Abu Dhabi Electric Cars

Introduction

Background

Electric cars have entered the business environment with the relatively low rate of presence. However, the trend towards environmental protection, the growing need for household savings, and the decrease in the price for electric cars contribute to the tendency of electric vehicle adoption. Moreover, an electric car has a fashionable aspect. In the contemporary conditions of technological change and on-line presence of trend creators, the driving gadget is a valuable introduction (Mims, 2016). In the short-term perspective, the hybrid vehicles propose a smooth transition from traditional cars to electric automobiles. In the long-term perspective, the electric cars will occupy the majority of market.

The worldwide demand for electric cars has been increasing at an exponential rate in the recent years. The change of industry as a whole is vivid in the previous decade. From being a fashionable and high-power business, car manufacturing switched to the image of sociological innovation and technological leadership (Voelk, 2016). The social influence factors create a need for adapting the long-lived industry to the new trends. Additionally, technological factors establish the basis and the pressure for comfortable creation of new automobiles. The consumer preferences have shifted from meeting the demand for creating the difference in the world. The market becomes knowledgeable, educated, and future-oriented.

The car manufacturing giants like BMW, Porsche, and Ford invest resources into creating and marketing new environmentally-friendly and technologically-savvy vehicles. The smartphone-connected and green-energy cars become an absolute state of art manufacturing (Voelk, 2016). The most recognizable electric carmaker is Tesla Corporation. Currently, the company is the market leader in the electric car industry. Also, it is the recognizable name of a brand that is associated with electromobile industry.

The analysis of trends at the global market allows recognizing the opportunity of crating the supply of electric cars into different markets. The UAE/GCC electric car demand persists highly due to various international and local challenges. The lack of local distributors is the primary issue that withholds the introduction of electric cars to UAE region to the full extent. Therefore, the market gap between demand and supply is present, and the business opportunity is recognized.

Opportunity

For a long time, there had been uncertainty over Tesla’s priorities and business model due to direct selling and limited production. The quick adoption of the electric vehicles in the world and fast technological advancement of Tesla Motors’ manufacture resulted in the change of paradigm. Thus, Tesla is now building up capacity of producing electric cars by thousands and presenting new models every year. Moreover, the corporation explores full-scale dealerships in the United States and also in international destinations (Ramsey, 2016). The market conditions present a prime opportunity for Abu Dhabi Electric Cars (ADEC) to present a solution catering to the GCC market.

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The ADEC Solution

The primary goal of ADEC is to become the exclusive distributor of Tesla vehicles in the GCC. The business will cater to the growing market of electric vehicles in the region through wide network of dealerships and representatives’ participation in marketing opportunities. The business addresses both the issues of local product availability and after-sales service. Thus, the ADEC provides a full range of services related to Tesla cars by closing the cycle. The pre-sale, sale, and after-sale services are to be provided by the same organization. The long-term orientation is the prime goal of ADEC due to the exclusive rights acquisition for Tesla dealership in UAE. With a view to increase local expertise, ADEC aims to implement an Abu Dhabi-based assembly for Tesla by 2030. The idea is still at the stage of assumption, but further calculations can realize the plan.

The specialty of the business is in its three major aspects:

1. Exclusive rights for providing closed cycle of services related to Tesla electric cars in the GCC region.
2. Long-term orientation for the investment opportunity in Abu Dhabi as the next venue for building assembly plant by 2030.
3. Smart utilization of external factors (including technology, social influence, and environmental awareness) for the benefit of the company.

The success of ADEC business plan depends on the implementation strategy and future perspectives of the electric cars market.

Applying the Idea

The application of business plan is based on major strategies that are venturing into different fields of influence. The following elements are the success factors for application of the idea.

Infrastructure

Due to the fact that electric cars are still at the innovation stage, the comfortable and convenient infrastructure is required for long-term success. Firstly, ADEC should accommodate the points of sale throughout the UAE. Secondly, the charging points are the requirement for Tesla cars. Therefore, ADEC management should start negotiations and construction of charging points around the city and country. The charging protocols have to be created, signed, and approved by the regional government (Kelly-Detwiller, 2014). The success of endeavor depends on supply of supporting materials. Tesla vehicles’ fuel is electricity. Providing charging points in the convenient places is the first step in application of the idea.

Integration

The introduction of the new vehicle that is popular throughout the world is a perspective idea. However, the consumer reaction and long-term loyalty is hard to be estimated. Therefore, integration of Tesla Motors dealership into everyday lives of UAE residents is the second step of implementation process. The consumers should become engaged into the interactive activities at the points of sale. The anxiety towards novelty is the challenge for business implementation. Thus, the ease of accepting the innovation is the key success factor. The aspect is to be addressed by marketing plan. The information sharing strategy and social networking presence coordinate the learning factor among consumer market. Gadget application is critical in the integration step as Tesla produce innovative vehicles. The charging stations are to be equipped with up-to-date gadgets, the local points of sale are to be constructed with smooth and modern hi-tech look, and the marketing campaign is to be concentrated on beauty of technology. The interest and desire to try out the new gadget should outweigh the novelty anxiety.    

