Tesla Considers Joint Venture With India Case Study PDF

Tesla Considers a Joint Venture with India Case Study REYNALYN A. CARGANILLA 20214742 BSBA - Financial Management A034 INTERNATIONAL BUSINESS AND TRADE 1:30 PM – 3:00 PM TTH October 15, 2024 Introduction:...

Tesla Considers a Joint Venture with India Case Study REYNALYN A. CARGANILLA 20214742 BSBA - Financial Management A034 INTERNATIONAL BUSINESS AND TRADE 1:30 PM – 3:00 PM TTH October 15, 2024 Introduction: According to Statista, Tesla was established in 2003 as Tesla Motors is a North American electric vehicle and clean energy automaker based in California was the most valuable car brand globally. In June 2023, Tesla was the most valuable automotive brand globally and ranked fourteenth across all industries. Moreover, Tesla sold about 1. 31 million cars and was the top company for electric vehicles in 2022. Most of the brand's success came from selling more Model 3 and Model Y cars each quarter, with numbers going up every year. Electric car manufacturer Tesla is the third most successful auto brand in the rankings after placing 12th. Tesla was also noted as the fastest riser in the ranking, with a 32% improvement over its 2021 numbers. Based on the Hindustan Times website, as India moves closer to drafting a new electric vehicle (EV) policy, Tesla is in advanced talks to make an entry into the country and may be open to committing nearly $30 billion in investments, directly and indirectly, over the next five years in a manufacturing plant, battery ecosystem, and ancillary industries, people closely involved with the company’s official business plans said. Furthermore, Tesla has been reportedly surveying potential sites for a manufacturing Plant in India. Electric vehicles (EVs) are vehicles that use electricity from a battery for driving. They have seen rapid growth worldwide, with nearly one in five cars sold in 2023 being electric. China, Europe, and the US are the largest markets for EVs. Market Research: Tesla, Inc. is conducting comprehensive market research to identify and evaluate potential new markets for its electric vehicles and clean energy products, focusing on regions with varying levels of infrastructure development, such as India and Brazil" (Economic Times, 2022). Cultural Differences: India offers unique challenges and opportunities for Tesla’s entry to the electric vehicle (EV) market. Consumers Preferences: As stated in the cyber switching website, Indian consumers often prefer smaller, more affordable vehicles due to the dense urban environments and varying income levels. Affordability and Practicality: Electric vehicles (EV) designed for the Indian market should prioritize affordability and practical features to appeal to this consumer mindset. Economic Conditions Import Tax Cuts: India has reduced import taxes on electric vehicles for companies investing $500 million and setting up a local manufacturing facility within three years. This could help Tesla enter the South Asian market, allowing them to import 8,000 EVs a year at a reduced 15% duty (Techcrunch, 2024). As indicated in an article, the Indian government is promoting domestic EV manufacturing and cleaner transportation  adoption, with Tesla reportedly nearing a $2 billion investment deal to export electric cars and establish a factory. Political and Legal Environments Regulatory Compliance: Tesla must adhere to stringent safety and emissions standards imposed by regulatory bodies in various countries. Government Incentives: Tesla benefits from a growing societal emphasis on sustainability and technological innovation. Intellectual Property: As stated in PESTEL Analysis 2024, protecting intellectual property is another crucial consideration. Tesla’s technological innovations, including electric drives and autonomous driving capabilities, represent valuable intellectual property. Trade Regulations Reduced Import Duty: India's 70%-100% tax on imported cars could lead to a 15% reduction in import duty for 8,000 EVs, benefiting Tesla and allowing other luxury car manufacturers to introduce affordable EV models in India. Local Manufacturing Requirement:Tesla must meet strict local manufacturing requirements in India, investing $500 million and establishing local electric vehicle manufacturing facilities within three years. This strategy aims to boost India's EV manufacturing capabilities and promote local industry growth by sourcing at least 25% of components domestically. Market Demand for company’s product or services: The India EV Report 2023 highlights the growing potential market for electric vehicles (EVs), with projections suggesting they could account for over 40% of the automotive market by 2030, generating over $100 billion in revenue. Infrastructure Development: The focus on improving infrastructure, such as charging stations, is crucial for supporting the widespread adoption of EVs. This development is essential for addressing range anxiety and ensuring convenience for EV users. Tariffs and Import Duties: According to the Choice India website, high import duties on fully assembled EVs make them expensive for Indian consumers. Tesla has refrained from direct car imports due to these high tariffs. A joint venture is the most strategic approach for Tesla as it expands into the Indian market through collaborations with a well-established local company.It has pros and cons when entering a joint venture strategy. Pros Allow innovation and creativity: Tesla's potential joint venture in India, particularly with Reliance Industries, is poised to foster innovation and creativity in the electric vehicle (EV) sector. (2) Shared intellectual property and expertise: Combining Tesla's cutting-edge technology with Reliance's local market knowledge can create synergies.(3). Reduces Cost Production: According to Tesla's VP of investor relations, the manufacturer has reduced the cost of producing its vehicles by 57% since 2017.The Tesla website says that with the reduction in production costs, the quality of Tesla cars continues to grow steadily. Cons: Shared control: Tesla and its local partners need to share decision making authority in controlling their operations. Conflict of interest: Differences in corporate culture which can disrupt its operations and create inefficiencies to overall performance. This study delves into analyzing the impact of the political, economic, and cultural risk on the electric vehicle industry. Political Risk: Government policies:The Indian government gave Tesla permission to start selling electric cars there in 2021. However, fully assembled EVs were subject to high import duties by the government, which increased their cost to Indian consumers. Political Stability: The Indian government is promoting initiatives like "Make in India" to attract foreign investment and boost local manufacturing, despite challenges like high import duties and regulatory hurdles for Tesla, demonstrating a strong commitment to economic growth and industrial development ( Economic Times, 2024). Economic Risk: Tesla faces several economic risks such as high import duties, currency fluctuations and regulatory changes in the government. High import duties imposed a 100% import tax for fully assembled EVs costing above $40,000.Due to exchange rate volatility can impact the importing cost. Cultural Risk: Tesla faces cultural risks in India due to language, norms, values, and consumer preferences. Communication barriers and local preferences may lead to misunderstandings and inefficiencies. Tesla must adapt its products and marketing strategies to meet these local needs. Strategies to mitigate the risk: The strategies to mitigate the risk are that government incentives and subsidies for electric vehicles (EVs) are available to reduce costs and make them more competitive with traditional ICE vehicles. Engaging with Indian government officials aligns with national priorities and helps understand concerns. Establishing local manufacturing facilities, like Tesla's with Reliance Industries, helps navigate regulatory difficulties and gain insights. REFERENCES: https://www.tesmanian.com/blogs/tesmanian-blog/tesla-has-reduced-the-cost-of-manufacturin g-its-cars-by-57-since-2017?srsltid=AfmBOorAmR9L7LmmgYiEANfzG0KWwnOEpQfAujVBZilel4y SygmcAnT3 https://thestrategystory.com/blog/tesla-pestel-analysis/ https://boardmix.com/analysis/tesla-pestel-analysis/ https://techcrunch.com/2024/03/15/india-cuts-import-taxes-on-evs-in-win-for-tesla-entry-plans / https://www.investindia.gov.in/team-india-blogs/indias-ev-economy-future-automotive-transpo rtation https://www.statista.com/topics/2086/tesla/ https://www.hindustantimes.com/india-news/tesla-makes-big-plans-for-india-may-set-up-facto ry-make-new-car-for-developing-nations-101705089954724.html https://cyberswitching.com/commercial-ev-charging-station/ https://economictimes.indiatimes.com/__assets