Monday, 6 October 2014

Why Tesla Motors Could Be the Most Important Car Company in the World.


Tesla Motors founder Elon Musk- often dubbed 'the
real life Tony Stark'.
One of the hottest new companies to come out of the golden hills of Silicon Valley is not another computer-based company, but, for the first time, a car company. 
Tesla Motors, the brainchild of a founder of PayPal, Space X and numerous other ventures Elon Musk have set out to revolutionise the car industry.

Although it's not overly apparent at the moment, much of the conventional car industry today is broken. Yes, cars are being innovated, crammed with more technology in the shape of screens, cameras and whatnot, and they are becoming more comfortable and so on but fundamental environmental problems still exist (yes, despite the increasing MPGs we are seeing). 
First and most important is the issue of the environmental impact that cars today hold. In 2011 the number of cars worldwide surpassed 1 billion, with newly boosted economies such as China and India in particular seeing huge increases in car usage. And the growth is not expected to stop any time soon; in the same year, the OECD's International Transport Forum claimed we could see up to 2.5 billion cars on the roads by 2050.

Now there are two major environmental issues with such a large number of cars- firstly, the large majority of cars on the road (particularly in newer economic giants such as those in Asia) pollute huge amounts of harmful gases- mixtures of various hydrocarbons, carbon monoxide and dioxide, which all contribute to a polluted air that with it carries increased risk of cardiovascular disease and cancer to humans, poor nutrition for plants and ominously it is a major cause of global warming, which, causing the melting of polar caps, could in future lead to huge natural disasters
Cars are certainly dangerous to the environment- according to the US Environmental Protection Agency, transportation (most of which is in the form of cars) contributes 27% of the greenhouse gas emissions in the USA.

Smog, one of the many unpleasant effects of pollution,
shrouds Paris.
Another key issues relies in the scarcity of the resources required to continue our dependency on automobiles. According to the World Bank, for every 1000 citizens of the USA there exists 786 cars in the country- when you consider the large chunk of people unable to drive, this makes for over a car per person, and the 300 million population of the US makes these statistics even worse. The US, while a prominent example, is not alone in this obsession with cars- the UK's figure lay at 516, still a large amount.
So we are so dependent on cars- but the large majority (over 95%) of cars sold in the US are conventional petrol/diesel affairs. Considering this, the seemingly endless growth of car ownership and the fact that BP claimed there to be only 53.3 years of oil left on the earth, it really does seem we can't afford to continue depending on these vehicles because one day in the near future, we will not be able to run them (one can state that, as has often been the case, new oil reserves will be found in the future, but can we really afford to rely on that anymore).

So, back to Tesla. Basically, they want to circumvent all these issues associated with conventional fossil fuel cars. So how do you do that? Make hybrid cars, of course.
But that's not enough; hybrid cars are hybrid, remember- a mixture of petrol/diesel and electric power. They still require these preciously damaging commodities to be used to work, and above a certain speed they still pollute.

The Tesla Model S, Musk's first major entry into the electric
car market.
So Tesla set its sights to popularise the fully electric car, with their first stab at the premium saloon market coming in the very easy on the eye Model S, and a forthcoming more affordable 'Model 3'. The aim is to bring electric cars (which require absolutely no fossil fuels to be inserted, nor burns any harmful gases) into the mainstream, but a certainly interesting move by Tesla has been that, unlike most companies, they seek not to monopolise this new industry by innovating internally and patenting endlessly to block out competitors. 
No, they are, spectacularly, doing quite the opposite: in a bold move earlier this June, Tesla opened up its collection of 249 patents to use by any competitor 'in good faith', something Elon Musk claimed to be part of the 'open source movement' with the intent of sparking genuine market development and competition in the bare area of electric cars.

In normal business terms, this is a ludicrous move- patents, after all, have been the focus of this mega conflict between two technology giants, Apple and Samsung. Conflict over patents cost these sides over a billion dollars- so why are Tesla just letting go of all of them?

It's a textbook example of what economist Umair Haque calls a development of 'market resilience' in his book The New Capitalist Manifesto. Tesla could have kept tight hold of the revolutionary patents they possessed, and with their incredibly 'cool' brand they could have dominated the electric car market for the next decade via their exclusive technologies. But no- Musk and co. opening up these patents has the effect of opening up the market to fair and vibrant competition. Tesla perhaps a year or two ago would have easily been crushed by huge competitors- but now it can stand on its two feet it wants to kick of the stabilisers and compete. 

BMW have already made their entrances into
Tesla's market with their i3 and i8 electric cars.
Opening up the patents shows a desire to see development in the market, and is actually a dangerous move for Tesla. BMW could tomorrow launch a Model S competitor in a fully electric 5-Series- the huge marketing and already existing prestige of the brand could possibly reduce Tesla to just a minor 
player in the market. Mercedes, Audi, Toyota, Ford, all these brands and more could do the same.

This is where the 'Resilience' mentioned by Haque comes into play; Tesla, by opening itself up to market competition, will have to fight to grow, fight via innovation, genuine development of technology, and so will its competitors if they want to grab a share of this growing market. Tesla won't have the security of a cocoon of patents- but neither will they have the temptation of laziness that comes with market security- just ask Microsoft about what complacency brought by monopoly did for them in the noughties (cough, Vista, cough).

Tesla opening up their patents was a bold move indeed, especially by a relatively new entrant into the automotive market. But it is a truly innovative, progressive move that will hopefully boost the automotive industry as a whole, and help us escape from the tyranny of conventional gas-guzzlers by providing a cleaner, affordable and most importantly more sustainable alternative.
It will be a long, hard battle for Musk and Co.- but we wish them the best of luck.
Long live Tesla. 

SOURCES (and recommended reads):
The Capitalist Manifesto by Umair Haque is a real eye opener to the next generation of corporation- the Googles, the Teslas, the Nikes and the Wal-Marts (yes, really, you'll have to read the book to find out why). It's definitely worth a read: http://www.amazon.co.uk/The-New-Capitalist-Manifesto-Disruptively/dp/1422158586

Space X, Elon Musk's latest venture into the stars: http://www.spacex.com/

Number of Cars in the World surpass 1 Billion: http://www.huffingtonpost.ca/2011/08/23/car-population_n_934291.html

We Could See 2.5 Billion Cars on the Road by 2050: http://www.ipsnews.net/news.asp?idnews=55943

Global Warming and Natural Disasters: 

Transport responsible for 27% of US Greenhouse Gas Emissions: http://auto.howstuffworks.com/air-pollution-from-cars.htm

World Bank Global Car Ownership Stats: http://data.worldbank.org/indicator/IS.VEH.NVEH.P3


Elon Musk Announcing Release of All Tesla Patents: http://www.teslamotors.com/blog/all-our-patent-are-belong-you 

List of current 2014 Tesla Motors Patents (as of 5/10/14): http://stks.freshpatents.com/Tesla-Motors-Inc-nm1.php


Tesla Official Website: http://www.teslamotors.com

BMW Official Website: http://www.bmw.com
Mohammad Lone Editor