The second element of integration is government subsidies that contribute to green industry development. As of 2015, the Emirates Authority for Standardization and Metrology introduced comprehensive project that adapts the roads to electric cars (Shahbandari, 2015). Moreover, the sustainability initiatives of the country created grounds for numerous grants and subsidies that support green businesses. The integration aspect of ADEC business plan implies close cooperation with government to share the responsibility and collect additional resources for development and growth. Finally, the possibility for mutual cooperation establishes room for better publicity and faster acceptance by the public.

Programming

The technology department is the critical element of ADEC business initiative as Tesla cars are highly digital and smart. Thus, the closed-cycle business venture requires full range of tech services to be provided to consumers. The support team and computer programmers should have different areas of influence. Computer presence in ADEC initiative is valid at every step of business cycle. Acquisition of software for programming charging stations, support software for smart cars, and platforms that allow real-life control of vehicles are all implementation elements in programming section. Consequently, the success of ADEC business plan depends on infrastructure, integration, and programming.   

Expected Budget

ADEC initiative will work under the budget constraint due to its business nature and limited financial resources. The section provides the projections of major expenses and revenues for the period of 5 years.

Figure 1. Projected budget for 2016-2020

The biggest expense is the launch spending that will take place in 2016. The land costs of AED 100,000,000 consist of land for sales premises, office allocation, and charging station payments. The land will be purchased through corporate financing. 2016 is the setting year. The management completes business plan, searches for preferred premises, and establishes networking coordination throughout the area. Also, the hiring of personnel starts in 2016 because the operational planning incudes human resource requirements.

In 2017, the operations will be established completely. The expenses for major construction are to be encountered the same year. The total sum of AED 160,000,000 is the long-term construction cost that depreciates thorough time. The investing activities are the largest sources of expenses and cash allocations. The expense account is comprised of corporate investment and government funding, as training center can be subsidized under educational improvement programs. The business is expected to start generating income based on the operational capacity. The first-year revenue of over AED 20,000,000 results in relatively small income of AED 3,000,000 due to heavy investment in marketing and sales efforts. The public relations expenses will account for the largest part of total costs till 2020. ADEC Company will adhere to the growth strategy during the first two years. The significant almost twofold income increase is projected to take place by the end of 2019 due to growth in sales revenue.

The critical expenditures for ADEC during the first five years of operation are marketing and sales efforts. Due to the fact that UAE does not have Tesla dealership as of 2016, the information sharing is critical requirement for project launching. The consumers may be reluctant to try novelty cars, but with proper information and skillful sales personnel, the revenues are projected to increase. Moreover, training and technical services are the expenses in the first three years. The need to prepare local human resources for accepting the challenge of electric cars presentation calls for investment in education and training spheres. Therefore, the three-year projection does not ensure large net income. However, after investing for the period of 2016-2019 into business building, it will finally start incurring significant income.   

Marketing

Competitive Advantage

The competitive advantage is the critical aspect of marketing strategy that defines its future success. ADEC has to ensure that it is the best company in the market that can sustain business growth and stability. There are three elements of competitive advantage for ADEC to introduce Tesla Motors to UAE. Firstly, the company possesses local knowledge of consumer and business markets. Thus, the adaptation time is shortened due to skipped learning phase. Secondly, offered exclusivity is an interest of Tesla Motors that does not create cannibalization of sales and self-competition. Establishing new exclusive partnership with local dealers provides sufficient control of UAE market corresponding to the total strategy. Thirdly, ADEC can take advantage of the local presence. The business networks go beyond the UAE and cater to the broader GCC market. The initiation steps in Abu Dhabi market allow gradual expansion into UAE and further Gulf regional representation.

Marketing Mix

The complete line of Tesla products will be presented in ADEC premises. The inventory will be limited, which contributes to the perception of exclusivity. For instance, the Tesla Model S is built to order. Potential customers would have to pre-book test drives and put $5,000 deposit for the ability to drive their car of preference.

The price is motivated by general image of Tesla Motors and its sense of exclusivity for the car owners. The price is not a subject to negotiation because the brand targets the well-off segments of the market. The sales persons are not commissioned; thus, the aggressive sales approach is not applicable to ADEC.

The place is exclusive dealership premises, which will be built in 2016-2017. The high-tech building with the variety of gadget-control functions are part of marketing as the consumer can increase desire for owning the state-of-art car. Moreover, the online sales are available because some cars are pre-ordered, and the waiting time can reach few months.    

Promotion mix consists of the variety of public relationship strategy, corporate social responsibility image creation, and high-tech value advertisements. The aspect implies the transcending idea that a consumer has to want a car, he/she has to possess a desire; and ADEC provides satisfaction to that desire. The company uses pull marketing strategy that offers information, but the customer requests for the product (Chernev, 2012).

