Proposal

LAFCC : Elctrical powered taxis in LA.
Team C - ESC Toulouse (FRANCE)
November, 18th 1999

Table of contents :

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Executive Summary.

There are your benefits in our partnership :
  • A fair partnership (we both are the same size, and have the same motivation).

  • An innovative electrical engine system.

  • Electronical devices know-how (Satellite location, on-board computer, emergency systems, ...)

  • Vehicles customization know-how

  • Acces to the European market opportunity.

  • A ROI of 10,8% and a ROE of 37% in the year 2010.

  • A strategy which offers quick financial return and geographical widespread market.

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Project Objectives.

This project targets different objectives, which are technical, environmental, social and commercial.

Firstly, developing and producing fuel cells cabs is an innovation. Even if fuel cells have been used in the space industry for a while, its adaptation to the car engines is new. That makes it a technical challenge.

Secondly, the fuel cells offer a very clean power source. Thus, the environmental impact of their use is a very important advantage of this technical concept.

Nonetheless, this project carries a social goal as well. Indeed the creation of new assembly plants will generate direct employment.

Moreover, the fuel cell cabs have an interesting commercial side. Since the market of the fuel cells cars is still to be taken, this situation offers the joint venture big opportunities of growth.

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Presentation of our firm

We are a French company specialized in two areas:

So far, we have been working on the following projects:

1. Suburb and city center buses equipped with high security systems for European cities.

We developed :
  • GPS guided location
  • Emergency warning and fast reporting
  • Far-off buses fleet management

 

2. Local Digital Taxis Network.

We developed :
  • Location and mapping
  • Far-off taxis fleet management

 

3. Electrical new concept cars.

We developed a four wheels drive engine concept (patented) in partnership with an international car company.

4. HandiCar.

Customized cars for disabled.

5. Healthwarn.

Emergency location for sick people (suffering of heart diseases or other serious diseases needing constant surveillance).

 

 

Moreover, we use to deal with local, national and European grants to complete our financial plans.

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Technical aspects

1. Engine

Our motorization is a new concept, totally revolutionary.

The main characteristic of the electric engine is to decentralize this engine on each wheel of the car.

Advantages : No transmission gear

Independence of each engine

High security car behaviour

Gain space under the hood

Better energy management so environment protection

2. Design

We could supply a Global Position System technology in automotive navigation. Futhermore, we have developped a computer process to diagnose the engine and the Fuel-cells.

Advantages : Report failure (diagnostic) and emergency cases

Setup of refueling stations location due to taxis displacement.

The taxis features devices for disabled people.

Futhermore, we can valorize the environment protection by recycling the different parts of the taxi.

We have elaborate a computer process to make diagnostic (repair electric failure by GPS location).

3. Maintenance

Our customers are taxis companies, so they have their own mainteance teams. Those teams are already familiar with classical cars maintenance. Hence we propose to form them to the electrical engine and fuel cells maintenance.

Moreover, our diagnostic system of engine and fuel cells allows us to guide them online. We will keep on being devoted to them as a system expert.

This type of maintenance organization allows us to be the most efficient without having to setup a maintenance unit for every customer or every city. The whole world wide maintenance can be driven from the LA unit.

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Development and production plans

Planification of the JVs start :

    ... to reach the rate of 200 cars per year.

    projet.jpg (48445 octets)

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Commercial strategy

Fuel cell taxis commercialization will be done in several parts corresponding to joint-venture objectives and goals.

Then, fuel cell taxis commercialization will be extended to other states of United States of America and Canada,very quickly (within the next five years).

And after four or five years, the joint-venture should open a firm in Europe to conquer Western Europe, then Eastern Europe. Country customers will be those where taxis are organized in companies.

Following is the sketch which presents the total sales volume between the two markets :

ventes.jpg (11123 octets)

At the beginning, taxis are sold in U.S.A and not in Europe : this corresponds to the first increase. Then, there’s a  big growth due to their apparition in Europe, while the increase continues in the U.S.A .

In this section, we also have to consider the environmental politics by doing an anticipation policy, using the technology intelligence and lobbying tools.

