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The Case for Tesla Making a Gasoline Car

In the wake of the Apple stores, that Microsoft (MSFT) also has copied, Tesla made the genius move to circumvent the relic of the independent auto dealership.

And customers love it!

A Tesla customer can shop in confidence knowing that the dealer isn't going to try to play a cat-and-mouse game with them for various kinds of hidden fees. When the car comes back for service, or needs repair, the consumer doesn't feel like he is being robbed nearly to the same extent as would likely be the case with an independent dealer for an older auto maker.

This leads me to the main point of this article. Tesla does not have only two major advantages in the market right now:

1. An all-electric high-performance car with good interior space that can go 265 miles on a single charge. Nobody comes close.

2. A rapidly growing 440 volt DC charging network for long-distance travel. Nobody comes close.

Rather, there is also a third one: The absence of the traditional independent car dealer. Mind you, this has nothing to do with Tesla cars being electric, and the electric car charging network.

This leads us to an interesting thought experiment: What if Tesla started making gasoline and/or diesel cars? If people prefer the Apple model of direct sales and service, it suggests this would be a major advantage for Tesla even inside the gasoline/diesel world.

Clearly Tesla has no intention of making a gasoline or diesel car today. Amazingly, Tesla has been almost equally clear that it hasn't been considering any form of plug-in hybrid either (think BMW i3 with range-extender or Chevrolet Volt).

With this as a background, let's consider two scenario inputs, not necessarily co-dependent:

1. Gasoline prices decline, and electric car subsidies go away:

In this scenario, all other things equal, Tesla would face sales headwinds. It should be obvious that this isn't as good for Tesla as if gasoline prices stay flat or go up, or if subsidies continue or were increased.

In this scenario, Tesla might have to consider making at least some form of plug-in hybrid. There are many different architectures for this, but the most likely would be the one pursued by BMW in the i3, which hits U.S. shores in a couple of months.

Even if it were a pure gasoline or diesel car, with no plug-in anything-battery, Tesla would have a natural advantage in its direct sales model. Electric car buyers are not the only ones wanting to escape independent car dealers.

2. The prospects of Tesla being acquired:

First of all, I don't think there is anything pointing to Tesla being acquired right now, for several obvious reasons, including most prominently the valuation and the controlling shareholder. That said, what could happen if scenario No. 1 above played out, causing a fall in Tesla shares to the point where a sale would be financially viable and otherwise possible?


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