"Radical Patent Move" Speculation

[ggies07]

I know most of us are shareholders, but if the open patents to others produce more AND better EVs, then I'm all for it. I'm not a shareholder to solely make money off this company, yes, I've seen what the future could hold and think I can make money off of it, but I'm more for the spreading of EV adoption and getting off oil. My bottom line is for us to get onto sustainable energy as fast as possible and if I make money on it, then that's great.

 

[eepic]

Tesla is and will remain supply restricted beyond 2020... They barely have enough batteries to supply the Model S and X... And the gigafactory will not sustain 3rd gen and beyond... I find it hard to believe they will do any significant licensing deals where those components will go to other competing cars

That's precisely why they are sharing the basic recipe, while keeping the secret sauce to themselves.

 

[Lump]

Tesla is and will remain supply restricted beyond 2020... They barely have enough batteries to supply the Model S and X... And the gigafactory will not sustain 3rd gen and beyond... I find it hard to believe they will do any significant licensing deals where those components will go to other competing cars

Totally agree, the other manufactures end up at the end of the line at the Giga factory waiting for batteries forcing them to invest & partner into worldwide GF construction, a few patents now result in billions of batteries sold?

 

[SteveG3]

I know most of us are shareholders, but if the open patents to others produce more AND better EVs, then I'm all for it. I'm not a shareholder to solely make money off this company, yes, I've seen what the future could hold and think I can make money off of it, but I'm more for the spreading of EV adoption and getting off oil. My bottom line is for us to get onto sustainable energy as fast as possible and if I make money on it, then that's great.

ggies, I can see what you are saying, even if I'm somewhat more ambivalent on this than you.

fortunately I don't think it really matters... as I suggested on the Annual Meeting thread, I think Tesla is approaching what you could call "escape velocity" in terms of competition. Even if they give away all their secrets, the magnitude of investment needed to convert infrastructure from ICE production to BEV is so massive (roughly a trillion dollars) that Tesla is still very likely to be supply constrained for decades. I went into more detail on this in that thread if you are interested.

2014 Annual Shareholders Meeting - Page 10

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Totally agree, the other manufactures end up at the end of the line at the Giga factory waiting for batteries forcing them to invest & partner into worldwide GF construction, a few patents now result in billions of batteries sold?

I think the idea we are speculating about (and we are speculating, who really knows what Elon has in mind) would be Tesla opening up battery pack patents so other players can come in with their own resources to build their own Gigafactories, adding supply rather than waiting at the end of the line for Tesla battery production. This would be consistent with Elon's mission of expediting the adoption of EVs, which was referred to in the question that got Elon revealing he is considering something radical in terms of the patents.

 

[Lump]

ggies, I can see what you are saying, even if I'm somewhat more ambivalent on this than you.

fortunately I don't think it really matters... as I suggested on the Annual Meeting thread, I think Tesla is approaching what you could call "escape velocity" in terms of competition. Even if they give away all their secrets, the magnitude of investment needed to convert infrastructure from ICE production to BEV is so massive (roughly a trillion dollars) that Tesla is still very likely to be supply constrained for decades. I went into more detail on this in that thread if you are interested.

2014 Annual Shareholders Meeting - Page 10

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I think the idea we are speculating about (and we are speculating, who really knows what Elon has in mind) would be Tesla opening up battery pack patents so other players can come in with their own resources to build their own Gigafactories, adding supply rather than waiting at the end of the line for Tesla battery production. This would be consistent with Elon's mission of expediting the adoption of EVs, which was referred to in the question that got Elon revealing he is considering something radical in terms of the patents.

In that scenario who would be capable of building a GF, Samsung, LG, Foxconn?

 

[SteveG3]

In that scenario who would be capable of building a GF, Samsung, LG, Foxconn?

Sounds about right. I'd add that Foxconn and other Chinese companies might be in that group with the benefit of large dollars from the Chinese government (I see them as the most clear powerful force with a passion for EVs on a scale like Elon's). If such entities moved in that direction it would also be added pressure/incentive for the incumbent automakers to do likewise.

 

[The Blue Owl]

Sounds about right. I'd add that Foxconn and other Chinese companies might be in that group with the benefit of large dollars from the Chinese government (I see them as the most clear powerful force with a passion for EVs on a scale like Elon's). If such entities moved in that direction it would also be added pressure/incentive for the incumbent automakers to do likewise.