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Environmental Considerations

As in the United States, some european parliament acts concerning environment are very strict. In particular, the level of small particles emission (azote, carbon dioxide…) has to be as small as possible.

Another directive has been made, it will impose the recycling of 95% of a vehicle in 2015. So we will choose a car manufacturer which has developed a channel to valorize collected products and recycle them.

Indeed, the technology to valorize materials and energy has already been developed. For example used parts can be transformed into different new cheaper parts. It is also possible to use some second hand parts or products as substituted combustible. For instead, windshield is transformed into "calcin", used for the production of bottles, glass products or glass wool. And bumpers in polypropylene are cut in small pieces, pulverized and used for production of new bumpers.

Vehicle out of service has first to be getting rid of polluted products as oil, battery, fuel… Then renewable parts are thrown away. And finally, the skeleton is pulverized and used in iron and steel industry.

With this recycling channel, almost 80% of a taxi could be valorized after its use.

Our firm, which is really involved in environment protection is working with this kind of manufacturers for many years. By the way, we have decrease emissions level using electrical engines, and we are also working on every (or almost) parts of the cars recycling.

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Joint Venture Management Terms

The joint venture has to take advantage of the specialization and advantages of each company involved. That is the reason why we think that the repartition of the tasks should be done as follows:

    We provide

    LAFCC provides

    -Customization and equipment of vehicles.

    -Fuel Cell production facilities.

    -Engine development and production
    (engine technical support).

    -Fuel Cell design capabilities
    (engineering & development).

    -Vehicle and engine maintenance.

    -High credit rating.

    -High grade credit rating and financial resources

    -Local presence, marketing, financial, and legal resources.

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Business Plan

In the RFP, you are asking the JV to produce 100 units the first production year. With a growth of 20 units per year until a maximum productivity of 200 units per year. The market had to be the USA for the first 10 years, then we would try to sell overseas.
Such a strategy give the following results :

wpe5.jpg (43612 octets) The capital structure is made in the year 2000 with $6.700.000 in equity and $15.633.000  in debt.

The Return on Investment (ROI) is 6,3%

We think this strategy does not use the full potential of our JV. So, we did some modifications, as describe more precisely in the 'Commercial Strategy' part :

Following is the Business Plan details :

