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Aspiring Lawyers - Interviews & Vacation Schemes
Commercial Awareness Discussion
Commercial Awareness Update - January 2020
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<blockquote data-quote="Jaysen" data-source="post: 18182" data-attributes="member: 1"><p><strong>Uber Challenges the Californian Gig Economy Law</strong> (by Brian Chiu)</p><p></p><p><u>The Story</u></p><p></p><p>Uber and Postmates sued California alleging that the legislation “AB-5” which will be in force this year unfairly targets their business model and affects countless drivers’ choice of working style. The law is likely to change the employment status of Uber drivers from independent contractors to employees, similar to the classification in the UK. </p><p></p><p><u>Impact on Businesses and Law Firms</u></p><p></p><p>This Californian law is only one of several bad news for Uber since our previous update. By the end of the lock-up period that prevented early investors and employees from selling their shares in November 2019, Uber’s stocks were once traded at the price of $25, 38% below their initial listed price worth $45. Worse still, the ride-sharing giant’s latest net quarterly loss was $1.2bn, and even the former boss and founder Kalanick recently sold all of his $2.5bn of stocks and stepped down from the boardroom. Is the company simply burning investors' cash, or can it truly make a turnaround? </p><p></p><p>While the company claimed that its core ride-hailing business covers its costs, the US and UK regulators surely are stepping up efforts; the company lost the licence to operate London, again. Secondly, the company is currently in talk to sell its food delivery business in India. Investors may soon run out of patience. According to Goldman Sachs, investors’ appetite for gig economy companies fell more than a fifth in 2019. </p><p></p><p>It is necessary to ensure Uber revises its drivers’ contracts in accordance with the Californian law. If Uber changes its drivers’ employment status, its business model of achieving economies of scale by undercutting incumbents and wooing enough customers with below-cost prices may not be sustainable. Treating its drivers as employees will significantly increase its fixed costs in the long term. We may thus see a protracted lawsuit in California. </p><p> </p><p><strong>Tesla’s First ‘Made in China’ Cars </strong>(by Curtley Bale)</p><p></p><p><u>The Story</u></p><p></p><p>Tesla has delivered the very first batch of electric cars that were made in China instead of America, just a year after their Shanghai factory opened. Fifteen Model 3 cars were delivered to employees last week, with delivery to the public expected to take place from 7th January 2020. The new cars were produced at Tesla’s ‘Gigafactory 3’ – the first factory to be fully owned by a foreign company without part-Chinese ownership. The Model 3 is priced at around USD 50,000 before subsidies. </p><p></p><p><u>Impact on Businesses and Law Firms</u></p><p></p><p>Tesla opened a factory in China not only to circumnavigate the ongoing US-China trade war, but also to access the world’s largest car market. China sold over 23 million automobiles in 2018, compared to America’s 17 million. Tesla has been granted an exemption from the 10% Chinese purchase tax, plus a government subsidy of around USD 3,600 per vehicle sold. This makes the car cheaper to customers, potentially meaning Tesla can sell more units, generate more revenue and increase market share.</p><p></p><p>Tesla’s success means competitors must find ways to differentiate themselves. Domestic rivals Xpeng are trying to beat the Model 3 on cost and specifications, such as driver safety. Whilst this may lead to short term success, cost-cutting has hit Chinese car company Nio hard. They failed to meet their Q3 delivery targets on time as well as entering their last 12 months of cash reserves. Conditions such as these present the perfect opportunity for Tesla to grow its business from within and take advantage of the competition’s struggles. </p><p></p><p>For law firms, it is necessary to ensure Tesla complies with all local building, infrastructure and employment regulations. Tesla must also comply with China’s competition laws which aim to prevent market monopolisation. American company Ford Motors fell on the wrong side of this law in June 2019 and were fined USD 23.5 million.</p></blockquote><p></p>
[QUOTE="Jaysen, post: 18182, member: 1"] [B]Uber Challenges the Californian Gig Economy Law[/B] (by Brian Chiu) [U]The Story[/U] Uber and Postmates sued California alleging that the legislation “AB-5” which will be in force this year unfairly targets their business model and affects countless drivers’ choice of working style. The law is likely to change the employment status of Uber drivers from independent contractors to employees, similar to the classification in the UK. [U]Impact on Businesses and Law Firms[/U] This Californian law is only one of several bad news for Uber since our previous update. By the end of the lock-up period that prevented early investors and employees from selling their shares in November 2019, Uber’s stocks were once traded at the price of $25, 38% below their initial listed price worth $45. Worse still, the ride-sharing giant’s latest net quarterly loss was $1.2bn, and even the former boss and founder Kalanick recently sold all of his $2.5bn of stocks and stepped down from the boardroom. Is the company simply burning investors' cash, or can it truly make a turnaround? While the company claimed that its core ride-hailing business covers its costs, the US and UK regulators surely are stepping up efforts; the company lost the licence to operate London, again. Secondly, the company is currently in talk to sell its food delivery business in India. Investors may soon run out of patience. According to Goldman Sachs, investors’ appetite for gig economy companies fell more than a fifth in 2019. It is necessary to ensure Uber revises its drivers’ contracts in accordance with the Californian law. If Uber changes its drivers’ employment status, its business model of achieving economies of scale by undercutting incumbents and wooing enough customers with below-cost prices may not be sustainable. Treating its drivers as employees will significantly increase its fixed costs in the long term. We may thus see a protracted lawsuit in California. [B]Tesla’s First ‘Made in China’ Cars [/B](by Curtley Bale) [U]The Story[/U] Tesla has delivered the very first batch of electric cars that were made in China instead of America, just a year after their Shanghai factory opened. Fifteen Model 3 cars were delivered to employees last week, with delivery to the public expected to take place from 7th January 2020. The new cars were produced at Tesla’s ‘Gigafactory 3’ – the first factory to be fully owned by a foreign company without part-Chinese ownership. The Model 3 is priced at around USD 50,000 before subsidies. [U]Impact on Businesses and Law Firms[/U] Tesla opened a factory in China not only to circumnavigate the ongoing US-China trade war, but also to access the world’s largest car market. China sold over 23 million automobiles in 2018, compared to America’s 17 million. Tesla has been granted an exemption from the 10% Chinese purchase tax, plus a government subsidy of around USD 3,600 per vehicle sold. This makes the car cheaper to customers, potentially meaning Tesla can sell more units, generate more revenue and increase market share. Tesla’s success means competitors must find ways to differentiate themselves. Domestic rivals Xpeng are trying to beat the Model 3 on cost and specifications, such as driver safety. Whilst this may lead to short term success, cost-cutting has hit Chinese car company Nio hard. They failed to meet their Q3 delivery targets on time as well as entering their last 12 months of cash reserves. Conditions such as these present the perfect opportunity for Tesla to grow its business from within and take advantage of the competition’s struggles. For law firms, it is necessary to ensure Tesla complies with all local building, infrastructure and employment regulations. Tesla must also comply with China’s competition laws which aim to prevent market monopolisation. American company Ford Motors fell on the wrong side of this law in June 2019 and were fined USD 23.5 million. [/QUOTE]
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