Im Mini Project.docx

International Marketing Mini Project on TESLA

SUBMITTED TO Prof. Shalini Submitted by ANURAG SARAF

PB17006

ASWIN JOHN CHERIAN

PA17005

PRAVESH KUMAR SHUKLA

PB17027

DURGI VAMSI KRISHNA

PB17013

SANJEEV REDDY

PA17008 1

INDEX CHAPTER

TOPIC

PAGE.NO 3–9

1

INRODUCTION

2

METHODOLOGY

3

CONTENT

11- 21

4

TRADE BARRIERS

22 – 25

5

CONCLUSION

26

6

BIBLIOGRAPHY

27

2

10

TESLA INTRODUCTION Tesla, Inc. (formerly Tesla Motors, Inc.) is an American automotive and energy company based in Palo Alto, California. The company specializes in electric car manufacturing and, through its SolarCity subsidiary, solar panel manufacturing. It operates multiple production and assembly plants, notably Gigafactory 1 near Reno, Nevada, and its main vehicle manufacturing facility at Tesla Factory in Fremont, California. As of June 2018, Tesla sells the Model S, Model X and Model 3 vehicles, Powerwall and Powerpack batteries, solar panels, solar roof tiles, and some related products. Tesla was founded in July 2003, by engineers Martin Eberhard and Marc Tarpenning, under the name Tesla Motors. The company's name was derived from engineer Nikola Tesla. In early Series A funding, Tesla Motors was joined by Elon Musk, J. B. Straubel and Ian Wright, all of whom are retroactively allowed to call themselves co-founders of the company. Musk, who formerly served as chairman and is the current chief executive officer, said that he envisioned Tesla Motors as a technology company and independent automaker, aimed at eventually offering electric cars at prices affordable to the average consumer. Tesla Motors shortened its name to Tesla in February 2017. After 10 years in the market, Tesla ranked as the world's best-selling plug-in passenger car manufacturer in 2018, both as a brand and by automotive group, with 245,240 units delivered and a market share of 12% of the plug-in segment sales. Tesla vehicle sales in the U.S. increased by 280% from 48,000 in 2017 to 182,400 in 2018, and globally were up by 138% from 2017.

STRATEGY Tesla's sales strategy is to sell its vehicles online and in company-owned showrooms rather than through a conventional dealer network. Moving towards an e-commerce strategy, customers are able to customize and order their vehicles online. Tesla's technology strategy focuses on pure-electric propulsion technology, and transferring other approaches from the technology industry to transportation, such as online software updates. Tesla allows its 3

technology patents to be used by anyone in good faith. Licensing agreements include provisions whereby the recipient agrees not to file patent suits against Tesla, or to copy its designs directly.Tesla retained control of its other intellectual property, such as trademarks and trade secrets to prevent direct copying of its technology. With these goals in mind, Tesla is scanning for opportunities around the world to minimize cost and maximize revenue. They currently have facilities in the United States and throughout Europe where parts are being manufactured and assembled. Since they have limited resources, they must be very selective of the location for your expansion. The decision to expand into India signifies your commitment and belief in the long-term success of Tesla in international markets. India boasts one of fastest growing economies in the world with a Gross Domestic Product (GDP) of $1.4 trillion in 2009. They are also simultaneously working on improving their countries infrastructure to be more favorable for automobile manufacturing, research and development, and business through the India’s Automotive Mission Plan (AMP) 2006-2016. Due to its geocentric location to the Asian market and its existing environment for multiple big-name automobile manufacturers, Chennai, India will serve as our international headquarters. This facility will serve as a location where we can conduct further R&D, final vehicle assembly, quality control, and administrative tasks for cars being purchased in the Asian markets. Due to the largely to the lack of quality roads in India which inhibit the growth of docking stations and non-existent government tax breaks for alternative energy vehicles, our immediate efforts in India will not be focused on sales but rather operations. We do believe though that with the AMP, rapidly growing GDP, and decreasing trade barriers, India will eventually prove to be a very lucrative automotive market in the future.

