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The Case for Tesla Making a Gasoline Car

NEW YORK (TheStreet) -- In this article, I am making the case that Tesla (TSLA) is building such a powerful customer relationship model that it could have success in also selling "traditional" gasoline engine-powered cars. Much of this is because U.S. consumers have come to hate car dealerships, which Tesla doesn't use.

Remember those days 10-20 years ago, when you bought a PC from one of those independent "dealers" located on every fifth street corner? It was a bit like buying an allegedly antique hand-knotted oriental rug: You absolutely didn't trust the person who was selling you the rug, and you hoped you would never have to return to that store for any reason.

Next to visiting a hospital or dentist for a surgical procedure, buying a car -- new or old -- is a painful event. You KNOW that you are being taken advantage of; you just hope you minimize the damage.

Either you pay too much up front, or at the next service visit they will "find" $2,700 worth of "unfortunate" repairs not covered under warranty. This is in part a function of the lack of a unified incentive structure between the auto makers and the independent dealerships.

The car maker wants you to be happy, so that you recommend the brand and return to it next time you buy. The car dealership's incentive to do so is less. Yes, they too want you to like the brand and come back. However, there is only so much the dealership can do to impact this equation. To take advantage of you in the short term can be much more tempting, for some.

As a result, the dealership experience may be viewed by consumers as one of the worst shopping experiences, let alone servicing and repair experiences. Yes I know -- the auto companies are trying to combat this with endless quality surveys, holding back cash for year-end based on quality survey results, and so forth.

Still, impressions tend to be long-lasting, and the consumer generally has been looking for a better way.

In the PC industry, Apple (AAPL) found the better way. It opened its stores and aligned the brand's long-term incentives with the people who touched the consumer. Is there anyone who doubts anymore Apple's superior retail and life-cycle service experience?

In the auto industry, existing auto makers saw the Apple store phenomenon and would have loved to emulate it. However, they can't. Not unless the laws change.

Basically, most U.S. states have laws preventing car makers from selling cars directly to the consumer. These are ancient laws, probably in deep conflict with the intent of the U.S. Constitution to ensure that states don't limit competition.

However, in most of these states, the automobile sales franchising laws cover only auto makers with existing franchisees. In other words, if you hadn't already accepted an independent franchise to sell your cars, you are exempt.

People had almost forgotten about this exemption seeing as there had not been any new significant auto companies in many decades. Chrysler was founded in 1925, and Ford and GM are older than that. Smaller auto companies died or were acquired along the way. The issue was asleep, "settled" for generations. Forgotten.

Until Tesla.

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