TESLA IN UNITED ARAB EMIRATES?

Agenda

Tesla UAE Market Entry Risks Investment Analysis Pros/Cons to Market Entry Conclusions Questions & Answers

Tesla was Founded by

Martin Eberhard and Marc

Tarpenning

Elon Musk joins Tesla board

Nov. 2007 Eberhard removed

Tesla buys NUMI plant in Fremont, CA

Model S Launch

20142012201020072003 2008 2013201120042002

LAUNCHTesla Roadser.Elon Musk CEO

LAUNCHModel S

Feb 2008 launch of Tesla

Roadster. Oct 2008 Musk CEO

Tesla’s History

FOUNDED

Tesla’s 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

Tesla’s Strategy

Long term Strategy “ Build affordable mass market electric vehicles in order to have a material impact on oil consumption”

Tesla’s Product Line

Roadster – 2008Model S – 2012Model X – 2014

Tesla’s Financials

Tesla’s Financials

WACC US Operations

UAE’s 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)

UAE’s Economy

UAE’s 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.  

UAE’s 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

UAE’s 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

Inflation Risk (Historical data )

Political Risk (Middle east crisis)

Foreign Exchange Risk

Technology change

Tax rate change

0 20 40 60 80 100 120

55

70

85

90

95

120

115

110

105

104

Appendix

Analysis Assumptions

Mid-Range Poor FavorableSales Growth (YOY) Taper 100-50-20% 10% YOY

100% Years 1-350% Years 4-6

Financing Strategy

Retain Cap Structure 45%

debt 55% Equity100% 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 revenuesInitial Cost of Project (Millions) $5M USD $7M USD $5M USD

Financial Analysis of Investment Decision

FavorableMid

Poor

0%10%20%30%40%50%60%70%

IRR

WACC

IRR & WACC Comparison

APV Analysis

0 1 2 3 4 5 6 7 8

(3000.00)

(2000.00)

(1000.00)

0.00

1000.00

2000.00

3000.00

4000.00

Mid-rangePoorFavorable

No. of Years

USD

Recommendation

Move forward with project since mid range IRR > WACC

0 1 2 3 4 5 6 7 80

500010000150002000025000300003500040000

Annual Gross ProfitAnnual Operat-ing Cost

Number of Year

USD

Break Even

APV: $1.2M IRR: 10%

Appendix

Tesla’s 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=uaebusiness

http://www.galadarilaw.com/uploads/brochures/172113_tax.pdf http://articles.timesofindia.indiatimes.com/2011-08-09/neena-p/29868213_1_import-tax-uae-inco

me-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-rat

e-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_July

183.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