Tesla Motors Inc. Makes Controversial Announcement and the Boeing Company Is Poised For Another Big Order

Dow Jones Industrial Average (DJINDICES: ^DJI  ) was trading 118 points lower, or 0.7%, by midafternoon after some economic data hit the news feeds. The Commerce Department said consumer spending, excluding autos, rose 0.1% in May from the prior month, significantly less than the expected 0.4%. However, keep in mind that total sales are still up 4.3% from last May, and that a bright spot in automotive sales (up 1.4% from April) isn't a bad thing.

Paul Schatz, chief investment officer at Heritage Capital, offered Reuters his opinion on the market direction: "The market has had a fantastic run and this is just a healthy and routine pause we're in right now. The bull market is old and wrinkly, but nowhere near dead." 

With that in mind, two companies are making major headlines in the markets today.

Inside the Dow, Boeing (NYSE: BA  ) could be a big winner from a surprise announcement from rival airplane maker Airbus yesterday. Airbus announced that Emirates has canceled an order for 70 of its new A350 wide-body commercial airplane. That order was valued at roughly $16 billion, and now the front-runner to land an equivalent order may be Boeing's new 777X wide-body airplane.

It makes sense, as Emirates is the world's No. 1 customer for the highly popular 777 and has already ordered 150 of the new 777X. Beyond the great news of Boeing's potential to land a multibillion-dollar order for the 777X is the brand image impact that could come along with Emirates canceling its Airbus order.

"Emirates is the largest and most influential long-haul airline in the world," said analyst Sash Tusa of Edison Investment Research in London, according to Bloomberg. "When it looks at your flagship product and decides it can do better with somebody else's, that's a problem."

The 777X, scheduled to enter into service in 2019, will play a large role in the company's revenue and profit going forward. Any word of an agreement for Emirates to buy additional 777X aircraft in the next month or two would be a small positive boost to the aviation manufacturer, which already boasts a backlog of orders valued at $440 billion.

Tesla's Model S charging. Source: Tesla Motors

In other huge industrial news, electric-vehicle maker Tesla Motors (NASDAQ: TSLA  ) made a huge and potentially controversial announcement this morning. Tesla CEO Elon Musk announced his intention to release the company's legal right to its electric-vehicle patents.

Musk's strongly believes Tesla's competition isn't automakers producing electric vehicles to rival his company's own vehicles, but rather mainstream automakers continuing to produce millions of gasoline-powered vehicles. If Tesla releases its patents and enables mainstream automakers to produce better electric vehicles, faster, it could accelerate the adoption of those electric vehicles and thus boost Tesla's overall business potential.

In a blog post, Musk admitted this is a reversal from Tesla's original thinking: "We felt compelled to create patents out of concern that the big car companies would copy our technology and then use their massive manufacturing, sales and marketing power to overwhelm Tesla. We couldn't have been more wrong."

This is an interesting development for investors to watch. In the automotive industry a company's success is really defined by two factors: vehicle quality and customer service.

The Model S has been one of the best vehicles ever created and Tesla's focus on customer service has earned a very loyal following and flawless brand image. Musk releasing the company's patent rights could enable mainstream automakers to catch up on the technology side of things; however, as long as Tesla continues to design and produce extremely high-quality vehicles and go the extra mile to take care of customers, the company will continue to thrive -- Elon Musk seems to know this. 

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  • Report this Comment On June 12, 2014, at 10:47 PM, pitache wrote:

    I believe we are missing the real significance of this announcement. Elon Musk has laid out a plan that promises to truly disrupt the world economies and clean the air at the same time. With one billion vehicles on the planet powered by the internal combustion engine of the twentieth century, we can see true freedom from foreign oil as that number dwindles in this , the twenty first century.

    About ten percent or roughly 100 million vehicles replace those old, worn out gasoline dependent vehicles every year. The technology exists today to replace them with electric powered vehicles that never have to stop at a gas station, never again be subject to the monopoly of the five largest companies in the world. Never again would the industrial nations of the world find it necessary to wage wars for oil or be influenced by tyrants just because they sit on millions of barrels of dirty energy.

    Think of this as domestic security. Our way of life, our mobility just got cheaper, cleaner, safer. There will be no need for stupid pipelines crisscrossing our land, no need for oil tankers and rail cars spilling a cargo of black goo into the environment.

    All we have to do is convince the automakers of the world to break free from the gas guzzling internal combustion engines and embrace the next step in our evolution. I can see it now: a super charging station at every Seven Eleven and similar locations allowing for free replenishment of fuel for our vehicles. The nameplates might be Ford or GM, still in business, still making cars and trucks alongside Tesla of course. Figuratively and literally we will all breathe a little easier.

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