Electric Vehicle Business Strategy

The idea to startup an electric vehicle business is to give a contribution to the reliable transport services and also give the provision of cheap products. In the transport sector of China, the fastest, as well as major emitters of greenhouse gases, are fuel burning vehicles. The statistical analysis shows that during the year of 1990 to 2013, the emission of greenhouse gases is increased seven times, and transport emission is expected to be double more the present value in 2035. China is one of the leading countries due to the emission of carbon dioxide. The country is also considered as the leading country in the manufacturing of electric vehicles. The climate change situation has a direct impact on changing the transportation system. In order to overcome the issues of greenhouse gas emission, various considerations are taken by the government of China. In fact, the government of China has introduced a number of policies and initiatives for the promotion of electric vehicles. The electric vehicles business in the Chinese market is targeted to reach more than 5 million by 2020 while the stock of the electric vehicles business of China during 2016 reached only 0.65 million at the end of the year. In fact, a survey detailed that, along with the improvement for the use of electric vehicles in China, there is estimation on the huge demand for public charging station which considered to be nearly equal with the estimation demand in Europe. For this reason, the Chinese government has become more motivated to give the support for the electric vehicle business to achieve the challenging task for manufacturing of the electric vehicle (Mackett, May, Kii, & Pan, 2013). Therefore, it would be a great idea to startup an electric vehicle business in China, since the country opens an excellent opportunity for this type of business to be successful.

Resource: https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/three-surprising-resource-implications-from-the-rise-of-electric-vehicles

 Entry strategy of Electric Vehicle Business

The reason for startup business in China due to several reasons such as resources efficiency, cheap availability of labor and material resources, and high market demand for vehicles in China. A research indicates that several big vehicles manufacturing companies have their manufacturing plants in China; therefore, high-quality materials are easily available in this market. Moreover, high population decreases labor rate in the market because of excessive supply of labor and workers in each field and industry. Thus, in short, by establishing a manufacturing plant in China, this new company would be able to purchase the best quality resources at relatively cheaper rates. Finally, the company will take financial advantage as a decrease in cost will contribute positively to an increase in profit margin. In addition to this, this new company also considers the situation in which the government of China who has concentrated on the efforts to make electronic vehicle basis to become more extended in the country. As a realization for this, and in order to reduce air pollution of toxic gases and climate changes in China, the Ministry of Science and Technology along with the Ministry of Finance give out a notification for electric vehicles experimental demonstration area. Plus, these two legal constitutions also give the administration for the existing businesses to create many posters for energy saving. In the previous research, the Chinese government even has introduced a program which known as ten cities and thousands of electric vehicles. This program of government has committed to increasing the higher purchase of electric vehicles within the vehicle market in China (Li, Zhan, Jong, & Lukszo, 2016).

Alliance Electric Vehicle

This new company will also make alliance with a Chinese partner as well. The reason of this alliance is to maintain, obtain and defend the competitive position of electronic vehicle manufacturing company. Along with this alliance, the company will also identify the responses of changes in technology. New Business models will be designed to reach the customer demands and to use the latest modern technology to support in the manufacturing processes. Considering the growth phase of the electronic vehicle market in China, it is important to identify incomplete state owned by the local companies to reach the level of expertise, extensive capitals, and government financing. This new company also realized the importance of long-term competitive edges are Insurance of sales services, government financing, extensive capital and expertise, and sustainable, innovative ideas for the business as well. Therefore, to get more advantage from the strategies, it is quite essential to get the support from local strategic alliances for the enhancement of business as well as sustainable innovation of the company. For this, the new company has already targeted for a partner who is a local company in China to become an alliance. The alliance company will support in supplying raw materials such as a battery to back up the electric vehicle production within this new company. And since the alliance company came from China, then the alliance will give proper guidelines about the market of electric vehicles there, and thus, it will support this new company to create a proper strategy for the business as well (Clegg, Wang, & Berrell, 2007). 

The legal status of the Business

This new company will be in the form of Wholly Foreign-Owned Enterprise or WFOE, with an exclusive responsibility for both the profits and losses as well. The reason behind this is due to a Wholly Foreign-Owned Enterprise or WFOE will be registered as a legal individual and will able to implement the effective strategies to adapt the interests. In addition to this, this type of company will get a better protection in technology and knowledge. Certain terms that the company will need to follow as a Wholly Foreign-Owned Enterprise or WFOE are such as (Wang, 2014):

·         A Wholly Foreign-Owned Enterprise or WFOE is allowed to get the privileges for the land use in certificate documents

·     There is a requirement of minimum registered capital level of manufacturing business for  RMB

·     The corporate tax ranges between  which depend on the location and industry of the company

·     Rates of income tax up to of the business incomes

·     Consumption tax ranges from  which depend on the sales profits of the product

·         1% for stamp duty tax

·     Resources tax ranges from  which depend on the resources

·     The tax of land appreciation ranges from  of advances on transfer

 Brief capital budgeting analysis of Electric Vehicle

A calculation of the net present value of returns to the investment required for this startup business could be seen from the table below.