SALES Tesla's global sales since 2012 totaled over 532,000 units at the end of 2018, of which, over 245,000 were delivered in 2018, up almost 138% from 2017.[12] Year over year Tesla U.S. vehicle sales from 2017 to 2018 increased by 280% from 48,000 to 182,400.[11] As of October 2018, Tesla's sales represented about 20% of the all-electric cars on the world's roads, according to Navigant Research.[41] In July 2017, Tesla said their vehicles had traveled 5 billion miles (8 billion km). 4

Cumulative global sales of Tesla's electric vehicles by model up to December, 2018 Model/launch year

Units delivered

Roadster (2008)

2,450

Model S (2012)

263,504

Model X (2015)

120,739

Model 3 (2017)

147,819

Tesla was the world's best selling plug-in passenger car manufacturer in 2018. Shown its entire line up as of 2019

TECHNOLOGY As a vertically-integrated manufacturer, Tesla has had to master multiple technology domains, including batteries, electric motors, sensors, and artificial intelligence.

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VEHICLE MODELS

MODEL S

Model S deliveries began on June 22, 2012. The first delivery in Europe took place in August 2013.Deliveries in China began in April 2014. First deliveries of the right-hand-drive model destined for the UK, Australia, Hong Kong and Japan came in 2014. As of January 14, 2019, the Model S has three configurations: The Model S, the Model S Extended Range, and the Model S Performance with EPA ranges of 310 miles (500 km), 335 miles (539 km), and 315 miles (507 km) respectively.

MODEL X

6

The Tesla Model X is a mid-size crossover SUV with a lightweight aluminum body. Model X deliveries started in September 2015. It is offered in 5-, 6- and 7-passenger configurations. Notably, the passenger doors are articulating "falcon-wing" designs that open vertically. Production was rescheduled several times, from 2013 to late 2014, to the second quarter of 2015, to the third quarter of 2015. In August 2015, user groups estimated around 30,000 X pre-orders, compared to 12,000 for the S. Deliveries of the Model X Signature series began on September 29, 2015. Model X sales totaled 2,400 units during the first quarter of 2016, rising to 4,638 in the second quarter of 2016. Global deliveries totaled 25,312 units in 2016 and 46,535 in 2017

Motives for Expanding into India The motives that drove our decision to open an international headquarters in Chennai, India was driven by three primary factors. The most immediate benefit, was the abundant amount of low-cost technical and managerial talent that India produces on a consistent basis. These 7

low labor costs will provide us an immediate expansion in our production possibilities frontier for producing cars while also cutting down drastically on the plants fixed operating costs. Secondly, we found that both the historical data for the return on other foreign investments in India and their ability to successfully trade throughout India to be a sound indicator for predicting our success. Opening their plant in Chennai, India, an automobile hotbed for foreign companies, will allow them to benefit immediately from the cluster effect by receiving associated cost savings and forcing us to innovate to remain competitive. Lastly, the legal framework in India will offer protection for our investment, flexible financial management, and fair process for any issues that may arise.

Low Manufacturing Labor Costs In 2010, India’s labor costs rose approximately 20% and surpassed China’s average manufacturing costs by reaching USD 2.51 per hour to USD 2.68 per hour. India as a whole has seen how the recovery of domestic demand, inflation, and new government policies have led to greater labor costs for foreign companies across the board. Although there is some unpredictability in the growth rate for India’s labor costs, our country will still hold a comparative advantage in labor costs to the US automotive labor market. While our overall manufacturing costs are higher than China’s, our autoworkers are compensated 18% less at USD 3.30/hour and USD 4.02 respectively

HISTORICAL TRENDS Major players such as Hyundai, Ford, Nissan and BMW have already established manufacturing plants in Chennai, which is considered by many to quickly becoming the “Detroit” of India.

Compared to establishing a manufacturing plant in China, one expert

says, “in lower-volume manufacturing where technology use is more intensive, then India is better”. Since Tesla uses proprietary cutting-edge technology and is targeted towards more affluent individuals, you fit especially well into the low-volume, technology intensive criteria. Additionally, India’s average return on investment has historically compared favorably to China’s with a five-basis point difference at 19%. Both of the following trends largely link back to the high quantity of quality workers in India that attract high-value manufacturers.

8

LEGAL FRAMEWORK Our government has made it very easy for foreign companies to set up an automotive plant in our country. Industrial licenses are not required and thus there will be no barriers into our market entry.

