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The Auto Industry As You've Never Seen It Before

Tamara Rutter
June 11, 2012

The idea of buying a car at your local shopping mall sounds a bit wacky -- at least until you meet start-up electric-car maker Tesla Motors (Nasdaq: TSLA  ) .

Forget everything you know about electric cars. Unlike the golf-cart designs of competing EVs, Tesla's new Model S sedan promises superior performance to the tune of zero to 60 mph in 5.6 seconds and a range of 300 miles for the high-end 85-kWh battery version, and all models get an interior complete with a 17-inch touchscreen computer. This is a company that's shaking up the industry in more ways than one.

Changing the rules of retail
Buying a new car can be a daunting task. However, with the help of George Blankenship, vice president of worldwide sales for Tesla, the company's retail strategy is nothing like the so-called dealership experience you've come to loathe. Blankenship's 10-year history as Apple's (Nasdaq: AAPL  ) real estate chief makes him a perfect fit for Tesla as the Silicon Valley-based company attempts to reinvent the car-buying experience.

Tesla is opening mall stores around the country to showcase display models of its upcoming zero-emission cars. Mall-goers are welcome to take pictures, sit in the car, explore, and ask questions. "We want to engage with people when they're not thinking about buying a car," Blankenship insists. The first of these new concept stores is now open in White Plains, N.Y.

But not everyone sees this as a winning approach to selling cars.

The nonbelievers
According to CNN, Leonard Bellavia, an attorney who represents auto dealers, believes that "Tesla's idea is doomed to failure." He adds: "Tesla will go back to the old ways. The idea that they're reinventing automotive retailing is somewhat laughable."

Now this sounds familiar.

In 2001, just a year after Blankenship joined Apple, the Mac maker opened its first retail store to similar scoffs. In fact, Bloomberg published a story that year with the headline, "Sorry, Steve: Here's Why Apple Stores Won't Work." Dozens of Wall Street analysts followed suit. MacWorld quoted one such analyst saying, "Apple will turn the lights off within two years and will have a very bad and expensive experience."

In retrospect, these naysayers couldn't have been more wrong. Today, Apple is the world's most valuable company, with more than 300 Apple Stores worldwide. The iProducts retailer is the top U.S. chain by retail sales per square foot, too. The average U.S. retailer brings in sales of $341 per square foot, but Apple racks up $6,000.

In 2001 at the MacWorld trade show, Steve Jobs said: "Buying a car is no longer the worst purchasing experience. Buying a computer is now No. 1." With the help of Blankenship, Jobs changed that. Leading from Apple's example, I think Tesla's pioneering retail concept will be anything but "laughable" down the road.

Legal implications
True, Tesla could run into potholes related to state laws that forbid