall Street, doubts the upstarts will innovate. He singles out Tesla. Eager investors have bid its stock price over $620 per share, but Johnson tells clients shares will plunge to about $67 this year. Investors, he said, will realize Tesla depends on image.
“They don’t have any of their own technology,” Johnson said, noting many key components including the all-important battery systems are purchased from suppliers including LG Chem of South Korea.
If a carmaker has no proprietary technology that sets it apart, and small rivals can buy the same components, there is little unique about the car other than the way it looks or handles, Johnson said. At the same time, small new rivals push into the business, buy the same components.
When this happened in Europe, which leads the United States in EV popularity, the pack of upstarts set the pace. Then established automakers fielded their own versions behind impressive marketing clout. Since 2018, big automakers’ EVS have taken European market share every year from the upstarts, a Johnson report shows.
He said the same trend will take hold and crush America’s weak EV companies, leaving a string of empty car plants and a wave of well-off entrepreneurs who made their riches by taking their own cut of the early investment money.
Ted Evanoff, business columnist of The Commercial Appeal, can be reached at evanoff@commercialappeal.com and 901-529-2292.