BMW announced this week (via Automotive News) that it is opening up its patents related to battery cell technology that it co-developed with Samsung SDI. The move follows electric-car maker Tesla Motors' (NASDAQ:TSLA) announcement that it would be opening up all of its patents to peers who used them "in good faith." Why are manufacturers so open to sharing patents related to electric vehicles? In the minority market of electric vehicles, one company's success is likely to lead to greater opportunity for the entire group.
BMW follows Tesla's example
More specifically, BMW is sharing patents related to its electric-vehicle battery cell technology in order to gain economies of scale, Automotive News' Luca Ciferra says.
"BMW purchasing boss Klaus Draeger said sharing the technology would reduce the cost of the battery cells -- the most expensive part of an electric vehicle," Ciferra explains.
Draeger gave an example of how this could result in scale by saying, "If Mercedes called us, we would be happy to find a way with Samsung SDI to supply them with battery cells."
Hoping manufacturers will take up BMW on its offer to use its battery technology, BMW is planning to increase orders for battery cells from Samsung SDI by about 20%-30% in 2016 from its 2014 level. But the increased supply is also for its own vehicles; BMW says it is increasing the supply of its electric BMW i3, as well as the supply for the plug-in hybrid i8.
A shared vision
While BMW and Tesla certainly are taking different approaches to electric vehicles, they seem to share the same opinion on how opening up patents for other EV manufacturers to use could give a boost to the entire EV sector.
The reasoning goes like this: Shared technology could lead to greater total innovation, greater innovation could lead to higher sales, and higher sales could bring much-needed scale to lithium-ion supply.
Last month, when Tesla announced it would share its patents, it said it was "for the advancement of electric vehicle technology."
Tesla may have needed to protect itself in the past, Tesla CEO Elon Musk explained. "[W]e 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," Musk said in the blog post announcing its initiative to share patents.
But the days of Tesla having to fear being overwhelmed by larger auto manufacturers are long gone. Today, Tesla boasts half the market capitalization of General Motors.
Now Musk thinks that the EV sector would "benefit from a common, rapidly evolving, technology platform" and that "applying the open source philosophy to our patents will strengthen rather than diminish Tesla's position."
Indeed, with the combination of Tesla and BMW both sharing its patents with the three largest EV manufacturers now discussing greater collaboration on charging solutions, it is looking increasingly likely that EVs have a solid chance of playing a big role in global automotive market in the future.
Daniel Sparks owns shares of Tesla Motors. The Motley Fool recommends BMW, General Motors, and 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.