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  • Will Tesla's Move To Open Up Patents Stir Faster Electric Vehicle Adoption In America? 0 comments
    Jul 15, 2014 9:20 AM | about stocks: TSLA

    Tesla Motors Inc.'s (NASDAQ: TSLA) CEO, Elon Musk, has been hinting at it for some time, dropping one bread crumb at a time. And now it has finally come to pass. Tesla, in a move that dominated headlines for close to a week, released its patents to all interested in using the technology in good faith, as represented in the company blog on June 12. A week before the announcement, Elon Musk had intimated a surprise move on Tesla patents, describing his planned move as "fairly controversial", as cited onUSA Today.

    Musk's move to embrace open source philosophy and as he describes it, "follow the spirit of the open source movement," has sparked divergent views. On one hand, some analysts have remarked that the move might diminish Tesla's position in the electric vehicle (NYSE:EV) market by attracting both upstarts and established players into the EV market and in the process diluting Tesla's market share. Some, however, believe that this will strengthen Tesla's position by enhancing faster EV adoption across America.

    Greedy Lawyers

    While Tesla subscribes to the view that opening up its patents will strengthen its market position, CEO Musk is also fighting a bigger enemy; lawyers. He asserts that patents always seem to make lawyers rich instead of the inventors who came up with the technology. This is a fair argument. Smartphone maker Apple (NASDAQ: AAPL) serves up a good example. It has spent much on litigation in the past few years. In 2012, for instance, Apple and Google (NASDAQ: GOOG), who are perennially in and out of court over patent infringement allegations, spent more on patent lawsuits and patent purchases than they did on research and development, according to a post on the New York Times.

    Instead of leaving a trail of "intellectual property landmines" behind Tesla's electric vehicles, Musk believes that patents on its EVs should be released to expedite the adoption of sustainable transport.

    Fighting Gasoline Cars

    Warding off lawyers is just a build up to Musk's real fight. Musk wants to fight gasoline cars by accelerating the adoption of EV cars across America.

    "Our true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world's factories every day," reads the Tesla blog post in part.

    Tesla's strategy, though risky to its dominant market share in the EV market, may actually pay off. Tesla doesn't have the scale, finances or political connections (read: Tesla hit with painful reminder: business and politics inseparable pair) that bigger names have. However, by presenting a compelling entry point for many promising upstarts to enter the electric car market, it is building a formidable number of adopters; a strong fleet that, if well coordinated, will descend on the gasoline car market like the Spanish Armada did on England in 1588, though successfully.

    Moreover, most of the electric vehicle upstarts will not be direct competitors with Tesla as there are other niches in the car market other than Sedans (which Tesla focuses on) that can be targeted. HarleyDavidson (NYSE: HOG), for instance, very recently released its first electric motorcycle. VIA has also in the recent past advanced electric alternatives to vans and trucks.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: TSLA
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