An FDI of 100% is allowed under the automatic route and additional

incentives are granted to set up units in certain areas. Since Chennai falls under the Mahindra City area for Special Economic Zones (SEZ), we will be receiving 100% corporate tax exemption for the first 5 years and 50% corporate tax exemption for the next 10 years. Also, business’s investing over Rs 4000 cr over seven years, or approximately $78 million USD, receive special incentives from the government such as tax cuts, easy land acquisition, and speedy implementation times for projects. The official business government website of India is very transparent and adamant for their support of investors.

They state that, “An effective regulatory and legal framework is

indispensable for the proper and sustained growth of the company.” The Companies Act in 1956 and Companies Bill in 2004 have each been revised numerous times in order to provide clear interpretation for foreign businesses and put in place a legal framework that supports rapid economic growth. Combined with the support of the Securities and Exchange Board of India for foreign investors, India clearly stands out as a country who has one of the best legal frameworks to protect investments, facilitate growth, and support foreign investors.

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METHODOLOGY  Introduction & Content done by –Anurag Saraf.  PESTEL Analysis of Company & Entry mode Strategies done by – Pravesh Shukla.  SWOT Analysis & Trade Barriers done by Aswin John Cherian.  Import & Export policies & International Organisations done by Durgi Vamsi  Conclusion done by Sanjeev Reddy.

Information for our report has been collected from various websites and some journals from library . We scrolled down the company information from Company’s official website. Sales & Strategy part has been taken from News apps and Company’s worth is up to date and taken from various Information portals. Overall it was a collective effort by all the Team members and preparing this report helped us all knowing about company , its operations and expansion strategies followed to enter foreign county like India.

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CONTENT WORTH OF THE BUSINESS Tesla has been publicly traded since 2010. The electric car company’s Q2 2018 earnings report revealed a loss of over $717.5 million. CEO Elon Musk has announced that he’s considering taking Tesla private. Tesla shares fell by about 11 percent in after-hours trading on Sept. 27 after news broke that the Securities and Exchange Commission was suing CEO Elon Musk for fraud. The legal action stems from a tweet Musk made back in August 2018 about taking Tesla private, which the SEC considered false and misleading

What Tesla Is Worth

Tesla’s Share Price, 52-Week Range

$244.59-$387.46

Tesla’s Market Cap, 52-Week Range

$41.7-$66.1B

2017 Revenue

$11.76B

2017 Profit

– $1.96B

GOBankingRates’

of $2.2B

Evaluation

Tesla’s Net Worth

All information on 52-week range accurate as of Sept. 27, 2018.

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The company, publicly traded since 2010, saw a loss of more than $717.5 million (£554.2m) per its quarter two 2018 earnings report. In August 2018, Musk announced plans via social media to take Tesla private but reportedly abandoned those plans later that month.

PESTLE ANALYSIS OF TESLA MOTORS Tesla Inc. (formerly Tesla Motors, Inc.) needs to overcome challenges linked to the external factors identified in this PESTEL analysis. The PESTEL analysis is a strategic management tool that determines the effects of the macro-environment on the company. Tesla’s case involves the macro-environment of the automotive industry, the energy generation industry, and the energy storage industry. These industries external factors influence other determinants of the business, such as customers and community-based organizations. For example, Tesla Inc.’s customer base and market share depend on factors like the costeffectiveness of technologies in the transportation sector. With a strong brand image and improving profitability, the company can enhance its long-term success by including the results of its PESTEL analysis in strategic formulation. Tesla’s business effectiveness is a reflection of how well the company addresses the external factors in its industry environment. The conditions of the macro-environment change, requiring the company to change its strategies accordingly. Tesla, Inc.’s electric automobile, battery, and solar panel sales revenues are increasing, despite competition with large firms, such as automobile manufacturers like General Motors Company, Honda Motor Company, Toyota Motor Corporation, Volkswagen, Nissan Motor Company, and BMW (Bavarian Motor Works). This condition indicates effectiveness in addressing the external factors in the macro-environment of the business. As shown in this PESTEL analysis of Tesla, the external environment is diverse because of the variety of the company’s product types and target markets. Strategic management solutions must correspond to such variety. Thus, it is imperative to identify and address the most significant of the external factors from these business environments. There are following PESTEL analysis which tells about suitability of Tesla in India:

