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Evaluation of tesla's strategy to go into UAE market.
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TESLA IN UNITED ARAB EMIRATES?
Agenda
Tesla UAE Market Entry Risks Investment Analysis Pros/Cons to Market Entry Conclusions Questions & Answers
Tesla was Founded by
Martin Eberhard and Marc
Tarpenning
Elon Musk joins Tesla board
Nov. 2007 Eberhard removed
Tesla buys NUMI plant in Fremont, CA
Model S Launch
20142012201020072003 2008 2013201120042002
LAUNCHTesla Roadser.Elon Musk CEO
LAUNCHModel S
Feb 2008 launch of Tesla
Roadster. Oct 2008 Musk CEO
Tesla’s History
FOUNDED
Tesla’s Goals
Selling its own vehicles in a growing number of company-owned showrooms and online.
Selling patented electric powertrain components to other automakers.
Serving as a catalyst and positive example to other automakers.
Present Internationally in 37 different countries
Tesla’s Strategy
Long term Strategy “ Build affordable mass market electric vehicles in order to have a material impact on oil consumption”
Tesla’s Product Line
Roadster – 2008Model S – 2012Model X – 2014
Tesla’s Financials
Tesla’s Financials
WACC US Operations
UAE’s Economy
The UAE consists of seven emirates. Each has a hereditary emir. Population: 7.8 million. Significant expatriate percentage. Demographic: Muslim 96% (Shia 16%), other (includes Christian,
Hindu) 4% Currency: dirham (AED) introduced in 1973 and pegged to the USD
( 1 U.S. dollar = 3.6725 dirhams). UAE economy is thriving – current GDP is $386.39 billion which is
30th in the world. Index of Economic Freedom Ranking: 35 Score: 69.3 (Moderately
Free) (2009) (100=totally free 0=totally repressed)
UAE’s Economy
UAE’s economy driven by: Exports: $300 billion and 77.9% of its GDP. 45% of exports are crude oil. Imports: $220 billion in 2012.
Current fuel price: $1.82/gal In 2009 100% of electricity came from burned fossil fuels.
UAE’s Monetary Strength
Exchange rates: fixed on the US dollar Capital: free flow so its monetary policy effectiveness is limited Interest rates: align with US dollar Inflation: 0.7% Market Value of Debt: 14.6% of GDP Market Value of Equity: 93.77 billion Debt Rating:
Moody's rating: Aa2 Moody's outlook: STA
Average HHI is over $7300/month
UAE’s Luxury Auto Market
2012: 245,000 cars sold in the UAE - a 25% rise over 2011.
2013 projected number will reach 370,000 vehicles, an increase of almost 38%.
First three months of 2013, recorded growth: 46% jump in Audi sales 45% rise in sales of Volkswagen cars 25% increase in sales of Jaguar Land Rovers
Abu Dhabi Motors, registered a 39% increase in sales of cars in Q1.
Emirates Motor Company reported a 23% rise in sales in Q1.
UAE Tax
Income < AED 1,000,000 0%
Income ≥ AED 1,000,000 but < 2,000,000
10%
Income ≥ AED 2,000,000 but < 3,000,000
20%
Income ≥ AED 3,000,000 but < 4,000,000
30%
Income ≥ AED 4,000,000 but < 5,000,000
40%
Income > AED 5,000,000 55%
Interest Rate Risks
Foreign Exchange Risks
Inflation Risk
UAE Market Imperfections
Inflation Risk (Historical data )
Political Risk (Middle east crisis)
Foreign Exchange Risk
Technology change
Tax rate change
0 20 40 60 80 100 120
55
70
85
90
95
120
115
110
105
104
Appendix
Analysis Assumptions
Mid-Range Poor FavorableSales Growth (YOY) Taper 100-50-20% 10% YOY
100% Years 1-350% Years 4-6
Financing Strategy
Retain Cap Structure 45%
debt 55% Equity100% Equity @
16%
100% Debt @ 3%
(concessionary)
Cost of goods sold 80%-75% of Rev 85% - 75% of Rev
75% - 70% of Rev
SG&A 18% of revenue 23% of revenue 18% of revenuesInitial Cost of Project (Millions) $5M USD $7M USD $5M USD
Financial Analysis of Investment Decision
FavorableMid
Poor
0%10%20%30%40%50%60%70%
IRR
WACC
IRR & WACC Comparison
APV Analysis
0 1 2 3 4 5 6 7 8
(3000.00)
(2000.00)
(1000.00)
0.00
1000.00
2000.00
3000.00
4000.00
Mid-rangePoorFavorable
No. of Years
USD
Recommendation
Move forward with project since mid range IRR > WACC
0 1 2 3 4 5 6 7 80
500010000150002000025000300003500040000
Annual Gross ProfitAnnual Operat-ing Cost
Number of Year
USD
Break Even
APV: $1.2M IRR: 10%
Appendix
Tesla’s Strategy(Details)
Tesla's long-term strategic goal was to create affordable mass market electric vehicles in order to have a material impact on oil consumption.
