This report explores the potential of the market for Electric Vehicles in Brazil, through a little research on Brazil’s economy, consumer behavior and evaluating the barriers of entry, comparative advantages, opportunity cost, and ease of doing business. And determine if it is right move for Tesla to establish a manufacturing plant in Brazil and propose a vision moving forward.

1. Report on
“Tesla in Brazil”
Scope for Tesla’s electric vehicles in Brazilian Market
D M BIPIN BANERJEE (19124005)
M.A BUSINESS ECONOMICS

2. Confidential Customized for Lorem Ipsum LLC Version 1.0
Proposed Vision for Brazil
Ease of doing Business
Opportunity Cost : India
Indifference USA-Brazil
Economies of Scale
Comparative Advantages
Barriers of Entry
Potential Reach
Brazil’s Economy
TOC
Overview Overview
This report explores the
potential of the market for Electric
Vehicles in Brazil. Through a little
research on Brazil’s economy,
consumer behaviour, evaluating
the barriers of entry, comparative
advantages, opportunity cost, and
ease of doing business. We try to
determine if it will be profitable for
Tesla, to establish a manufacturing
plant in Brazil and propose a vision
moving forward.

3. ECONOMYBRAZIL’S
ORDER & PROGRESS

4. GDP Growth Rate & Fiscal Indicators
1 GDP Growth Rate : Brazil’s economic
recovery after the 2015−2016 recession
remains sluggish. IMF has forecasted
for next 5 years that Brazilian economy
will advance at a GDP growth rate close
to 2 percent every year from 2020.
2 Fiscal Indicators : The Government
Revenue is expected to be constant at
30% of its GDP for the next 5 years, but
the optimistic view is that the net debt
is expected to grow at a very slow rate
as compared to past 5 years.
Source: IMF | Data Mapper

5. Consumer Behaviour & Vehicle Sales
Motor Vehicle Sales : Passenger car
sales have been oscillating in Brazil
throughout recent years. In 2018,
approximately 2.1 million passenger
cars were sold in the South American
country, up from 1.86 million units
recorded one year before.
3
4
Consumer Behaviour: The wage
differences in Brazil & USA are very
high, almost 70-85%. By purchasing in
installments, they are strengthening
their purchasing power, thus boosting
average transaction value of customer.
Source: Wage Indicator | Brazil

6. Potential Reach
Brazil is a country of young people, as the 62% of
Brazilians are aged 29 or under, and around 60%
of the population are in working age.
The country's richest 5 percent (~10 million) have
the same income as the remaining 95 percent.
01 | 80% of the population live across the coastal area
02 | 85% of the population live in urban areas
03 | Brazil’s GSP & MFN status helps to export parts & cars
04 | Consumers strengthen purchasing power through EMI
05 | Reach extends to all of the South American countries.
Source: Worldometers | Population

7. 1
Brazil stands first, around 80% of its electricity is
generated from renewable sources. Hence,
government may have less motivation towards
the Electric vehicles in terms of cleaner energy or
environment.
2 The substitutes for Tesla’s electric cars are ethanol,
gasoline based vehicles available at a very low
price compared to Tesla. Moreover, Brazil is the
world’s second largest producer of ethanol.
3
There is no special incentive or tax rebates for both
firms & consumers w.r.t Electric vehicle purchase.
Tesla’s car can be made affordable and available as
a budget option if more incentives are provided by
Government, similar to Norway.
4
Huge capital investment (sunk cost) of $5Bn is
required to establish a Gigafactory. Setting up
Charging stations everywhere in the country is
going to be a great challenge.
Barriers of Entry
Source: EIA | Brazil

8. Comparative Advantages
1
Brazil’s Gasoline Prices : Brazil is world leader in biofuels. Still,
gasoline prices are consistently among the highest, Brazilians
devote 17.3% of avg. day’s wages for a gallon of gas.
2
Lithium Mining by Sigma : Sigma has
recently received its license to begin
hard rock lithium mining in the
Brazilian state of Minas Gerais, which
would be among the world’s lowest cost
suppliers of the mineral.
3
Carbon Tax : IMF proposed to impose Carbon Tax on developing
& emerging countries to control CO2 emissions.
4 Tesla Energy : With Carbon Tax, the
non-renewable energy production in
Brazil becomes expensive. This will
create and increase the demand for
Tesla’s Solar Tiles, Powerwall and
Powerpack among the households and
industries.
Source: IMF | Fiscal Monitor, Oct 2019

