A Study on the Path to Reducing Tesla’s Transaction Exposure in China—Base on Hedge Models
- 10.2991/978-94-6463-024-4_21How to use a DOI?
- Tesla; Transaction Exposure; Exchange Rate; Hedge
Transaction exposure is a large risk for a multinational company. It measures gains or losses that arise from the settlement of existing financial obligations whose terms are stated in a foreign currency. The capacity at Tesla’s Shanghai factory is going to reach 550,000 in 2021. With such a huge capacity in Chinese market, a small change in exchange rate can bring a large loss in Tesla’s revenue. Therefore, they need to convert their revenue to the U.S. dollar in an effective way. In current years, the exchange rate between China yuan and the U.S. dollar is unstable because of the trade war and the pandemic. Based on current three years exchange rate, if Tesla decides to remain unhedged with the currency risk, it may cause up to $13,629.61 loss in revenue for each 1,000,000 China yuan convert to the U.S. dollar. The purpose of this research is to analyze the current exchange rate between China yuan and the U.S. dollar, evaluate the feasibility of each hedge, and suggest the best option to reduce the transaction risk of Tesla. Based on the data from Tesla’s annual report, this research creates models with Excel and Tableau to analyze all the situations. With the results of each hedge model, the research outlines the difficulties and advantages of these hedges, but accurately presents a best-case scenario that works for Tesla.
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Cite this article
TY - CONF AU - Yao Jia PY - 2022 DA - 2022/12/12 TI - A Study on the Path to Reducing Tesla’s Transaction Exposure in China—Base on Hedge Models BT - Proceedings of the 2022 2nd International Conference on Education, Information Management and Service Science (EIMSS 2022) PB - Atlantis Press SP - 193 EP - 199 SN - 2589-4900 UR - https://doi.org/10.2991/978-94-6463-024-4_21 DO - 10.2991/978-94-6463-024-4_21 ID - Jia2022 ER -