Major Strategies

The direct sales approach is the combination of communication, sales, and promotion aspects. Due to the fact that the consumer reaches out to the dealer, the latter has an opportunity to exercise higher power. Thus, the first major strategy is to have only one Tesla cars point of sale. The exclusivity of location contributes to the stir created around the cars and to the feeling of belonging to the closed club. ADEC can overview the entire process of marketing by attracting potential customers to only one point of sale. The location should be at a comfortable distance from major cities and have access from the highway. Thus, infrastructure is critical for the location.

The second major strategy is creating the demand. Marketing of expensive models that cause lust and envy ensures that high-profile consumers enter the picture. ADEC should take the already approved advertisements of Tesla cars and initiate stir within the UAE. Furthermore, delivering limited number of cars increases the demand further. Thus, the focus on technology and sleek designs contribute to the self-advertisement and desire to own a Tesla car. The sustainable public relationship with the community of Tesla owners and the induced participation of Tesla enthusiasts in the communication between marketers and drivers is the critical venue for marketing. ADEC sustains self-marketing through communicating with Tesla lovers, inviting them to exclusive test drives, and informing them of gatherings.

Media coverage consists of non-traditional means. The traditional media is not the important factor for modern rich customers. Thus, car shows, internet advertising, and high-class premise displays are the approaches to attract the targeted clientele. Sustainability initiative is an effective measure to increase media coverage for ADEC. Some percentage of income is to be allocated to environmental protection and sustainability measures in the country. This approach is expected to increase interest for Tesla Motors and its ADEC dealership.

Challenges and Mitigation

The first challenge that ADEC is likely to encounter is the change in business model. Tesla has initiated the transition from classical push marketing and aggressive car sales approach to pull marketing and demand creation. Although the model is working in the United States and European countries, UAE can meet the change with resistance. It is the risk that ADEC should be ready to take. The mitigation strategy is the dealership preparation and active marketing involvement that concentrates on the product instead on its distribution means. Thus, pre-booking test drives should be advertised as a unique experience and exclusive right to drive a car rather than competition and absence of larger network of the points of sale. The challenge of resistance should be addressed by marketing.

The second critical challenge is the competition in the UAE market. The presence of car manufacturers in the country and their aggressive marketing pose a serious problem for ADEC. Moreover, the premium pricing of Tesla cars and inability to negotiate the final payment put the business into luxury sector. The premium cars have established reputation and long history of existence in the UAE market. The counteraction to the competition problem is the benefit of sustainable energy and clean fuel. Although BMW, Ford, and Chevrolet companies attempt to design and market their own electric cars, Tesla Motors has managed to create single association with electric vehicles only. Therefore, the reputation and popularity factor is the basis for creating awareness about brand, its history, and benefit.

Investment challenge relates to lower capability in terms of financing new projects and marketing strategies. Although the budget for first year of preparation equals AED 320,000,000, the competitors in premium car segment can operate larger financial resources in response to Tesla marketing. The reaction to challenge is the structural environmental cooperation and government-subsidized activities that receive media coverage. The combined marketing strategy is the effective response to high-priced advertisements. Good public relations, sustainability initiative, and participation in environmental protection worldwide create the platform for responding to competitive advertisement campaigns.           

The anxiety towards novelty is the challenge for business implementation in the UAE setting. The electric cars are innovation in the country. Therefore, the resistance to change and absence of desire to try new technology can create a problem for ADEC business plan. The mitigation measure returns to marketing campaigns that is created to build stir around the exclusive Tesla models. Although the resistance to change is inevitable to some degree, Tesla Motors has established the image associated with sleek designs, expensive construction elements, clean manufacturing, and long-term sustainability. ADEC should capitalize on the aforementioned achievements of manufacturer and initiate local marketing that strengthens the image of Tesla.

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Conclusion

The electric cars are the future of vehicle industry. The tendency to follow technological advancements contributes to the manufacturer’s ability to charge premium prices for innovative products. The benefit of lower noise pollution, better environmental care, and high performance create the background for effective marketing of Tesla cars. ADEC can take advantage of the established branding and marketing strategy, request subsidies form the government, and introduce Tesla Motors to UAE and eventually GCC region. The budget allocation for the first years of operation is significant, but the cost-revenue analysis ensures that the initial investments will be recovered.

The consumer relationship allows establishing the lasting cooperation and word-of-mouth marketing. The Tesla customer typically belongs to the closed group of rich and modern individuals. Therefore, the ownership of Tesla car automatically results in the presence among the larger group. Sustainability and environmental protection are the strongest points of ADEC strategy that enables the company to charge premium prices for the cars. Tesla Motors’ reputation is a contributing factor to success planning as the brand is internationally known, recognized, and respected. It is the association with electric cars, which strengthens the competitive position among other premium brands in UAE.

The demand for electric cars creates the basis for industry change. Tesla Motors pioneered the segment and remains the unifying brand name for the entire market. The plan to increase production of cars is the factor that forms the basis for establishing dealership and widening the presence network of Tesla cars. Therefore, ACED initiative has the benefit of time and the value of exclusivity. The UAE is ready for electric cars to be introduced to the market, and ACED can start the transformation of the state from fuel-based luxury brands to electric exclusivity.