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POLITICAL FACTORS This part of the PESTEL analysis of Tesla Inc. identifies governmental impacts on businesses and macro-environment of India. Governmental entities are among the main societal forces that affect businesses and industries in India. For example, policies on trade can limit industry performance and the company’s revenues. The political factor which will be significant for the Tesla’s business if they will come to India are given below: 1. Make in India: Prime Minister Narendra Modi launched the Make in India initiative on September 25, 2014, with the primary goal of making India a global manufacturing hub, by encouraging both multinational as well as domestic companies to manufacture their products within the country. Led by the Department of Industrial Policy and Promotion, the initiative aims to raise the contribution of the manufacturing sector to 25% of the Gross Domestic Product (GDP) by the year 2025 from its current 16%. So if Tesla will start their business in India then it will be a greater opportunity for the company to grow.

2. 100% FDI in Industries: Foreign direct investment (FDI) in India is a major monetary source for economic development in India. Foreign companies invest directly in fast growing private Indian businesses to take benefits of cheaper wages and changing business environment of India. The government allowed 100 percent foreign direct investment through the automatic route in which FDI is allowed without prior approval by Government or Reserve Bank of India. In the automobile sector so it become beneficial for the tesla to do 100% investment in the India.

3. Assisting use of vehicles propelled by alternate energy sources: Government will allow tesla because it will help in removing the pollution and the vehicles which will be used in tesla motors will be propelled by energy sources and government should not have any intervention with this.

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4. Govt. supporting NATRIP (National Automotive Testing and R and D infrastructure project): NATRIP is the most significant initiative in Automotive Sector by Govt. of India with an initial investment of Rs 1718 Cr. in 2005 revised to Rs. 3727.30 Cr in 2016. A unique project under which the Government of India, a number of State Governments and Indian Automotive Industry came together to create state-of-the-art testing and R&D facilities, so that core competencies in automotive technology in India can be created to facilitate seamless integration of the Indian Automotive Industry with the world. This will help tesla if it will start their business in India.

ECONOMIC FACTORS The effects of economic conditions on the macro-environment are considered in this part of the PESTEL analysis of Tesla Inc. These conditions include market growth, trade levels, currencies, and other variables that influence the automotive business. For example, the solar energy market’s growth rate determines the growth opportunities of the company’s solar panel business. Tesla needs to address the following economic external factors that influence the automotive market: 1. Decreasing battery costs: There will be a greater opportunity for Tesla if they will decrease their battery cost India and if they will do Tesla’s business performance benefits from lower battery costs. This external factor translates to affordability of the company’s electric automobile products in India.

2. Decreasing renewable energy costs: There will also be a greater opportunity for tesla if they will decrease their renewable energy cost. Decreasing renewable energy costs as an external factor makes Tesla’s products more attractive in India. The business improves as renewable energy solutions become more popular.

3. Economic stability :In India economic is growing at a healthy GDP rate of 7.9%, domestic sales are increasing and manufacturing sector is also growing at 8-10% so with this we can say that economic stability of India is good and it will be beneficial if tesla will come and start their business in India . 14

SOCIAL FACTORS Social conditions and trends affect a firm’s macro-environment through employees, customers, and investors. This part of the PESTEL analysis of Tesla Inc. considers how the business aligns with the social trends in its target markets. The company’s managers must ensure that strategies are applied to maximize the business benefits of such external factors. The sociocultural external factors important in Tesla’s business are as follows: 1. Increasingly popularity of low-carbon lifestyles: Because the popularity for low carbon lifestyles are increasing in India it became greater opportunity for Tesla grow the automotive business there. 2. Lower Labor Costs: When it comes to manufacturing wages, India has some of the lowest in the world. India's relatively low cost of labor is one of the strongest incentives for setting up business there. 3. Increasing preference for renewable energy: Preference for renewable energy is also increasing in India .these external factors improve market demand for the company’s electrical vehicles and related product.

