International Business - Expansion Project: SolarCity
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Transcript of International Business - Expansion Project: SolarCity
Company Background
● Brothers Lyndon and Peter Rive co-founded SolarCity in 2006
● Traded in NASDAQ: SCTY
● Largest solar panel manufacturing plant (New York)
● Elon Musk - Chairman
Company Background
● Commercial/Residential/Industrial/Utility
● Vertically Integrated
○ Acquisition of Silevo
● Most Efficient Panels In The World
● Tesla Powerwall
● 19 States
Mission
● Better Energy ™
● #1 in America
● Simple & Affordable
● Leasing or Buying
● Customer Service
Target Market
● Well-Educated
● 35-50 Years Old
● Income of Over $100,000 Per Year
● Investment Savvy Caucasians & Asians
SWOT Analysis
Strengths● 1 in 3 USA homes● Best Technology● Vertically integrated● 60% revenue increase
from 2Q14-2Q15● Tesla
Opportunities● 1% market penetration● Solar Gardens- Minn.● IEA 700 GW by 2020● International
consensus to reduce carbon footprint
Threats● USA Tax Subsidy● County regulations● Solar companies
Weaknesses● $1.8 billion LT debt● International exposure● 1-dimensional● Sun ● 20 year minimum
commitment
Porter’s Forces
Threat of New Entrants● high entrance costs
Determinants of Supplier Power● vertically integrated
Determinants of Buyer Power (within solar industry)● 4 leasing options● efficiency: goal of 24%
LOW
Porter’s Forces
HIGHThreat of Substitutes
● hydro, wind, coal, & geothermal
Determinants of Competitive Rivalry
● no product diversification● 34% of the market segment
Determinants of Buyer Power (within energy industry)
● ease of access to substitutes● 20-30 year
Key Contact
● Marco Krapels
● Senior Vice President - Strategy & Global Markets
● Keys for SolarCity
○ 1200 Hours Of Sunlight
○ High Electricity Costs and Increasing
○ Needs to “Make Sense”
Strategy: B2B With Walmart
● Low Risk
● Established Partner - 200 Projects
● 80% of Walmart solar installations in USA
are SolarCity
● Projecting 18.68% growth in 2016
● Create a Presence, Then Expand
● “Walmart is absolutely a logical fit. It
makes a lot of sense.” - Marco Krapels
● “Right now our focus is on buildings, but
next year we are going to launch
residential.” - Lyndon Rive
Criteria Selection
● Sunlight Hours 10%
● Average Electricity Price 7%
● Solar Power Price 7%
● Number Of Walmarts 5%
● Subsidies 4%
Germany
Cons:
Subsidies: 24%
Corporate Tax Rate: 29.6%
No Walmart: 0
Pros:
Living Standard: 0.91
Price of Electricity: $0.35
Disposable Income: $31,252
China
Cons:
Disposable Income: >$2000
Strong Competitors
Pros:
Preferential Tax Rate: 15%
Walmart: 416
Sunlight: 2700 hours
C02 Produced: 8.5 billion tons
Sweden
Cons:
% of Energy from Solar: 0.1%
Low Electricity Price: $0.12KWh
No Walmart
Pros:
Extremely “Green”: 50%
Strong Collaboration: $550 million
High Disposable Income: $30,000
High Subsidies: 35%
United Kingdom
Cons:
Sunlight Hours: 1493
Electricity Consumed
Government Cuts
Pros:
Walmart: 616
Ease of Doing Business: 6
“It probably doesn’t make sense to put solar in England…But the beer is pretty good.”
-Marco Krapels
Brazil
Cons:
Ease of Doing Business
Corruption
Disposable Income
Economy
Pros:
Walmart: 558
Subsidies: 80%
Drought
Brazil is “on our radar.” - Marco Krapels
Reasoning
Walmart & Corporate Tax
Rate
Sunlight Hours& Government
Cuts
Walmart & Low Electricity Price
Competition - China
● Strictly a manufacturer
● Sells panels to residential and
commercial consumers through
wholesalers
● Own 35% of Chinese market
● Produced 704 MW* of PV modules in
2015
● Major installations include: Beijing
National Stadium and Google’s
Headquarters
*1 MW hour can power about 360 homes
Competition - China
● Manufactures and sells PV panels
direct-to-consumer
● Vertically integrated in production
● Produced 525 MW of PV modules in
2015
● Major installations include: 2014 FIFA
World Cup stadiums, FIFA
headquarters and affiliates
Competition - Brazil
● MNC based in Japan
● Vertically integrated in the production
● Sells both direct-to-consumer and through
distributors
● Does not provide installation or mounting
systems
● Produced 1.4 GW of PV modules in last FY
● Major installation included: Arco
Metropolitano do Rio de Janeiro
Competition - Brazil
● Focus on utility systems and commercial;
do not sell to residential consumers
● Provide several proprietary mounting
systems
● Cadmium Telluride modules vs. silicon
modules
● Major Installations include: Topaz Solar
Farm, Desert Sunlight Solar Farm
Brazil vs. China
● Preferential Tax Rate: 15%
● Corruption sweep
● High interest rates on return: 4.35%
● Low interest on loans: 5.6%
● No import licensing or quota
requirements
Country Entry Conditions: Pros
Brazil vs. China
● $64 Billion in Infrastructure Improvements
● 0% import duty on photovoltaic cells
● Market in Demand for Solar
● “on our radar”
Country Entry Conditions: Pros
Brazil vs. China
● 84 ease of doing business
● 9.4% tariff
● 13-17% VAT
● “Guanxi”
Country Entry Conditions: Cons
Brazil vs. China
● State and Federal taxes 2-18%
● 116 ease of doing business
● Decrease in import licensing and quotas
(favors locals)
● High Loan Interest (32%)
Country Entry Conditions: Cons
Brazil● Economy
● SunEdison
● Dilma Rousseff
Why?
China● Centralized Government
○ Coal 2020
● Preferential Tax Rate
● $80 billion renewable energy (2014)
● 2700 hours of sunlight
Leasing with SolarCity
SolarLease SolarPPA MyPower Upfront Purchase
● 20 year● Fixed payments● Maintenance● Upgrade or drop● est. $21,000
● No money down● Various lengths● Maintenance● Pay for power
● 30 year loan● APR 4.50-4.99%● No down payment● Maintenance ● Fully own ● est. $15,000-$25,000
● Buy outright● 30 year warranty● Maintenance● Typical ROI 7-10 years● est. $15-25,000
Electricity Prices
● United States (Cents per Kilowatt Hour)
○ 2009: 9.91
○ 2014: 10.45
● Brazil
○ 60% price jump in the last 12 months
● China (Cents Per Kilowatt Hour)
○ 2004: 6
○ 2011: 9
“A lot of people still think clean energy is expensive. It’s not. It costs you less than dirty energy. So stop using dirty energy.” -Lyndon Rive