tesla - potential market expansion in india

Tesla Motors’

Potential Market Expansion in INDIA

Ha Thi Thu NgoDigant BambShreyans JainPrateek DhariwalPuneet Kaur

Chief Strategy

Officers:

Who are we? Tesla was founded in 2003, California, USA

by Elon Musk and Martin Eberhard

Design, manufacturers and sells electric cars and vehicle powertrain components

Tesla is positioned as a high-end green electrical car’s company in a luxury market

Gained widespread attention after launching first fully electric sport cars-The Tesla Roadster in February 2008

Our Top Markets

Competitors

Core competenciesNewly categorized products

Generate self-reinforcing enthusiasm for the brand

Create and utilize cutting edge, sustainable technology

Global Expansion

Gain a more global presence and business growth

A hit demand of Model 3 in global markets

Reduce transportation and production costs worldwide

Supercharger network need to double in size worldwide

Value Chain

Countries Examined

INDIA SOUTH AFRICA VIETNAM

INDIA VIETNAM SOUTH AFRICA

Political

• Make in India • 100% FDI in industry• Assisting use of vehicles

propelled by alternate energy sources.

• Govt. supporting NATRIP (National Automotive Testing & R&D

infrastructure projects) for growth of Auto industry in India.

• Receptive attitude towards welcoming FDI

• Political risk mitigated using local partners

• Stable politicalenvironment

• Govt. support to export market

PESTEL ANALYSIS


Economic

• Growing at a healthy GDP rate of 7.9%.

• Increasing domestic sales.• Manufacturing sector

growing at 8-10 %

• One of the fastest growing economy (5.4% GDP Growth)

• Low disposable income

• Weak currency

• Largest economy in Africa.

• Low GDP growth rate of 2%

• High unemployment, growing public debt, income inequality.

PESTEL ANALYSIS


Socio-Cultural

• Preference for fuel efficient car with good looks.

• Household living standards improving year over year.

• Lower labor costs

• Primary Language- English

• High Literacy Rate (94.5%)

• Low labor cost

• Current population not very high.

• High literacy rate.• Low number of

labors

PESTEL ANALYSIS


Technology

• Great emphasis on R&D• Presence of advanced tech

because of global entrants for product as well as production.

• Evolution of hybrid cars in the recent years.

• Technology sector in early development stage

• Lack of knowledge • Dependent on

external expertise

• Leaders in technology related to energy and fuel.

• World renounced quality and research

PESTEL ANALYSIS


Environmental

• Improving physical conditions of roads and bridges.

• Most companies switching to Bio Fuel.

• Poor transportationlinks

• Extreme weather conditions

• Very strict environment protection laws.

• Should complywith Consultative National Environment Policy Process (CONNEPP).

• Stricter laws

PESTEL ANALYSIS


Legal

• Indian legal standards and norms at par with international standards.

• Motor Vehicle Act, 1988 governing emissions and safety.

• Progressive laws for FDI

• Govt. has dominance in influencing judiciary outcomes.

• Extreme water conservation practice.

• High level of corruption.

PESTEL ANALYSIS

PORTER’S DIAMOND MODEL OF NATIONAL ADVANTAGE

:

Demand Factors People is a great demand factor for the electric cars.

Example- switching to the use of environment friendly

products ODD-EVEN rule in Delhi, India.

The high population and improving roads and highways will

also support the demand for automobiles in India.


Factor Conditions With the Make in India initiative and also

the employment for all initiative, the

government would help them in their

initialization.

Inexpensive and skilled labor.

Firmly established testing and R&D facilities.


Firm Strategy, Structure & Rivalry

Electric Cars manufactured would be a

differentiating factor in the present Automobile

industry.

Rivals – a number of automobile industries are

currently present in India like BMW, Mercedes,

Chevrolet, Honda, Toyota, Tata Motors.


Government’s Role (As a catalyst) The Indian government is committed to encouraging alternate pollution-free

transport in the country by providing incentives to bio-fuel, CNG, ethanol and

electric vehicles. It offer incentives to bio-fuel, CNG, ethanol and electric

vehicles.

