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June 20, 2014

Was Tesla's Open Source Stunt Overly Ambitious?


Here's a question not everyone is asking themselves right now: Do I or do I not give away my innermost secrets? We tend to pass at the “opportunity” to freely shell out the very thing that's making us money. But that's exactly what Elon Musk did for Tesla Motors. He gave any automotive manufacturer the ability to make his EVs. How could this move possibly be anything but disastrous?

It may seem absolutely baffling for some, but Elon Musk isn't the type of person who carelessly gives away information for nothing. He has a strategy in mind, albeit a highly risky one that resembles a gambit more than anything else. Tesla's stock climbed a bit after the announcement that it was going to completely open up its patents. Do investors know something we don't? Let's have a look.

The chief problem with electrical vehicle development is that automobile manufacturers are currently working behind closed doors on their models. Everything is all hush-hush, and it's one expensive ball game where no one wants to do the opening pitch. If Tesla wants to get ahead, it's going to have a look at what its competitors are doing. It seems like Musk hopes to achieve exactly this by revealing his hand. They will probably start showing what they've been working on as a reply to Musk's act of good faith.

But there's a bigger problem with this. As Thilo Koslowski, an automotive analyst at Gartner, puts it: “You know that if they put this stuff out there, Chinese companies are just going to take everything they can and copy it completely. I don't think their brand is strong enough to be the only differentiator they can offer.”

Musk replied to this by saying, “People often mistake technology for a static picture. It's less like a picture and more like a movie. It's the velocity of technology innovation that matters. It's the acceleration. To what degree is the company accelerating the advent of new technology, which is what represents true competitiveness – not the static picture of, 'Oh, I have this patent.'”

Maybe, just maybe, there's the possibility that Musk hopes to sell more batteries and drive-trains to manufacturers from his enormous factory he's calling the “gigafactory”. This is only speculation, but it seems like a plausible strategy, considering that it would be easier to put that factory to work if other auto manufacturers depend on it for their EV parts. Releasing a specific set of patents could direct traditional auto manufacturers to start making EVs that are based on them. And voila! There's a factory out there that will make their batteries so they don't have to import inferior ones or reinvent the wheel in-house.





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