And when that happens, we will get to a crucial tipping point that will trigger the avalanche. Once one or two of the big manufacturers commit to EVs in a big way, it will convince prospective car buyers that this transition is inevitable, and that it is happening NOW. People looking to buy new will start postpone buying ICEs if they feel that EVs are here or right around the corner. Why buy yesterday's technology when you can get tomorrow's with some patience and maybe a little bit more expense? Soon after, you'll start seeing perpetually increasing ICE inventories, wars of incentives, production lines being shut down, then a bankruptcy or two, and industry consolidation. When the dust clears, the only ones left standing will be the ones with the Gigafactories.

At least this is how I imagine it will go down. I see a very slow start up to a point, after which it will turn into a sudden, catastrophic transformation.

 

[kenliles]

Sounds about right. I'd add that Foxconn and other Chinese companies might be in that group with the benefit of large dollars from the Chinese government (I see them as the most clear powerful force with a passion for EVs on a scale like Elon's). If such entities moved in that direction it would also be added pressure/incentive for the incumbent automakers to do likewise.

If they do it with Chinese govt dollars- it would need to be limited to internal market (likely anyway) - Trade Orgs would be all over anything shipped out of that source. If I were the Chinese I'd do it anyway as their market no longer needs scale from overseas. But the companies partnering with such a move would necessarily have to size for a non-export scope

 

[SteveG3]

And when that happens, we will get to a crucial tipping point that will trigger the avalanche. Once one or two of the big manufacturers commit to EVs in a big way, it will convince prospective car buyers that this transition is inevitable, and that it is happening NOW. People looking to buy new will start postpone buying ICEs if they feel that EVs are here or right around the corner. Why buy yesterday's technology when you can get tomorrow's with some patience and maybe a little bit more expense? Soon after, you'll start seeing perpetually increasing ICE inventories, wars of incentives, production lines being shut down, then a bankruptcy or two, and industry consolidation. When the dust clears, the only ones left standing will be the ones with the Gigafactories.

At least this is how I imagine it will go down. I see a very slow start up to a point, after which it will turn into a sudden, catastrophic transformation.

I think you are right about the tipping point idea. I think it's all about when the incumbent automakers realize they have to do this... and I agree that would be when one or two of their own make that move. I think they all know EVs of the quality Tesla is turning out are inevitably a better value to the consumer than ICE cars. Until one of them breaks ranks, and starts selling an EV of that quality, they're all content to continue making money with what they already know how to do, ICE (Nissan excepted). The day one or two of them break rank, they know it's the beginning of adapt or be extinct, even if extinction would take a decade or two to play out. As to the public, I really think at least a third are already ready for something like a well-executed Gen III car. The day Tesla actually starts selling such a car, I think about 2/3 of the public will be convinced if only half in developed markets can afford it. I think it's all about putting a giant dent into the other automakers resistance to transitioning to EVs. I think this is what Elon ruminates on when he spends time ruminating (oh, of course, this and Mars).

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If they do it with Chinese govt dollars- it would need to be limited to internal market (likely anyway) - Trade Orgs would be all over anything shipped out of that source. If I were the Chinese I'd do it anyway as their market no longer needs scale from overseas. But the companies partnering with such a move would necessarily have to size for a non-export scope

Kenliles, not sure exactly what you mean here.

 

[The Blue Owl]

As to the public, I really think at least a third are already ready for something like a well-executed Gen III car. The day Tesla actually starts selling such a car, I think about 2/3 of the public will be convinced if only half in developed markets can afford it.

I agree that people are ready, in the sense that if they see such cars being pushed by big manufacturers, they'd buy them today. But I think that the vast majority of buyers out there still haven't heard of Tesla, or if they did, they don't see themselves buying their products, at least not today. To get an avalanche, you need the huge mass of mainstream customers out there to do more than just entertain the idea of buying electric. They need to be convinced it's for real, and most people don't feel comfortable to live on the leading edge. They need to be told it's ok to buy this tech, and they unfortunately believe Ford, Toyota, and Daimler over Tesla, as preposterous this situation may seem to hard core EV advocates.

It's a matter of getting both mainstream buyers and mainstream manufacturers in the mindset that this is not just possible or desirable, but inevitable. Manufacturers need to believe buyers will be there, and buyers want to see the cars on dealership lots. They are waiting on each other and we get deadlock.

Tesla doesn't have, and won't have for a long time, the production capacity to accomplish this transition by themselves. They absolutely need the other car makers to make the jump. This is the context in which I see Elon exasperated that something must be done to give other car makers a shove into the future, and that something might be technology sharing.

 

[kenliles]

Kenliles, not sure exactly what you mean here.