Tesla's goals is to increase the number and variety of EVs available to mainstream consumers in 3 ways, by:
selling its own vehicles in a growing number of company-owned showrooms and online
selling patented electric powertrain components to other automakers so that they may get their own EVs to customers sooner
serving as a catalyst and positive example to other automakers, demonstrating that there is pent-up consumer demand for vehicles that are both high-performance and efficient.
Tesla's goal is to sell EVs to mainstream consumers at more affordable prices.
The company then plans to launch a US$30,000 vehicle, codenamed BlueStar.
Resources
http://www.gfmag.com/gdp-data-country-reports/153-the-united-arab-emirates-gdp-country-report.html#axzz2bAFhHXCH
http://www.numbeo.com/gas-prices/city_result.jsp?country=United+Arab+Emirates&city=Dubai&displayCurrency=USD
http://www.gfmag.com/sources-for-country-economic-reports-and-gdp-data.html#3 http://www.gfmag.com/gdp-data-country-reports/153-the-united-arab-emirates-gdp-country-report.
html#ixzz2cNUzzU3E
http://www.arabianbusiness.com/uae-monthly-household-income-revealed-80418.html http://www.gfmag.com/gdp-data-country-reports/153-the-united-arab-emirates-gdp-country-report.
html#ixzz2bAOToHlb
http://www.khaleejtimes.com/kt-article-display-1.asp?xfile=data/uaebusiness/2012/November/uaebusiness_November408.xml§ion=uaebusiness
http://www.galadarilaw.com/uploads/brochures/172113_tax.pdf http://articles.timesofindia.indiatimes.com/2011-08-09/neena-p/29868213_1_import-tax-uae-inco
me-taxes http://www.kpmg.com/CN/en/IssuesAndInsights/ArticlesPublications/Documents/inv-uae-O-0611.
Resources
http://www.thenational.ae/business/industry-insights/retail/rolls-royce-sales-cruise-to-22-rise http://www.thenational.ae/business/industry-insights/finance/uae-banks-lending-at-their-fastest-rat
e-in-two-years http://www.thenational.ae/business/retail/car-sales-shift-back-into-fast-lane http://www.ameinfo.com/volkswagen-sales-rise-35-dubai-emirates-305896 http://www.khaleejtimes.com/biz/inside.asp?xfile=/data/uaebusiness/2013/July/uaebusiness_July
183.xml§ion=uaebusiness http://inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_Table.asp http://www.dubaichamber.com/news/dubai-chamber-study http://www.ameinfo.com/bmw-launches-special-ramadan-2013-campaign-348613 http://www.sec.gov/Archives/edgar/data/1318605/000119312513212354/d511008d10q.htm http://biz.yahoo.com/e/130510/tsla10-q.html http://www.drivearabia.com/news/tag/tesla-model-s/ http://www.reuters.com/article/2009/07/13/aabar-daimler-tesla-idUSLD56046820090713 http://en.wikipedia.org/wiki/Tesla_Motors
Resources
http://www.thenational.ae/business/industry-insights/retail/uae-car-sales-leave-others-behind
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