YEARS

2 000

2 001

2 002

2 003

2 004

2 005

2 006

2 007

2 008

2 009

2 010

Liquidation

Immaterial investment

Material investment

$2 000

$5 000

$150

$150

$150

$2 000

$5 000

$300

$300

$300

$300

TOTAL INVESTMENT

$2 000

$5 000

$150

$150

$150

$2 000

$5 000

$300

$300

$300

$300

$0

US turnover

$0

$7 000

$8 400

$9 800

$11 200

$12 600

$14 000

$15 400

$16 800

$18 200

$19 600

Quantity

$35

0

200

240

280

320

360

400

440

480

520

560

EU turnover

$0

$0

$0

$0

$0

$0

$7 000

$8 400

$9 800

$11 200

$12 600

Quantity

$35

0

0

0

0

0

0

200

240

280

320

360

TOTAL INCOME

%
Turnover

$0

$7 000

$8 400

$9 800

$11 200

$12 600

$21 000

$23 800

$26 600

$29 400

$32 200

$0

Variable purchases

70,00%

$0

$4 900

$5 880

$6 860

$7 840

$8 820

$14 700

$16 660

$18 620

$20 580

$22 540

$0

Variable labour costs

10,00%

$0

$700

$840

$980

$1 120

$1 260

$2 100

$2 380

$2 660

$2 940

$3 220

$0

Variable commercial costs

5,00%

$0

$350

$420

$490

$560

$630

$1 050

$1 190

$1 330

$1 470

$1 610

$0

Fixed running costs

$100

$100

$100

$100

$100

$200

$200

$200

$200

$200

$200

$0

%
Turnover

1,43%

1,19%

1,02%

0,89%

1,59%

0,95%

0,84%

0,75%

0,68%

0,62%

Fixed labour costs

$130

$130

$130

$130

$130

$260

$260

$260

$260

$260

$260

$0

%
Turnover

1,86%

1,55%

1,33%

1,16%

2,06%

1,24%

1,09%

0,98%

0,88%

0,81%

TOTAL EXPENSES

$230

$6 180

$7 370

$8 560

$9 750

$11 170

$18 310

$20 690

$23 070

$25 450

$27 830

$0

Depreciation

$200

$700

$738

$775

$813

$1 013

$1 475

$1 513

$1 550

$1 625

$1 000

Earning before income taxes

-$430

$120

$293

$465

$638

$418

$1 215

$1 598

$1 980

$2 325

$3 370

11,71%

12,26%

12,65%

12,95%

11,35%

12,81%

13,07%

13,27%

13,44%

13,57%

CUSTOMERS RECEIVABLES %TURNOVER

20,0%

$0,00

$1 400,00

$280,00

$280,00

$280,00

$280,00

$1 680,00

$560,00

$560,00

$560,00

$560,00

-$6 440,00

STOCKS %TURNOVER

0,0%

$0,00

$0,00

$0,00

$0,00

$0,00

$0,00

$0,00

$0,00

$0,00

$0,00

$0,00

$0,00

SUPPLIERS DEBTS%purchase

20,0%

$0,00

-$980,00

-$196,00

-$196,00

-$196,00

-$196,00

-$1 176,00

-$392,00

-$392,00

-$392,00

-$392,00

$4 508,00

Cash requirements

$0,00

$420,00

$84,00

$84,00

$84,00

$84,00

$504,00

$168,00

$168,00

$168,00

$168,00

-$1 932,00

Immaterial investment

$0,00

$0,00

$0,00

$0,00

$0,00

$0,00

$0,00

$0,00

$0,00

$0,00

$0,00

Material investmenet

$2 000,00

$5 000,00

$150,00

$150,00

$150,00

$2 000,00

$5 000,00

$300,00

$300,00

$300,00

$300,00

TOTAL REQUIREMENTS

$2 000,00

$5 420,00

$234,00

$234,00

$234,00

$2 084,00

$5 504,00

$468,00

$468,00

$468,00

$468,00

-$1 932,00

%
Turnover

77,43%

2,79%

2,39%

2,09%

16,54%

26,21%

1,97%

1,76%

1,59%

1,45%

7.NET CASH FLOWS

-$2 230

-$4 600

$796

$1 006

$1 216

-$654

-$2 814

$2 642

$3 062

$3 482

$3 902

$1 932

8.CUMUL NET CASH FLOWS

-$2 230

-$6 830

-$6 034

-$5 028

-$3 812

-$4 466

-$7 280

-$4 638

-$1 576

$1 906

$5 808

$7 740

This Business Plan has a best result concerning the ROI : 10,8%

The following scheme sums up the evolution of the cash flow and the net profit :

wpe1.jpg (43110 octets) This strategy needs a capital structure of $6.000.000 in equity and $14.000.000 in debt in the year 2000. Then, we need and other $3.000.000 in equity and $7.000.000 in debt in 2004 to launch the European production plant.

Despite the fact that the ROI is much better than the previoud one, the second advantage is to be present quickly on most markets, and then being known as the leader.

The second strategy offers a final benefit in the year 2010 of $3.370.000 instead of $970.000 for the first strategy. And from this point, both markets will go on growing above the year 2010 onwards, with most of the investments already done.

In the end, the Return On Equity (ROE), most important ratio on an investment point of view, is different ragarding the strategy :

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Strategy 1

-20%

-12%

-8%

-4%

-2%

3%

5%

5%

5%

5% 12%
Strategy 2 -21% -10% -4% 2% -2% 1% 11% 16% 21% 26% 37%

The second strategy is the most profitable on an  investment point of view.

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Conclusion

Basically, we agree that targeting the taxis market to sell fuel cells powered cars is a good project. Refering to your market study, there is a big potential all around the world. This is the reason why we think our partnership has to start with a bigger production and a bigger geographical market, than the objectives you had.

We really believe that this JV may have really good chances to become the leader of this new market, because our partnership would be based on an equal participation : a win-win relation between two equally sized firms.

So, if there any further information you need, feel free to contact us, via e-mail at teamc_2000@yahoo.com. We look forward to getting in touch with you.

Thank you for your consideration.

Team C.

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