TECHNOLOGICAL FACTORS This part of the PESTEL analysis determines how technologies influence the company’s macro-environment. The advancement of Tesla’s automotive and energy solutions business depends on available technologies. For example, materials engineering technology determines the efficiency and cost-effectiveness of the company’s batteries. The following technological external factors are significant in Tesla, Inc.’s automotive business in India: 1. High rate of technological change: The high rate of technological change is an opportunity and threat in this business analysis. The high rate presents opportunity for Tesla in India to enhance its products’ technologies. However, the same external factor threatens the company in India in terms of the potential rapid obsolescence of technologies used in its products. 2. Increasing automation in business: Increasing business automation is a trend that creates opportunities in this PESTEL analysis case. For example, Tesla has growth opportunities through further automation of its business processes.

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3. Evolution of hybrid cars in recent years: In these recent years the demand of hybrid cars are increasing so if tesla comes with their business in India we can say that tesla has a greater opportunity in this.

ECOLOGICAL FACTORS The macro-environment of the global business is subject to the effects of ecological conditions covered in this part of the PESTEL analysis of Tesla, Inc. For example, ecological trends determine the availability of materials used in the company’s production processes. In this case, the following ecological external factors that helps Tesla to enter into are: 1. Improving physical conditions of road and bridges: in India physical conditions of road and bridges are improving and it becomes easy for the people to run their expensive cars smoothly in that type of places. So if tesla will come in India it has greater opportunity to grow. 2. Expanding environmental programs: The Company has opportunities to promote its electric vehicles based on concerns on climate change, expanding environmental programs, and rising standards on waste disposal. The company’s electric vehicles, batteries and solar panels are considered suitable in directly addressing these external factors linked to business sustainability and environmentally friendly products.

LEGAL FACTORS In this part of the PESTEL Analysis, the effects of regulatory factors on the macroenvironment are determined. Laws and legal systems shape managerial decisions and business development. The following are the legal factors that help the company to enter into the market of india: 1. Industrial licenses are not required: Our government has made it very easy for foreign companies to set up an automotive plant in our country. Industrial licenses are not required and thus there will be no barriers into our market entry. 2. Transparent business government websites: The official business government website of India is very transparent and adamant for their support of investors. They state that , “An effective regulatory and legal framework is indispensable for the proper and sustained growth of the company. 16

Entry mode strategy of Tesla According to the strategic competition perspective the choice of entry mode in a new market is mainly influenced by non-controllable factors like the product the company is engaged with and external factors like the socio-cultural distance between the new market and the home country, market size and growth of the market to enter, trade barriers and intensity of competition. If we will talk about the entry mode strategy of tesla in India then joint venture with Indian automobile is the way because Joint ventures are formed in quest of managing company’s resources in efficient manner. This helps in reducing cost and risk that the company faces, obtaining scarce resources, obtaining cheap factors of production (land, labor and capital), to include new information and increase the managerial know how so that productivity can be increased and to retain innovative employees of the firm. There are also some of the benefit with joint venture that are given below:

1. Efficient market entry 2. Risk sharing 3. Joint product development 4. Enables to achieve marketing or manufacturing presence with local partner in new market 5. Comparatively higher risk ,Higher return

SWOT Analysis: Based on thorough analysis of the company's internal and external environmental situations, this part includes the SWOT analysis that are believed to be very critical for the success of the company and which will give hints on strategic implications.

Internal Strength  First-mover in the EV industry - Tesla become the first EV company by introducing Roadster which was the first federally-compliant highway EV.  Innovative corporate culture.  Strong R&D capabilities.  Has about 300 patents.  Enthusiastic investors due to the promising stock price of Tesla.  Young company that can start from scratch to build its own unique image. 17

 Partnerships with manufacturers. like Toyota, Mercedes, Daimler and Panasonic have provided the company the opportunity to support their battery technology research and development.  Focus on design, performance and efficiency. Tesla is the only auto company that give the same emphases on zero emissions, performance and aesthetics of the car.  Battery Technology: The company has superior battery technology to other auto makers in the industry. Tesla has developed its own core technology—the batteries, the electric motor, and the systems for controlling them.  Supplier of EV components: Tesla not only benefits from lower costs for its own cars, it’s also been able to sell its technology to other automakers, providing a boost of revenue that helped it survive in the time between producing its first car, the Roadster, and the current Model S..

