Tesla's Global Expansion: India and South Africa Markets

Overview of Tesla's Global Market Position

Tesla (TSLA) is a leader in the electric vehicle and solar and Powerwall services industries. Because of the company's broad entry into a number of different market segments — from cars and trucks to batteries and solar power — Tesla faces competitors around the world, including Tata, GM, Honda Motor Company, Kandi Technologies, Navistar, Oshkosh, PACCAR, Toyota, and many others. Tesla maintains a network of 80 stores across North America, Europe, and Asia and has reported gross revenues of more than $2 billion in recent years. Its market cap currently exceeds $50 billion. In order to compete on the global scale, Tesla must continue to internationalize its operations.

Emerging Market Opportunities: India and South Africa

Potential regions and countries that Tesla should target include both developed markets (DMs) and emerging markets (EMs). Europe and Asia are already targets for Tesla, but countries such as Nigeria, South Africa, and India — as well as regions in South America — could benefit from Tesla's solar power and Powerwall products as well as from its electric cars and electric vehicle charging infrastructure. With India and Africa becoming significant players on the global stage and increasing corporate attention turning to these regions, Tesla should move to capture market share early.

In India, Tesla's main competitor would be Tata, but in Africa the competitive landscape is largely unsettled, and countries like Nigeria and South Africa are actively seeking corporations to help transform their nations into first-world economic powerhouses. Tesla's Powerwall and solar panels have not gone unnoticed in these regions; the Hindustan Times (2017) has reported on Elon Musk's installation of solar roofs, confirming that interest in the product exists.

As Koppelaar and Middelkoop (2017) report, Tesla is leading the electric power revolution that is prompting many nations to convert their infrastructure from fossil-fuel-based to green-energy-based systems. Agar and Renner (2016) examined whether 100% renewable energy is achievable in urban areas and found that where collaboration between government and industry leaders exists, it is very much possible.

In India, the size of the market is substantial. Bavirisetty (2017) notes that "India is expected to become the world's third biggest solar market by end of 2017, after China and the US. The cumulative solar capacity, including rooftop and off-grid segments, has crossed 10,000 MW. With an average capacity addition of 8–10 GW per annum, the total installed capacity is expected to reach around 18 GW by end of 2017." In South Africa there is equally strong momentum for solar energy: "South Africa's Renewable Energy Independent Power Producers Procurement Programme (the REI4P) is an extensive initiative to install 17.8 GW of electricity generation capacity from renewables — wind, solar, biomass, biogas and hydropower — over the period 2012–2030" (Walwyn & Brent, 2015).

In India, solar power accounts for nearly 40% of all new power capacity, a development largely attributable to the Modi government's push for renewable energy (Sushma, 2017). IBEF (2018) reports that "around 293 global and domestic companies have committed to generate 266 GW of solar, wind, mini-hydel and biomass-based power in India over the next 5–10 years" and that "between April 2000 and March 2017, the industry attracted US$11.59 billion in Foreign Direct Investment (FDI)." Tata is a major player in this sector and has "invested Rs 200 crore (US$31.05 million) in their joint venture (JV), Tata Cleantech Capital Ltd (TCCL), to increase its loan book for investing in renewable energy projects" (IBEF, 2018). Tata also has an EV model currently available for purchase.

In South Africa, Soitec (a French firm), Sun Tank (South Africa's leading solar heating company), and Solar Capital are leading the way. Solar Capital has developed a solar farm described as "a 175-megawatt facility that spreads over almost 500 hectares" (CNN, 2016). In terms of EVs, only BMW and Nissan currently have EV models available in South Africa, though Volkswagen SA is in the marketplace and is developing an EV model that may enter the South African market.

Economic and Regulatory Environment

The balance of trade in India stood at a deficit of $95.37 billion USD in 2016. In South Africa, the balance of trade stood at a deficit just under a quarter of a billion USD. The exchange rate for India is currently USDINR 63.5875, near its all-time peak of 69.1 reached in 2013. The exchange rate for South Africa is USDZAR 11.85, down considerably from its 2016 peak of nearly 18 but still above its historical average of under 10.

India's percentage of domestic production that is exported is 19.2%, while South Africa exports 30.3% of its GDP (World Bank, 2018). Domestic consumption imported stands at 20.6% for India and 30.1% for South Africa. The cost of labor in India is just under $1 USD, while in South Africa the cost of labor is rising and is now at an index of 146. The tax rate for a foreign company in India is 41%, compared to 25% for a domestic company. In South Africa, the tax rate for a foreign company is 28%, while the domestic rate is 20%. The presence of government in both countries is very strong, and the percentage of ownership permitted to foreign companies and/or investors in both countries is unlimited. Local laws and regulations related to the EV and solar energy markets are still being formulated in both nations.

References

Agar, B., & Renner, M. (2016). Is 100 percent renewable energy in cities possible? In State of the World (pp. 161–170). Island Press.

Bavirisetty, S. (2017). Solar energy and electric vehicles could freeze India's fossil fuel growth. Retrieved from

CNN. (2016). Inside Africa's largest solar farm. Retrieved from https://www.cnn.com/2016/12/12/africa/de-aar-solar-south-africa/index.html

Hindustan Times. (2017). Tesla completes the first installation of its solar roofs. Retrieved from https://www.hindustantimes.com/tech/tesla-completes-the-first-installation-of-its-solar-roofs/story-I0f3woF6xYNp7P7jBPeI7M.html

IBEF. (2018). Power sector India. Retrieved from

Iyengar, R. (2017). One carmaker is leading. Retrieved from http://money.cnn.com/2017/12/01/technology/india-electric-cars-mahindra-2030/index.html

Koppelaar, R., & Middelkoop, W. (2017). The Tesla revolution: Why big oil is losing the energy war. Amsterdam University Press.

Sushma, U. (2017). Silver lining. Retrieved from https://qz.com/1134798/solar-power-accounts-for-nearly-40-of-indias-new-power-generation-capacity/

Walwyn, D. R., & Brent, A. C. (2015). Renewable energy gathers steam in South Africa. Renewable and Sustainable Energy Reviews, 41, 390–401.

Williams, F., & Jordan, D. (2017). Electric cars: The future also for SA. Retrieved from https://www.fin24.com/Companies/Industrial/electric-cars-the-future-also-for-sa-20170804

World Bank. (2018). Exports of goods and services. Retrieved from https://data.worldbank.org/indicator/NE.EXP.GNFS.ZS