Founded in 2003 by Marc Tarpenning, Martin Eberhard, and Elon Musk, Tesla Motors Inc. is an automotive firm that develops Electric Vehicles (EVs). According to Holmberg (2008), as part of its global strategy for growth, Tesla sought three strategic alliances with other auto manufacturers namely: Supplier, Research and development (R&D), and Original Equipment Manufacturer (OEM) alliances. The alliance with Lotus, a United Kingdom company would guarantee the supply of unique chassis for the EV (Cheong, Song and Hu 1-10). Panasonic Company from Japan supplied battery cells whereas Borg Warner in the United States supplied single-speed gearbox.
For research and development, the Panasonic Corporation worked on the development of efficient nickel-based lithium-ion battery cells (Karamitsios). In the meantime, Dana Holding Corporation from Canada and U.S was designing the heat-exchange technology for the batteries to obtain optimum performance (Holmberg). Even though Tesla was manufacturing its EVs, unlike other automotive companies, Tesla produced electric power components, battery packs, and chargers; these were later sold to other firms like Toyota and Daimler (Adén and Barray; "An Improved Tesla Partnership"). In this case, it acted as an OEM. These strategic alliances with companies from Asia, Europe and America, improved their visibility in the market and automotive industry. As Draughon (2014) puts it, international strategies can give a company access to cheap –cost of factors of production, and development of new competencies to minimize corporate risks. The growth led to its opening of an assembly and distribution plant for Europe in Tilburg, Netherlands, in 2013.
There are several reasons why Tesla chose Netherlands. First, the geographical position of the country has made it be considered as a gateway to Europe. The strategic location has made Netherlands be a prime location for logistics purposes, the entry, sales, and distribution of products into the European market. King (2012) asserts that the central location of Tilburg provides for the efficiency, timely and cost efficient business operations. According to the company’s Sales Director in Europe, the location was central to the operations in and future expansion into other regions within Europe (Dunnen). There are also excellent transport infrastructures like the high-speed rail and road networks in Tilburg, and the proximity to Rotterdam port makes the distribution of goods across major European markets within a day. Another reason for the choice of this location is the commitment of the Dutch government to promote its green image which resulted in tax incentives for manufacturers of EVs. Coupled with environmentally-conscious consumers, the Dutch provide a ready market for the EVs by Tesla. O'hara (2015) points out that Norway, a famous country for environmental conservation, is easily accessible from Netherlands. The Norwegian government provides incentives for environment-conscious companies like Tesla, which makes it easy for the firm to expand its market.
The Dutch government is also committed to the facilitation of research and development activities which has come with tax incentives. Tesla, which was still making progress and researching on the production of cost-efficient EVs, would have found this irresistible. There are immediate tax deductions for the costs of research and development works on intangible properties (The Netherlands: Your Business Hub For European Success). Besides that, there is additional 54% corporate income tax deduction for expenses and capital expenditure in R&D. Another way to encourage innovations was the subsidizing of the payroll expenses for R&D personnel. With qualified projects, they are given a credit tax of up to 50% against the payroll tax obligations of the company. Through the Ministry of Economic Affairs, the government has been awarding companies with electro-mobility innovation vouchers to encourage the growth in e-mobility expertise.
For imports and exports, according to auditing firm, KPMG, the Netherlands offers favorable customs and tax climates that are conducive to international trade and investments. Imported goods attract deferral of customs duty which earns a company significant cash flow (The Netherlands: Your Business Hub For European Success). This is in favor for Tesla, which was importing its vehicles and parts from the headquarters at California, USA. It is even more beneficial during the export of products to other countries from a customs bonded warehouse. The customs procedures are more simplified thereby reducing the handling and processing costs, and times. As a result, the products could reach destined markets or consumers within a short period. This contributes to customer satisfaction. Besides, goods destined for countries outside of the European Union are not charged VAT or customs (The Netherlands: Your Business Hub For European Success).
When it comes to sales and marketing, the tariffs charged are friendlier. The corporate income tax rulings for Netherlands are efficient such that a firm can be certain about its future corporate income tax. This is by making a request of the Advance Pricing Agreement (APA) (The Netherlands: Your Business Hub For European Success). The tax authorities then determine the taxable profit of the firm based on its activities, risks, and functions. Expatriates (employees) also receive a tax-free allowance of up to 3% of their personal income. As a result, a company like Tesla in Netherlands can be able to retain or attract skilled employees; this is good for the company concerning quality production.
Other factors which might have contributed to the establishment of the factory in Netherlands include political stability, stable and comprehensive financial services, availability of highly educated and multilingual workforce. A combination of these factors in addition to government incentives and strategic location has made the country a European business hub for multinationals.
Works cited
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Adén, Emil, & Barray, Aline. “Go Green in the Automotive Industry”. Kalmar: Baltic Business School. N.p., 2008. Web. 30 Apr. 2016
Cheong, Taesu, Sang Hwa Song, and Chao Hu. "Strategic Alliance With Competitors In The Electric Vehicle Market: Tesla Motor’s Case". Mathematical Problems in Engineering 2016 (2016): 1-10. Web.
Draughon, Jarrod. "Strategic Management". Strategic Management. N.p., 2014. Web. 30 Apr. 2016.
Dunnen, Paula. "Tesla Motors Opens Assembly Plant In Tilburg, Netherlands". Teslamotors.com. N.p., 2013. Web. 30 Apr. 2016.
Holmberg, Stevan. “Emerging Green-Technology Entrepreneurs: Entrepreneurial Pathways to Growth in the Hybrid and Plug-In Hybrid/Electric Vehicle Space”. ICSB World Conference Paper, N.p. 2011. Web. 30 Apr. 2016
Karamitsios, Achilleas. Open Innovation in EVs: A Case Study of Tesla Motors. Diss. KTH Industrial Engineering and Management, 2013. Web. 30 Apr. 2016.
King, Danny. "Tesla Will Assemble, Distribute Vehicles In Holland For European Market". Autoblog. N.p., 2012. Web. 30 Apr. 2016.
O'hara, Mark. "International Expansion Is Crucial For Tesla Motors - Market Realist". Marketrealist.com. N.p., 2015. Web. 30 Apr. 2016.
The Netherlands: Your Business Hub For European Success. 1st ed. Amsterdam: KPMG Accountants N.V., 2013. Web. 30 Apr. 2016.