Discount Rate 10.0%

 The table above explains that an investment will return for $10,000 every year for the period of 5 years, along with a 10% discount rate required. The final outcome we can see is that the value of this investment is worth for $61,446. In other words, this new company will give the payment about $61,446, in order to receive $10,000 for every single year throughout five years. With giving this amount of investment, the company will also receive an Internal Rate of Return or IRR of 10%. In the other hand, if this new company will give the investment below than $61,000, then the company will get an Internal Rate of Return or IRR which is better than only 10% (Patrick & French, 2016).

            The more the investment, the more progressive will be electronic vehicle industry of China. Recognizing the need of the hour in analyzin

direct investment impact on electronic vehicle manufacturers suggest that China provides higher facility and possibilities for the growth of electronic vehicle manufacturing business. Thus, the proper operating of the company requires higher investment and expansion in the production capacity and market demands.

           In the other hand, this new company also has prepared for startup costs as mentioned in the table below.

 Operations, HR and financial management strategies

Operations

The dealership is a key market actor for the successful development of the company, infrastructure, and electric vehicles. The process includes education and training of the manufacturer’s analysis of benefits with their services and warranty agreements. The dealership can also be defined as the management of staff and driving factor analysis. The key stakeholders in the electronic vehicle manufacturing company of China include general manager, dealer principal, sales manager and technician, manager of finance and insurance, and other stakeholders. The sales staff interact with the customers through online services or telephone. The customers can get information from them after having valuable negotiation (Xiaowen, 2016).

HR and financial management strategies

In order to conduct business in China, it will be important for the business to have an ineffective HR department. The HR department plays a key role in the success and failure of the business. The HR department is responsible for managing the HR policies of the organization. The HR department has a direct link with its employees and addresses their main concerns. The HR department not only recruits the employees but also responsible for the training & development of the employees. For making the electric vehicle business in China, a success the HR department of the business can help the business to achieve its desired goals.

The key HR strategy for the business would be to recruit such individual who is highly capable and has the necessary experience in handlig the operations related to top electric vehicle manufacturing. The employees who will have the necessary experience & skills will help the business to save not only the training cost but also the performance of experienced employees is higher than the unskilled employees. It means that through this HR strategy, the company can achieve its goal of making a significant amount of profit. The second key HR strategy would be the retention of talented employees.

Whether the HR will hire talented sales & marketing individuals for selling electric vehicles or such individuals who will manage the operations, the main thing would be the retention of skilled & talented employees. If the business is unable to retain the employees, then gaining success & sustaining in the long run for the business will become difficult. The talented employees are the asset of the organization and responsible for the growth of the organization. For retaining the employees, the organization will provide incentives & bonus based on performance of the employees. The employees whose performance will show improvement in the specific period will be given a reward, and through this, the motivation of employees will increase.

Another main strategy of the HR department of the business would be to provide training & development to the employees from time to time. This will not improve the existing skills of the employees but also help them to learn new things. With the passage of time, new technologies immerge in the market and it important for the employees to keep themselves updated with the latest technologies that come in the market. Moreover, through training, employees can learn new ways to perform various organizational activities.

Along with HR strategies, financial strategies are also equally important. The financial activities of the business are maintained by financial analysts & financial managers. The financial analyst focuses on various aspects to determine what the main expenses of the business are and how a business can gain maximum profit. The financial manager’s first strategy is to maximize the revenue & profitability of the business so that the company can experience growth & can sustain in the long run. For improving profitability, the managers usually cut the costs so that company profitability can increase. The financial strategies help the business to utilize its resources efficiently. The financial managers keep a record of the purchase & sales, and through this, the company can know how the organization is using its resources. It means that through effective financial strategies, the company have the opportunity to utilize its resources efficiently, which will help the business to experience higher performance (Wei, Liu, Zhang, & Chiu, 2008).

Cultural, local and ethical considerations of Electric Vehicle

The company will take into consideration some cultural, local, and ethical considerations to run operations appropriately. While working in a highly competitive market, cultural and ethical standard are important. In China, local communities have some standards and ethics that the company will have to follow up while running their operations in China. In China, people are really corporative and ethical standards are high for employer companies. While working in China, the company would have the responsibility to ensure anti-discriminative policies in the workplace. Discrimination at the time of recruitment and providing compensation is not acceptable in China. Considering the strict rules and regulations of China and employer acts, the company would have to ensure fair treatment with all employees. Fair wages and discount policies will definitely help the HR department of the company to ensure progress in the market with ethical operations. Cultural values are also important. While working with local labor of China, managerial staff would have to consider the cultural norms of Chinese people to make employees fully satisfied with their job duties and responsibilities.

Moreover, the HR department will try to eliminate all kind of discriminative behavior, workplace conflicts on the basis of races, and stereotyping to get a better reputation in the market (Ambler, Witzel, & Xi, 2016). In addition, a company working in China are highly concerned with Corporate Social Responsibilities. As a responsible citizen or organization in China, the managerial staff of the company would have to adopt all best strategies that end up pollution and negative environmental impact. Excluding this, managerial staff will also try to ensure the purchase of environmentally safe raw material and other supporting materials for the manufacturing and assembling of vehicles. For instance, paints contain some chemicals that can be dangerous for human being. The company would dispose of these paints and other harmful chemicals in the safest way to avoid negative consequences on the environment and users.

References of Electric Vehicle Business Strategy