Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk surprised the automobile industry last week by making the company’s patents available to other companies. That means Tesla won’t sue competitors who violate its patents “in good faith.” That move disappointed many investors who view the company’s patent arsenal as the closest thing to a “moat.” The San Francisco-based company’s protected it from larger rivals with much deeper pockets.
Tesla to be at the epicenter of the EV movement
So, why did Tesla Motors Inc (NASDAQ:TSLA) opt for the open source movement? Barclays analyst Brian A. Johnson says that the company’s goal is to further the penetration of electric vehicles. If other automakers adopt Tesla’s technology to develop their electric cars, it will position the Elon Musk-led company in the epicenter of the green car revolution.
Chris Hohn the founder and manager of TCI Fund Management was the star speaker at this year's London Value Investor Conference, which took place on May 19th. The investor has earned himself a reputation for being one of the world's most successful hedge fund managers over the past few decades. TCI, which stands for The Read More
Elon Musk said during the webcast that Tesla Motors Inc (NASDAQ:TSLA) was in talks with BMW on electric vehicle collaboration opportunities. These opportunities are mainly about the Supercharger network, which would potentially accommodate both Tesla and BMW electric cars. Nissan Motor Co., Ltd. (ADR) (OTCMKTS:NSANY) (TYO:7201) is reportedly also keen to work with Tesla and BMW to build charging stations that all three companies’ vehicles could use. Building out a dense Supercharger network in Europe and Asia would require heavy investment. And that’s necessary to support sales growth beyond early adapters. Johnson says that’s a sensible strategy.
However, that may disappoint some Tesla Motors Inc (NASDAQ:TSLA) bulls who believed Superchargers would drive incremental sales and eventually become a standalone profit stream. The Model S maker said it won’t collect any licensing fee from rivals that use its technology. But Tesla would request to use the technologies of other automakers. That’s yet another reason for bulls to be concerned as they saw licensing fees as another potential revenue stream.
Tesla’s battery pack ‘secret sauce’ still intact
Though Tesla Motors Inc (NASDAQ:TSLA) will now make its patented technologies available to other companies, its “secret sauce” for battery packs is still intact, noted Barclays. The company has about 250 patents related to its battery pack. But Tesla doesn’t have any patents around the key aspects of software, or the cell wiring of the battery pack, which give it a massive range advantage over rivals. Brian Johnson says, by opening up its patents to other companies, Tesla has made it clear that it’s far ahead of the competition in battery packs technology.
There could be another very important reason behind opening up its patented technology to rivals. Tesla Motors Inc (NASDAQ:TSLA)’s Model S has no viable competition. And Elon Musk might want some real competition soon. Tesla is facing the shortage of battery supplies. That’s why the company is building a massive Gigafactory that will manufacture Li-ion batteries on a large-scale. The San Francisco-based company will need some competition to justify that scale, says John Rosevear of The Motley Fool. Tesla needs some giant automakers who can buy batteries in huge quantities to make the Gigafactory worthwhile.
Tesla Motors Inc (NASDAQ:TSLA) shares soared 2.85% to $212.30 at 11:34 AM EDT on Monday.