Tesla Motors - Evaluating a Growth Company - Case Study Example

However, it has the advantage over its competitors as it had developed the first electric car, Model S, which no other company has developed. If the market welcomes it, then the cash inflow in terms of income will rise and depict active growth. The major disadvantage of the Model used by Tesla is that it faces stiff competition from big companies like GM, Ford, Nissan, Toyota, and BMW which offers prestigious cars at relatively lower prices. As the market stands, the sales volume of its new model is relatively small, and this is a disadvantage considering its substantial investment in the production.

The financial position of Tesla will improve in the future. The projection of Tesla fiscal standing will depict positive deviations. The sales volume will be over US $20,105 Million. The operating profit will double to US $ 2000 up from the current US $940 million. The net income will hit US $ 960 with a net margin of 4.43%. However, the operating margin will be 15% up from the current 8.46%. Additionally, its cost of production per unit will drop significantly, and the overall expenditure in production will decrease.

The primary assumption made when making these assumptions is that the market for the electric car unveiled by Tesla will stabilize by 2025. As such, the sales volume of the company will rise and stabilize. Its market coverage will increase, and this will increase its customer base. It is assumed that by 2025, organization that campaign for environmental conservation will advocate for the use of vehicles that do not pollute the atmosphere. Therefore, Tesla’s brand will get a boost from the organizations that will want to become socially responsible.

The increased operating margin and net income margin will be due to the uncertainty in the market and the rising market rivalry in competition. Most importantly, Tesla will out-compete its competitors as it will have efficient production machines and systems to produce its cars