9. Economies of Scale
Economies of scale are cost advantages reaped
by companies as production becomes efficient.
Companies can achieve economies of scale by
increasing production and lowering costs.
Tesla’s Gigafactory is aimed to do exactly the
same, and reduce the cost of the battery pack
for electric vehicles by 30%. As battery pack &
cells alone cost approx. 50% of the vehicle price.
The factory in Brazil can meet the demand of
lithium batteries for Electric cars in entire South
America and can even contribute to USA,
thereby reducing Tesla’s dependance partially
on Panasonic for battery cells.
Source: CNN Business | Wikipedia
1
2
3
Phase I
50K
1K Cars produced in
a week
Phase II
250K
20K Cars produced in a
month
Phase III
500K
500K Cars produced in
a year

10. Indifference
USA-Brazil
★ Tesla has 7 key suppliers, who manufacture the
main parts or items of Tesla’s electric vehicles.
They are listed below:
Sl Name of the Supplier Product or Part Supplied
Is the part Manufactured
in Brazil?
Can the part or product be
imported to Brazil from?
Increase of
Import Tax Tariffs
1 AGC Automotive Wind Shields Yes - -
2 Brembo Brakes Yes - -
3 Fisher Dynamics Power Seats No USA/Mexico/China 18%
4 Inteva Products Instrument Panel May Be Mexico 14%
5 Modine Manufacturing Co. Battery Chiller No USA/China 13%
6 Sika Acoustic Dampers Yes - -
7 Stabilus Liftgate Gas Spring Yes - -
The import tariffs are higher in Brazil than in
USA for automobile parts. The supply of Lithium
comes from Sigma, Brazil & it has the lowest
price of all in the world. The labour costs are
very low when compared to USA. These should
compensate the costs of import taxes and make
the cost of production in USA and Brazil almost
same.
Source: Investopedia & WTO
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2

11. Opportunity Cost : India
1
2
India’s population is 6 times of Brazil’s & GDP growth
rate forecasted is 2-3 times that of Brazil’s. The
opportunity cost of entering Brazil right now is not
entering into India.
3
The main drawback with India is the lack of Lithium
deposit presence in the country, and it has to be
imported from China. There are currently no tax rebates
offered by Indian Government over importing Lithium
or its Batteries into India.
Source: UN Comtrade | Database
The automobile industry in India is much larger, and
exports nearly $2Bn(USD) worth motor vehicles more
than Brazil. Indian Government appreciates EV’s as the
Government is concerned with CO2 emissions.

12. Ease of Doing Business
The score for the Ease of doing
business is high for India than
Brazil. Brazil has got good score
at enforcing contracts.
India allows 100% FDI to set up
an automobile manufacturing
plant in India. In next 2 years,
India can be the focus for Tesla.
China has the best scores, Tesla’s
factory has started its operations
this month. The government has
helped Tesla in its Construction,
taxes rebates & giving incentives.
Source: The World Bank | Doing Business
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2
3

13. Proposed Vision for Brazil
2023
Construction of Gigafactory
2024
Start the production of Lithium batteries
2025
Start the production of Electric Cars
2028
Reach the max. mass production Scale
2030
Establish Tesla Energy Line-up
Brazil is a promising market to Tesla,
and is the most eligible country to have
Gigafactory established in South America.
But the market demand, politics, policies
have not yet reached its full potential for
Tesla to have manufacturing plant in Brazil.
Brazil will be ready in the next 5
years for Tesla’s electric cars division.
But, Tesla can set up its manufacturing
unit in Brazil for the production of
lithium batteries and build it up slowly
towards electric cars.
Brazil has a market not just
for electric cars but for all of Tesla’s
Energy products Solar, Powerwall,
Powerpack. This is another added
incentive for Tesla to start the
production plant in Brazil.
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14. Thank you.