Internal Weakness  Tesla is a new company pitted against established auto companies.  Tesla have limited production facility.  Tesla’s stock price is based on future expectations.  Possible supplier problems if demand increases drastically. .  “Tesla Rangers” mobile service crews may be ill suited to serve the high demand market of mid-sized autos that Tesla intends to expand into.  Tesla has small number of employees compared to well established companies like Toyota.  Delay in release of projected models.  Logistical disadvantages  Lack of brand name recognition

External Opportunities  Successful in European markets and sees great potential in Asian and Canadian markets.  Alliances with other manufacturers to obtain synergies in distribution and service.  Rising gas prices will increase the demand for EVs. 18

 Government regulations and subsidies as well as economic incentives favour EVs over gasoline autos.  There is optimism in the stock price of Tesla.  Speculations indicate there will be growth in the global EV market.  Innovative sales channel models  Sourcing suppliers in the realm of power distribution and high current or high power electricity applications.  There’s also a strong case that improvements to the lithium-ion batteries that power the current generation of electric vehicles may be enough.

External Threats  Problems of economic and financial crisis globally, may have trouble generating revenue to get back their return on investment.  Competition! Automakers already have production and distribution systems, and may have more ability to absorb losses.  The end of subsidies and tax credits.  Sleepy consumer reviews. .  The EV market is still small, worldwide due to expense.  Partnered firms may reverse engineer Tesla’s intellectual property.  Disruptive technologies from competing firms.  Despite massive investments in battery technology and vehicles, even the most ardent EV adherents seem a bit ambivalent about the future of battery cars (Shirouzu, Kubota, & Lienert, 2013).  The gradual tightening of global fuel-efficiency standards from 2020 on is forcing automakers to assess their options, including the application of advanced technology (Shirouzu, Kubota, & Lienert, 2013)

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TRADE BARRIERS Threats to Entry Although the UNCTAD World Investment Prospects Survey 2007-09 deemed India the second most favoured FDI destination following China , there are still barriers to entry. First, India’s infrastructure and poverty pose the biggest threats to entry. Power, road, rail, and port infrastructure are poorly maintained or non-existent, thus raising cost of production and lowering efficiencies. For instance, unreliable power is a common problem in India. “On average a company can expect nearly 17 significant power outages per month, against one per month in Malaysia and fewer than five in China.” . To compensate, many companies incur the cost of maintaining their own private power supplies. In addition to power, transportation is inadequate. Many of the roads are narrow, congested, and poorly maintained. In 2007, only 41% percent of roads were paved . India’s poor infrastructure could affect Tesla’s ability to efficiently manufacture and transport automobiles. Also, bureaucracy and corruption have proven to be problematic while doing business in India. Bureaucracy and corruption hinder FDI by increasing costs of doing business, altering the allocating of resources, and wasting valuable time. Regarding bureaucracy, foreign businesses have reported that investment decisions and approvals by Indian government ministries can drag on for long periods of time for no apparent reason. Additionally, over the past few years, many government officials have been condemned under Indian anticorruption laws . According to Transparency International, India is ranked 87 on the Corruption Perceptions Index 2010 . To help you understand the implications of the ranking, the United States is ranked 22nd and Mexico is ranked 98th. To overcome the India’s obstacles, we recommend Tesla to locate in a SEZ to avoid issues with infrastructure and unreliable administration and bureaucracies.

Automotive Industry and Regulations “The auto industry in India has really matured. We are very upbeat about India, because we have been growing fast and we think we will go on growing fast.” -Indranil Chowdhury of Volvo. India’s Automotive Industry has seen great growth in recent years. India’s automobile exports totalled $1.5 billion in 2009. The United States auto component exports to India grew 20

from $210 million in 2004 to $437 million in 2009 . These figures demonstrate to Tesla that to facilitate expansion, India has implemented automotive policies that are conducive to foreign investment and Tesla’s business objectives. Since 2001, India has reduced import restrictions and opened the market. Also, India implemented the Automotive Policy of 2002. The policy permits 100% foreign ownership of automotive and automotive manufacturing firm without a minimum investment. The policy addresses import tariffs, and India’s objective to reduce the high tariffs. In 2003, tariffs were reduced to 30% and in 2005 they were further reduced to 15%. Moreover, in the Automotive Mission Plan 2006 - 2016, the vision statement states “To emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of $145 billion accounting for more than 10% of the GDP”. As mentioned above, India further caters to the automotive industry through the creation of Special Economic Zones. The SEZ attract foreign investors by offering tax incentives, access to reliable infrastructure, and assisting with bureaucratic and administrative problems.

