Tesla in UAE (Financial Strategy)

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Evaluation of tesla's strategy to go into UAE market.

Transcript 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%
  • Interest Rate Risks
  • Foreign Exchange Risks
  • Inflation Risk
  • UAE Market Imperfections 0 20 40 60 80 100 120 Inflation Risk (Historical data ) Political Risk (Middle east crisis) Foreign Exchange Risk Technology change Tax rate change 55 70 85 90 95 120 115 110 105 104
  • Appendix
  • Analysis Assumptions Mid-Range Poor Favorable Sales Growth (YOY) Taper 100-50-20% 10% YOY 100% Years 1-3 50% Years 4-6 Financing Strategy Retain Cap Structure 45% debt 55% Equity 100% 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 revenues Initial Cost of Project (Millions) $5M USD $7M USD $5M USD
  • Financial Analysis of Investment Decision IRR WACC 0% 20% 40% 60% 80% Favorable Mid Poor Favorable Mid Poor IRR 62% 10% 0% WACC 10% 9% 14% IRR & WACC Comparison
  • APV Analysis (3000.00) (2000.00) (1000.00) 0.00 1000.00 2000.00 3000.00 4000.00 0 1 2 3 4 5 6 7 8 USD No. of Years Mid-range Poor Favorable
  • 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.
  • 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&section=uaebusi ness http://www.galadarilaw.com/uploads/brochures/172113_tax.pdf http://articles.timesofindia.indiatimes.com/2011-08-09/neena-p/29868213_1_import-tax-uae- income-taxes http://www.kpmg.com/CN/en/IssuesAndInsights/ArticlesPublications/Documents/inv-uae-O- 0611.pdf
  • 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- rate-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_July1 83.xml&section=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