WORKPLACE APPLICATION $2$: HOMEWORK

PROMPT

Volvo

Disclaimer: The event described in this prompt is fictitious. No identification with actual persons, places, activities and buildings is intended or should be inferred.

Who are you?

You are the Chief Strategist for Volvo.

What are you required to do$?$

Evaluate the options proposed $($i$.$e$.,$ Raleigh or Puebla$)$ and provide a recommendation, via email, to the CEO of Volvo, Martin Lundstedt, on which option Volvo should pursue. All comparative financial information must be shown in Swedish Krona. You may assume that both projects will take the same amount of time to complete. Apply the appropriate business writing standards for content, style, and organization in your email. $[$Note: You are NOT required to take into consideration time value of money and discounted cash flows in your appraisal.$]$

What is the current situation?

A recent report published by Harvard Business School argued that there is no better time to launch an environmentally sustainable product. Recent surveys show that over $65$ percent of consumers, particularly Millennials, are actively seeking out "purpose$-$driven brands that advocate sustainability."

The impact of "green consumerism" can be felt across all industries. The automobile industry, for example, saw a $43$ percent increase in the global sales of electric vehicles $($EVs$)$ to over $3,000,000$ units sold in $2020.$ This segment of the automotive sector continues to develop as further technological advancements are introduced. In fact, the current EV Market is projected to reach $27,000,000$ units sold per year by $2030,$ at a compound annual growth rate $($CAGR$)$ of $21\mathrm{.}1$ percent during the forecast period. The consumer benefits of these vehicles are also projected to increase in the form of favorable government policies, tax rebates, EV carpool lanes, extended vehicle ranges, and the creation of a more extensive charging infrastructure.

Like other automotive manufacturers, Volvo, has identified a potential opportunity in the industry's shift towards electrification. In a March $2,2021$ statement, Volvo's CEO, Martin Lundstedt, announced that the Swedish car company would part ways with its traditional internal combustion engine by converting its entire automotive lineup to battery powered by $2030.$ As part of this proposal, Lundstedt also announced the construction of a state$-$of$-$the$-$art North American EV manufacturing plant. The executives at Volvo are currently considering two locations for this new plant: Raleigh in the US$,$ and Puebla in Mexico.

Raleigh is the capital city of North Carolina. It is known for universities, being the home of North Carolina State University. It is also part of the "Research Triangle," referring to the number of technology and scholarly institutions surrounding Raleigh, Chapel Hill, and Durham. Raleigh's reputation for having such a large skilled workforce has already attracted other large firms $($SAS$,$ Cisco, and Verizon$)$ to the area, and has motivated the city to upgrade both its digital and physical infrastructure. In addition, Raleigh is located only $80$ miles away from Volvo's US headquarters, located in Greensboro, NC$.$ State officials are committed to continue growing their relationship with Volvo. This has led them to offer Volvo a $$2,250,000$ stipend to build their manufacturing plant in Raleigh.

$38$

Puebla is a city in east$-$central Mexico, just southeast of Mexico City. Puebla is known for its significant cultural reputation. It's thriving urban center attracts some of the best and brightest minds in Mexico, and has an abundance of world$-$class restaurants, museums, and architecture. Puebla is located in close proximity to the Mexico City International Airport. In addition, Mexico is known for offering a friendly business climate, competitive labor rates, and favorable international trade policies.

An initial feasibility schedule found the estimated construction costs of the manufacturing plant in both Raleigh, US and Puebla, Mexico are as follows:

$\backslash$table$[[$Item$($s$),$Raleigh,Puebla$],[$Land Purchase & Preparation $($LPP$),$Cost $($in USD$),$Cost $($in Mexican Peso$)],[$Construction Expenses $($CE$),1,897,500,13,500,000$