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Business News/ Opinion / Tesla shows a new way to drive innovation

Tesla shows a new way to drive innovation

Elon Musk's move to give away patents can lead to more eco-friendly vehicles

Illustration: Jayachandran/MintPremium
Illustration: Jayachandran/Mint

Elon Musk is an entrepreneur par excellence. His track record of establishing profitable but sustainable businesses such as PayPal, SpaceX, Solar City and Tesla Motors is enviable. Yet, he has an unfinished agenda: to reduce the dirty carbon footprint that two billion cars currently leave all over the globe. The Tesla Roadster, a battery electric vehicle (BEV) has been Musk’s vehicle to change the way we commute. Tesla has had the first-mover advantage but in the technology business first-movers are rarely the big winners any more. Often as with the Palm or the many Web-based mailing systems before Gmail, it has been counterproductive. Fresh winners have emerged when the market takes off.

Musk’s vision has also met with very limited success. In 2013, Tesla sold 22,500 vehicles, a number that is expected to grow to 35,000 this year. That’s not even a scratch on the global installed base of carbon-spewing vehicles.

Part of the reason of course is the price. The Tesla Model S costs nearly $70,000. The Silicon Valley company has also had limited success in trying to sell its patented technology to other car makers. Of the big ones, Daimleris using a Tesla battery in the electric version of its urban Smart Car. Another partnership, with Toyotafor the supply of battery, gearbox, power train, and battery-management software for the company’s electric vehicle, was terminated recently.

No idle dreamer, Musk is now trying a wholly different tack. Last week, in a statement titled “All Our Patent Are Belong To You", he promised not to initiate patent lawsuits against anyone who wants to use Tesla’s technology “in good faith". Since 2003, when Tesla Motors was set up, the pioneering company has accumulated over 2,000 patent applications and pending patents, 104 of them to do with batteries, the key component in electric vehicles. Unfortunately, a lack of standardization and each manufacturer’s insistence on building its own proprietary battery systems has actually held back their volume production which would reduce costs.

Innovation economists Richard R. Nelson and Giovanni Dosi have long argued that patents actually stymie, instead of furthering, the process of knowledge. The ongoing battle between Apple and Samsung over smartphone patents has clearly inhibited real innovation in the area. This, despite the success of Linux proving the efficacy of collaborative working in creating intellectual property.

Which is why, Musk has invoked the spirit of the open source movement in freeing his company’s patents “for the advancement of electric vehicle technology". Not only is his move geared to disrupt the natural order of the automobile industry where commercial patents reign, it actually throws into question the very relevance of patents in the new knowledge economy. If the move inspires other car manufacturers to build more electric vehicles, it could lead to the development of new recharging infrastructure—the essential enabler for widespread adoption by consumers. On his blog, Musk writes that Tesla’s competition isn’t from other electric vehicles but from the many gasoline-powered cars. To compete successfully he, as a pioneer in the business, needs to foster an eco-system for cheaper parts, assemblies and vitally, charging devices. That can only happen if there is a sizeable volume of these cars being made. Pertinently, Tesla currently has just 97 charging stations in the US, while fossil-fuelled vehicles have access to a massive network of gas stations.

Cooperation not competition then is the answer. Thus, insurance analysis firm uAutoInsurance identified about 25 Tesla patents for technology that reduce the risk of battery fires, which could lead to safer electric cars in the same way that Volvo’s decision in 1959 to give away its patent for the three-point seat belt did for conventional cars.

Companies such as BMW have been among the first makers to talk to Tesla post Musk’s announcement. But his move is a far greater opportunity for nimble players in markets such as India where the product would have a large potential consumer base were it not for the prohibitive pricing. Without the burden of steep development costs or high license fees a Mahindra and Mahindra, whose acquisition of the Reva electric car has done precious little for the movement in India, could finally find some momentum. As could a Tata Motors whose Nano based on conventional energy, has been a write-off.

The first electric car was produced in the 1880s, before the internal combustion engine took over consigning electric vehicles to commercial oblivion. With the urgent need for cars to reduce their carbon footprint, if Musk’s move can lead to more eco-friendly vehicles, it could redefine not just the way we commute but also the way we view innovation.

Will Tesla’s decision lead to more innovation? Tell us at

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Published: 25 Jun 2014, 05:06 PM IST
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