The Tesla Effect

Tesla Car

Are you in the market for an electric car? Thanks to Tesla, there might be more of them on the road in the near future. It was recently reported that Elon Musk, CEO of Tesla Motors, made a bold decision to make his patent for Tesla cars “open source”, making the once proprietary technology available to all. Some may question this move, but Musk’s motivation isn’t driven by money. His strategy? Spread the good.

In a recent blog post on the Tesla website, Musk recounts how he once gravitated towards patents as a way to protect his company from automakers that might copy his technology platform. Musk had a recent revelation, saying that “Our true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world’s factories every day.” According to CNBC, 96,000 electric vehicles were sold in the U.S. last year. That’s less than one percent of the auto industry’s total sales of 15.6 million cars. The hope is that by sharing Tesla’s innovative patent, production of electric cars will increase at a faster rate, creating more cash flow for major automakers, and possibly drive down the cost of electric cars, making sustainable transportation available to all.  Nikola Tesla, the company’s namesake, would be proud.

While Musk has the bigger picture in mind by taking an important step towards combating global warming, where does this leave Tesla investors? Tesla’s stock price has dropped slightly, despite a 35 percent increase last year. Will other auto makers be willing to invest more money in this newly available technology, in the hopes that it will drive sales? Time will tell.

In any case, it’s still less expensive to buy a share of Tesla stock than to buy a Model S (starting price: $71k).

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