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IMPORT AND EXPORT POLICIES The Central Board of Indirect Taxes and Customs (CBIC) has removed customs duty exemption to battery packs for electric vehicles. The government has lowered the customs duty on import of parts and components of electric vehicles in a bid to promote domestic assembly of such vehicles in India. The customs duty on vehicle parts and components imported for assembly in India has so far been 15 to 30 percent. But now, the government has drastically lowered it to 10 to 15 percent. The Central Board of Indirect Taxes and Customs (CBIC) have carved out a separate category for parts and components of an electric vehicle for which customs duty has been lowered to 10-15 percent. Further, the CBIC has removed customs duty exemption to battery packs for electric vehicles and also doubled the duty on battery packs for mobile phones. Henceforth, import of battery packs for electric vehicles will attract 5 percent tax.

Make in India As per the policy, after manufacturing in India, a foreign investor is permitted to sell its products

in

any

manner

-

wholesale,

retail

or e-commerce.

"FDI policy also permits wholesale of imported goods in India without sourcing conditions,"

The Mega Agreements: Implications for India The three mega agreements that are currently being negotiated namely the Trans Pacific Partnership, Trans-Atlantic Trade and Investment Partnership and the Regional Comprehensive Economic Partnership (RCEP) add a completely new dimension to the global trading system. India is a party to the RCEP negotiations. The mega agreements are bound to challenge India’s industry in many ways, for instance, by eroding existing preferences for Indian products in established traditional markets such as the US and EU and establishing a more stringent and demanding framework of rules. Indian industry needs to gear up to meet these challenges for which the Government will have to create an enabling environment. Government is committed to transforming India into a manufacturing and exporting hub. This is possible only if India’s products are of world class standard. A roadmap has been

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developed on measures required to protect consumers, raise the quality of the merchandise produced and enhance India’s capacity to export to even the most discerning markets.

Merchandise Exports from India Scheme (MEIS) Entitlement under MEIS Exports of notified goods/products with ITC [HS] code, to notified markets as listed in Appendix 3B, shall be rewarded under MEIS. Appendix 3B also lists the rate(s) of rewards on various notified products [ITC (HS) code wise]. The basis of calculation of reward would be on realized FOB value of exports in free foreign exchange, or on FOB value of exports as given in the Shipping Bills in freely convertible foreign currencies, whichever is less, unless otherwise specified. Ineligible categories under MEIS The following exports categories /sectors shall be ineligible for Duty Credit Scrip entitlement under MEIS (i)

Supplies made from DTA units to SEZ units

(ii)

Export of imported goods covered under paragraph 2.46 of FTP

(iii)

Exports through trans-shipment, meaning thereby exports that are originating in third country but trans-shipped through India

(iv)

Deemed Exports; (v) SEZ/ EOU /EHTP/ BTP /FTWZ products exported through DTA units

(v)

Export products which are subject to Minimum export price or export duty.

(vi)

Exports made by units in FTWZ.

Service Exports from India Scheme (SEIS) Objective of Service Exports from India Scheme (SEIS) is to encourage and maximize export of notified Services from India.

