International Business - Expansion Project: SolarCity

Company Situation Analysis

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

Global Market Search

Countries Selection

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%

Criteria Selection

Pros and Cons

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

Module 2 Results

Countries Selection

Reasoning

Walmart & Corporate Tax

Rate

Sunlight Hours& Government

Cuts

Walmart & Low Electricity Price

In-Depth Market Analysis

Competition

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

Country Entry Conditions: Import Regulations

Brazil vs. China

Final Decision

Brazil● Economy

● SunEdison

● Dilma Rousseff

Why?

China● Centralized Government

○ Coal 2020

● Preferential Tax Rate

● $80 billion renewable energy (2014)

● 2700 hours of sunlight

Questions?

Future

Thoughts

Present

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

Oil

● U.S.A.

○ 1%

● China

○ 20%

● Brazil

○ 8.75%

● Germany

○ 35%

● Sweden

○ 21.5%

● UK

○ 37%