If the Chinese govt funds the GF, the production from that factory (included in an EV or as a separate pack-sale) will be tariffed heavily - (similar to Chinese Solar components now). As such, there won't be a market for those outside China as an export. So the scope of the effort should target Chinese market only, not as a potential export business

 

[SteveG3]

I agree that people are ready, in the sense that if they see such cars being pushed by big manufacturers, they'd buy them today. But I think that the vast majority of buyers out there still haven't heard of Tesla, or if they did, they don't see themselves buying their products, at least not today. To get an avalanche, you need the huge mass of mainstream customers out there to do more than just entertain the idea of buying electric. They need to be convinced it's for real, and most people don't feel comfortable to live on the leading edge. They need to be told it's ok to buy this tech, and they unfortunately believe Ford, Toyota, and Daimler over Tesla, as preposterous this situation may seem to hard core EV advocates.

It's a matter of getting both mainstream buyers and mainstream manufacturers in the mindset that this is not just possible or desirable, but inevitable. Manufacturers need to believe buyers will be there, and buyers want to see the cars on dealership lots. They are waiting on each other and we get deadlock.

Tesla doesn't have, and won't have for a long time, the production capacity to accomplish this transition by themselves. They absolutely need the other car makers to make the jump. This is the context in which I see Elon exasperated that something must be done to give other car makers a shove into the future, and that something might be technology sharing.

I see what you are saying, the other automakers coming in will play a role in swaying a significant part of the population, but I think the incumbents main potential role is getting moving on increasing supply rather than demand (at best Tesla will be making 3 million vehicles in the early-mid 2020s). Tesla is developing credibility with an ever growing part of the population. By the time Gen III comes out, there will be a 5 year track record on the Model S, and quite a media splash leading up to the Gen III launch. I think by 2017 more Americans than not will have heard of Tesla (perhaps already true), and they will have a very favorable opinion of the company. They already nabbed 5th most respected brand in Consumer Reports survey 6-12 months ago.

 

[30seconds]

I don't think Tesla will completely "open source" their IP. the main reason is that it would either substantially raise or limit their access to additional capital. In other words there would be substantial risk of no more bond/ equity raises which would allow the car companies to basically "sit" on the open sourced ID and let Tesla remain a niche manufacturer.

the only way that EM pushes the global companies to go EV is to find a balance between 1. TSLA eating their lunch and 2. a path to show them how to manufacture.

A better solution may be to form a consortium - something along the lines of 1. TSLA adds their patents to the consortium and 2. other manufacturers add their patents to the consortium. All manufactures who take part can use the pool of patents for free or for a low, pre-negotiated set rate to the patent holder

 

[SteveG3]

If the Chinese govt funds the GF, the production from that factory (included in an EV or as a separate pack-sale) will be tariffed heavily - (similar to Chinese Solar components now). As such, there won't be a market for those outside China as an export. So the scope of the effort should target Chinese market only, not as a potential export business

I see. Obviously quite significant if the cars made in China were strongly hampered from entering international markets. At the same time (as I think you already alluded to) the Chinese internal market is as big as the U.S. market and growing way faster. It's been the best growth driver for the global automakers sales and will likely continue to be so for many years to come. If Tesla adopts a patent policy that leads to a dramatic increase in battery supply within China for use in their own EVs, it will not only add those new EVs in China, but be a real incentive to the non-China automakers to get moving. Chinese plants sprouting up at great speed allowing China to produce several million EVs with Tesla battery tech in say 5-10 years would impact the automakers outside China.

 

[The Blue Owl]

I see what you are saying, the other automakers coming in will play a role in swaying a significant part of the population, but I think the incumbents main potential role is getting moving on increasing supply rather than demand (at best Tesla will be making 3 million vehicles in the early-mid 2020s). Tesla is developing credibility with an ever growing part of the population. By the time Gen III comes out, there will be a 5 year track record on the Model S, and quite a media splash leading up to the Gen III launch. I think by 2017 more Americans than not will have heard of Tesla (perhaps already true), and they will have a very favorable opinion of the company. They already nabbed 5th most respected brand in Consumer Reports survey 6-12 months ago.

Right, I agree. I'm thinking of the moment when we get past the point of no return. I'm not referring to a time when there will be more demand for compelling electrics (that time is already here, as you said), but when the demand for ICEs will irreversibly drop off a cliff, and any ICE car maker left who doesn't have EV capability will stare into the abyss and will realize it's too late for them. That's the moment I'm waiting for, and my prediction is that when that moment comes, it will happen in the blink of an eye.

