This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Case for Tesla Making a Gasoline Car

Stocks in this article: TSLA AAPL MSFT

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?


2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,039.62 -14.09 -0.08%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs