Is Tesla Motors, Inc.'s Patent Move Already Paving the Way for Higher EV Adoption?

Manufacturers are already eyeing Tesla's patents. Could Tesla-patent-empowerd peers give the entire electric vehicle sector a lift?

Jul 2, 2014 at 1:33PM

Reactions were mixed when Tesla Motors (NASDAQ:TSLA) opened up its patent portfolio for peers to use "in good faith." While it's going to take quite some time to really gauge the impact of the move, there are already signs the outcome may be positive for Tesla.

Tsla Supercharger

The Tesla Model S charges far faster than EVs manufactured by peers. Perhaps Tesla's open patent strategy could be one catalyst to help lead other EV manufacturers to build cars that can also charge in marketable times -- and maybe even share Tesla's Supercharger network. Image source: Tesla Motors.

Lifting the sector
When it took down the patents in the lobby of its Palo Alto headquarters and opened them up for the world to use, the electric-car maker's intentions were clear: Tesla wanted to give the electric-vehicle sector a lift.

But wouldn't Tesla-patent-empowered EV competitors hurt Tesla? The chances are slim. In fact, Tesla Chief Executive Officer Elon Musk has said that he hopes he is one day surrounded by EVs from other manufacturers.

The Wall Street Journal's Justin Lahart eloquently summed up this logic in a recent article.

Rather than hurt Tesla, this could help it. If established players were selling cheaper, mass-market electric cars, more drivers might eventually upgrade to a pricier, higher-performance Tesla. A larger electric-car market would also bring beneficial network effects for Tesla—most importantly, the establishment of more charging stations—that would broaden its vehicles' appeal.

Of course that's just one way of looking at it. There's an even broader view that would simply argue that faster adoption of EVs would, in general, elicit higher demand for all EVs from all manufacturers.

Real-world examples
But the best way to look at the potential impact is to examine two major reactions from peers already.

The first reaction that was likely sparked by Tesla's decision to open its patents up to peers happened only days after the announcement. The three largest EV manufacturers, Nissan, Tesla, and BMW have initiated talks regarding greater collaboration on charging networks, according to Financial Times.

Another known reaction to Tesla's move to share its patents has mostly gone under the radar. This story goes down in India.

"No noise. No gears. No tailpipe. No petrol. No emissions." It sounds like Tesla, but this description is from electric-vehicle manufacturer Mahindra, in India, about its fully electric e2o.

Striking, convenient, and comfortable, the e2o is the successor to the REVAi (known in the UK as the G-Wiz) which was among the world's best-selling electric vehicles.

Mahindra E

The Mahindra e2o seats four adults. Image source: Mahindra.

The Indian company is reviewing Tesla Motors patents "for applicability to its products," according to The Economic Times in India.

Tesla Chief Financial Officer Deepak Ahuja said in March that "India is a huge potential market where we need to be," projecting an entry to the country sometime in 2015. Perhaps Mahindra will begin paving the way with relevant infrastructure and vehicles compatible with Tesla's Supercharger before Musk & Co. even arrive.

For manufacturers in the electric-vehicle market, as the minority in a gas-guzzling world, it's not a zero-sum game. The success of one EV manufacturer is likely to spur the overall adoption of EVs in general. For every step forward in the EV sector that Tesla's open patent strategy aids, the more confidence investors can have in Tesla's success as a mass-market EV manufacturer.

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Daniel Sparks owns shares of Tesla Motors. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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