 

[SteveG3]

I don't think Tesla will completely "open source" their IP. the main reason is that it would either substantially raise or limit their access to additional capital. In other words there would be substantial risk of no more bond/ equity raises which would allow the car companies to basically "sit" on the open sourced ID and let Tesla remain a niche manufacturer.

the only way that EM pushes the global companies to go EV is to find a balance between 1. TSLA eating their lunch and 2. a path to show them how to manufacture.

A better solution may be to form a consortium - something along the lines of 1. TSLA adds their patents to the consortium and 2. other manufacturers add their patents to the consortium. All manufactures who take part can use the pool of patents for free or for a low, pre-negotiated set rate to the patent holder

Consortium idea makes sense. It could protect Tesla from being blocked from access to some future EV technology. It could also be set up so as to bring Tesla access to funds to speed up their own capacity build out.

I agree with the risk you are mentioning. Even if it wont actually impact demand for Tesla's cars, those Tesla may need to turn to for capital may not be convinced of this. For that matter, Tesla really can't do anything to bold until they lock up a deal with Panasonic. Panasonic has already made comments that they'll invest in GFactory 1 over time as they see demand established. They might panic that demand would be doomed if Tesla opens up the patents any time soon. So, if this in fact is what Elon is contemplating, I guess he either convinces Panasonic it will work (not sure he can do), or he doesn't really unveil the plan until Panasonic's investment in the Gigafactory is a done deal.

one other point, when I first posted about his on the Annual Meeting thread, I mentioned that I wouldn't want to see Tesla make any kind of bold move until they've successfully executed on Gen III mass production. It's only with a vehicle of clearly better value than ICE vehicles that I think this move can be made with confidence that it wont hurt Tesla investors (what I likened to "escape velocity" from competition)

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Right, I agree. I'm thinking of the moment when we get past the point of no return. I'm not referring to a time when there will be more demand for compelling electrics (that time is already here, as you said), but when the demand for ICEs will irreversibly drop off a cliff, and any ICE car maker left who doesn't have EV capability will stare into the abyss and will realize it's too late for them. That's the moment I'm waiting for, and my prediction is that when that moment comes, it will happen in the blink of an eye.

that blink of an eye scenario would be sweet after years of what are they waiting for!

 

[kenliles]

I see. Obviously quite significant if the cars made in China were strongly hampered from entering international markets. At the same time (as I think you already alluded to) the Chinese internal market is as big as the U.S. market and growing way faster. It's been the best growth driver for the global automakers sales and will likely continue to be so for many years to come. If Tesla adopts a patent policy that leads to a dramatic increase in battery supply within China for use in their own EVs, it will not only add those new EVs in China, but be a real incentive to the non-China automakers to get moving. Chinese plants sprouting up at great speed allowing China to produce several million EVs with Tesla battery tech in say 5-10 years would impact the automakers outside China.

agreed- it would help outside manufacturers and China doesn't need external markets, so I'd be all for it. As long as everybody understands it going in. Frankly I would support such a move in all countries, given the urgency

 

[gg_got_a_tesla]

Confirmation, sort of, by Elon in the UK to the BBC about the patent giveaway move:

BBC News - Tesla boss Elon Musk hints at technology giveaway

 

[Chickenlittle]

Confirmation, sort of, by Elon in the UK to the BBC about the patent giveaway move:

BBC News - Tesla boss Elon Musk hints at technology giveaway

I don't want to second guess but if he does he better start lawyering up. Can you imagine lawyers lining up if stock drops from a patent give away? I am not sure he would win that one. Got to be twist in the plot

 

[RationalOptimist]

I don't want to second guess but if he does he better start lawyering up. Can you imagine lawyers lining up if stock drops from a patent give away? I am not sure he would win that one. Got to be twist in the plot

The way it could make sense is two-fold:

1) Ignite massive extra public interest in electric vehicles. Once the world assumes that the industry is indeed going electric, the market will accelerate much faster. If Tesla continues its pace of execution it can still have a v significant market share in what would become a much bigger market. Better to be a large fish in a giant pond than a giant fish in a tiny pond.

2) They may consider that their ultimate business is in a combination of a) providing the batteries and b) controlling the supercharger network. If giving away their technology sparked 3 or 4 manufacturers to adopt Tesla's supercharger platform, those stations will roll out at incredible speed internationally and days of range anxiety will be over once and for all... With Tesla being the platform owner. That is going to be an incredibly profitable position.

Just speculation. I agree it's a little scary. But Elon has better system-design skills of anyone out there.