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Eligibility (a) Service Providers of notified services, located in India, shall be rewarded under SEIS. Only Services rendered in the manner as per this policy shall be eligible. The notified services and rates of rewards are listed in Appendix 3D. (b) Such service provider should have minimum net free foreign exchange earnings of US$15,000 in year of rendering service to be eligible for Duty Credit Scrip. For Individual Service Providers and sole proprietorship, such minimum net free foreign exchange earnings criteria would be US$10,000 in year of rendering service. (c) Payment in Indian Rupees for service charges earned on specified services, shall be treated as receipt in deemed foreign exchange as per guidelines of Reserve Bank of India. The list of such services is indicated in Appendix 3E. (d) Net Foreign exchange earnings for the scheme are defined as under: Net Foreign Exchange = Gross Earnings of Foreign Exchange minus Total expenses / payment / remittances of Foreign Exchange by the IEC holder, relating to service sector in the Financial year. (e) If the IEC holder is a manufacturer of goods as well as service provider, then the foreign exchange earnings and Total expenses / payment / remittances shall be taken into account for service sector only. (f) In order to claim reward under the scheme, Service provider shall have to have an active IEC at the time of rendering such services for which rewards are claimed. Ineligible categories under SEIS Foreign exchange remittances other than those earned for rendering of notified services would not be counted for entitlement. Thus, other sources of foreign exchange earnings such as equity or debt participation, donations, receipts of repayment of loans etc. and any other inflow of foreign exchange, unrelated to rendering of service, would be ineligible. Entitlement under SEIS Service Providers of eligible services shall be entitled to Duty Credit Scrip at notified rates (as given in Appendix 3D) on net foreign exchange earned. Remittances through Credit Card and other instruments for MEIS and SEIS Free Foreign Exchange earned through international credit cards and other instruments, as permitted by RBI shall also be taken into account for computation of value of exports. Effective date of schemes (MEIS and SEIS) the schemes shall come into force with effect from the date of notification of this Policy, i.e. the rewards under MEIS/SEIS shall be admissible for exports made/services rendered on or after the date of notification of this Policy. 24

Special Provisions (a) Government reserves the right in public interest, to specify export products or services or markets, which shall not be eligible for computation of entitlement of duty credit scrip. (b) Government reserves the right to impose restriction / change the rate/ceiling on Duty Credit Scrip under this chapter. (c) Government may also notify goods in Appendix 3A which shall not be allowed for debiting through Duty Credit Scrips in case of import. (d) Government may prescribe value cap of any kind for a product(s) or limit total reward per IEC

HOW OTHER ORGANISATIONS ARE GOING TO EFFECT WITH THIS BUSSINESS:Like Citron Research, I am surprised at how ineffective the leading car companies have been in developing a "Tesla-killer." Rather than compete with Tesla, Ford seems to be running away. Ford announced they were dropping traditional cars from their product line to focus on crossovers and SUVs. This strategy makes sense from an accountant's point of view as these are Ford's most profitable products. However, since there is no reason Tesla could not make an SUV, Ford's decision to focus on their high-margin products only protects them competing with Tesla for the time being. Mercedes and Volvo have shown concept cars which basically means they are years away from production. GM is currently selling the Chevy Bolt, which on paper looks like a competitor. However, Gorden Lam points out those sales of the Bolt plunged 40% in September while Tesla's Model 3 was the fifth bestselling car. The customers have spoken. Honestly take a look at both cars. Which one you would rather own? The Award-winning Chevy Bolt EV is presented during the four-day auto trade show Auto Mobility. It's almost as if GM doesn't want to sell too many Bolts. This would make sense if the Bolt is a money-loser and GM only sells it to get ZEV credits. I don't know what GM is thinking, but the Bolt is not a Tesla-killer.

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CONCLUSION India-Recommendation for operational expansion Based by on our report, we noted Tesla has sufficient savings to invest in an acquisition of BMW’s manufacturing plant in Chennai, India. We believe this is the fastest way and most cost effective way to start up our production abroad of the Tesla Roadster as well as the Model S early 2012. We recommend Tesla purchases BMW’s manufacturing plant for NPV $10 million, which can be financed over the course of ten years. The manufacturing plant will operate as Tesla’s international headquarter where it will serve as a central distribution center for our shipments to Asian, African, and European markets. Purchase of the plant will allow you to take immediate advantage of being placed into an Special Economic Zone (SEZ) where we can avoid certain risks associated with entry and quickly begin production of our vehicles overseas. The proposed agreement in place with BMW will meet our target required return rate and provide us with a projected net present value of $5.7 million (please see attached excel spreadsheet and appendix for details). We should make this purchase swiftly to start receiving the immediate benefits of reduced operating costs. In regards to hiring our Head of International Operations, the higher up positions such as VP of manufacturing and VP of research and development, we recommend promoting from within Tesla to ensure that we can maintain our strategic vision and consistent operating procedures. To address the cultural differences, we suggest hiring seasoned managers from within India to oversee the work of local manufacturing laborers and serve as a connection between laborers and the executives.

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BIBLIOGRAPHY 1. 2. 3. 4. 5. 6.

www.tesla.com www.quora.com www.teslarati.com www.bugcrowd.com www.autoblog.com www.nytimes.com

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