Tesla's Elon Musk Vows to Make Electric Car Technology Available for Free to Rivals

Elon Musk

The mogul cites the "trickle" of electric cars in his decision to open Tesla patents to anyone who wants to use them. UPDATED: Model X due early 2015, Morgan Stanley calls Tesla "most important car company in the world."

Taking a page from the open-source movement that gave the world the Linux operating system, Tesla Motors founder and CEO Elon Musk announced last week that the company would not pursue lawsuits against anyone who wants "in good faith" to use the company's proprietary electric-car technologies.

Far from fazing Wall Street, Musk's announcement seems only to have enhanced Telsa's reputation as an innovator with a bright future. In emails to customers yesterday, the company said its long-delayed Model X crossover SUV would go into production in early 2015, CNN reported. Customers have placed $40 million in deposits on the Model X since the car was unveiled two years ago.  

In a research note released today, Morgan Stanley calls the electric car company, which currently manufacturers a single car, the Model S, "arguably the most important car company in the world. We are not joking."

The report cited Tesla's increasing influence in the auto industry--car makers from GM to BMW are placing greater emphasis on perfecting electric cars, which today make up less than 1 percent of vehicles sold annually.

Morgan Stanley quoted a BMW engineer who acknowledged that Tesla had shaken up a complacent industry with its technology--BMW recently introduced the all-electric i3 and plug-in hybrid i8, the first cars in its new multi-billion dollar division dedicated to manufacturing  alternative fuel vehicles. Morgan Stanley noted that BMW "will be a stronger company longer term  because Tesla is around. Whoa." 

"Yesterday there was a wall of Tesla patents in the lobby of our Palo Alto headquarters," Musk said in a blog post announcing the non-enforcement of its patents. "That is no longer the case. They have been removed in the spirit of the open-source movement for the advancement of electric-vehicle technology."

Musk said that Tesla originally created patents to keep the big car companies from copying Tesla's technology and then overwhelming it with their much larger sales and manufacturing resources. But, Musk said, "we couldn't have been more wrong. The unfortunate reality is the opposite: Electric programs … at the major manufacturers are small to nonexistent."

Tesla's true competition is not the trickle of non-Tesla electric cars, Musk said, "but the enormous flood of gasoline cars pouring out of the world's factories every day."

Musk said that as the number of cars approaches 2 billion globally, it would be impossible for Tesla alone to build electric cars fast enough to address the crisis in carbon emissions and its contribution to global warming. An open-source platform for electric-car technology, he argues, would accelerate the process.

"We believe that Tesla, other companies making electric cars and the world all benefit from a common, rapidly evolving technology platform," Musk said.

The Wall Street Journal speculated that behind Musk's motivation was "the recognition that intellectual property as a competitive advantage is ephemeral at best." The newspaper cited Facebook and Goldman Sachs as examples of companies that are contributing to open-source projects to encourage the build-out of common infrastructure while keeping only those technologies that create an actual competitive advantage.

Musk seems to agree.

"Technology leadership is not defined by patents … but rather by the ability of a company to attract and motivate the world's most talented engineers. We believe that applying the open-source philosophy to our patents will strengthen rather than diminish Tesla's position in this regard."

Shares in Tesla closed up more than 3 percent today at $231 following Morgan Stanley's report.