Evaluation of tesla's strategy to go into UAE market.
Text of Tesla in UAE (Financial Strategy)
TESLA IN UNITED ARAB EMIRATES?
Agenda Tesla UAE Market Entry Risks Investment Analysis Pros/Cons to Market Entry Conclusions Questions & Answers
20142012201020072003 2008 2013201120042002 LAUNCH Tesla Roadser. Elon Musk CEO LAUNCH Model S Teslas History FOUNDED
Teslas 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
Teslas Strategy Long term Strategy Build affordable mass market electric vehicles in order to have a material impact on oil consumption
Teslas Product Line Roadster 2008 Model S 2012 Model X 2014
Teslas Financials
Teslas Financials
WACC US Operations
UAEs 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)
UAEs Economy UAEs 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.
UAEs 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
UAEs 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%
Recommendation Move forward with project since mid range IRR > WACC 0 5000 10000 15000 20000 25000 30000 35000 40000 0 1 2 3 4 5 6 7 8 USD Number of Year Annual Gross Profit Annual Operating Cost Break Even APV: $1.2M
Appendix
Teslas 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.