Vision 2030: To become 100% e-vehicle nation


Multiple Regression Analysis

“Intention to Purchase Electric Cars in India- A Study”

Study by: Khandelwal U (2016)

MajorFactorsImpactingPurchase Intention

Corporate Strategies

Porter’s 5 forces

Rivalry among existing

firms

Threats from New Entrants

Bargaining Power of Suppliers

Threat of Substitute products

or services

Bargaining Power of Buyers

Moderate

Low

Moderate

LowHigh

Mode of Entry

Ris

k

Time Commitment & Control

Low

Low

High

High Joint Venture:

Efficient Market Entry

Risk / Reward Sharing

Joint Product Development

Enables to achieve marketing or manufacturing presence with local partner in a new market

Comparatively Higher Risk, Higher Returns

Importing in India : an expensive option! 125% Import Tax

Setting up an assembly facility can boost domestic demand by bypassing the problem of import duties and make Tesla more competitive on price-basis

Mode of Entry

Joint Venture is the way!

Institutional voids exist within India resulting in inefficient markets for acquisition of resources, Tesla must choose between an acquisition mode of entry and a JV.

Foreign entrants can gain access of local resources held by local firms via JVs.

In this case, a JV is a more attractive option

Institutional Framework

Weak Strong

Local Resources Required

None Greenfield Greenfield

Tangible JV Greenfield/JV

Intangible JV Acquisition

Institutional cum Resource based Framework (KE Meyer et al)

Risk Mitigation Potential Risks in India How the risks will be mitigated

Infrastructure to support enough “charging stations”

Government Support (Subsidize duty on lithium imports, battery manufacturing costs)

Market Perception of Electric Cars in India(Previous failures of Mahindra Reva, E2O)

Lot of advertising and performance & reliability reviews to be shown on different media

Premium Price of the Tesla Car ₹ 18-24 Lakhs. Position it for the luxury car segment

Culture –“Culture eats Strategy for Breakfast” (Peter Drucker)

Localization Strategy has to be adopted in coordination with the local partner

Power Shortage – A massive risk! Tesla Plan to build a India-wide Superchargernetwork in collaboration with the Govt –PPP Model

Currency Risks – Appreciation of USD can have negative implications on production & assembly costs

Hedging foreign exchange risk by buying a spot contract. Negative swing won’t hurt much.

Strategic Locations for Setup

Well established automotive industry

Sea-port : Easy Accessibility

Extremely Skilful labour

Drawback:

High Power shortage! Kaveri dispute (Karnataka Vs Tamil Nadu)

Option 1 : Chennai, Tamil Nadu


The new Global auto hub! Proximity to the port

Good governance & incentives for Foreign investors

Abundant power supplies

PM’s vision to make Gujarat a large scale, low cost manufacturing and exports hub

Easy availability of land

Drawbacks:

Skilled labour shortage Quality of labour

Option 2 : Sanand, Gujarat


Proximity to the Capital of India – New Delhi(One Of the major potential markets within India)

NH8 Highway that links major cities

International Centre for Automotive Technology set up in Manesar

Drawbacks:

Stagnant growth

Option 3 : Manesar, Haryana

Strategy to Capture the Indian market“Electric car market in India hasn’t seen much success.But it has humungous potential. History must not be repeated. Hence, careful measures have to be taken.”

Enter the market in strategic partnership with a local partner (JV)

Establish a solar powered - super charger network in India in collaboration with the Indian Government by 2018-19 – PPP Model

Set up lithium battery manufacturing units by 2018 to reduce massive import costs (this can be used for household purposes too) and a fully automated car-production facility at one of the strategic locations discussed by 2020.This will facilitate domestic production as well as exports targeted to the Asia region.

Localize the brand using marketing strategies with the assistance of the local partner(Introduce only Tesla Model-3)

Open showrooms in Tier-1 cities such as Delhi (No VAT, No Registration, No road tax,15% subsidy on electric cars), Bangalore & Mumbai

Model 3(Price : ₹ 18-24 Lakhs) – LUXURY CAR MARKET SEGMENT

Competitors: BMW 3-Series, Audi A4 and Mercedes Benz C Class

Features:

The base model will accelerate from zero to 60mph (97km/h) in less thansix seconds, other models will go faster.

It will include the "autopilot" safety features found in existing models, which allow the cars to steer themselves and avoid collisions.

It will support "supercharging" as standard, allowing the cars to recharge more quickly at special power stations. Tesla aims to double the number of places offering supercharging to about 7,200 worldwide by the end of 2017.

It provides storage room at the front and rear of the vehicle

Estimated Investment

THANK YOU

INDIA is ready to ditch the pump

and embrace the PLUG!

tesla - potential market expansion in india

Leadership & Management