Why Detroit will squander Tesla's patent present

Why Detroit will squander Tesla's patent present

Summary: Chrysler, Ford and GM need to be willing to kick Big Oil in the crotch to bring affordable EVs to the general public.

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As many of you probably have noticed, I've taken an interest in electric vehicles (EVs) in the last two years.

EVs, however, have not been doing particularly well as an extant species. It seems to annoy the hell out of people that I've pointed this out, but the numbers don't lie: compared to gasoline and even diesel-powered vehicles, the sales stink.

Sure, they've been getting a little better. But in terms of making a real dent in the conventional vehicle market, worldwide EV sales are practically a rounding error.

There's a reason why this is the case. EVs are expensive compared to new conventional vehicles. There's a huge secondary market for used vehicles that EVs are also competing with. The range of EVs stink because of the battery technology in use, which is also expensive to produce.

And yeah, it would be nice if carbon emissions from fossil fuel power plants that power our homes, businesses, infrastructure and, of course, the EVs could be reduced, but in reality it doesn't factor into purchasing decisions whether to EV or not to EV as a whole.

Drivers don't really care about being green, no matter how important a problem it is that needs to be solved. And yeah, reducing carbon emissions is important.

Most people when they buy a car have a decision tree that goes something like this:

  • Can I afford the price of this new or used vehicle, via financing/equity or cash outlay?

  • Can I afford the insurance?

  • What kind of maintenance costs am I looking at for the next five years of ownership?

  • Does it get good mileage? 

  • What kind of money can I expect to pay for fuel given my driving habits?

EVs fail this decision tree often. But it doesn't have to be that way.

The only EV manufacturer that isn't failing right now is Tesla. The company borrowed $465 million from the US government and repaid it nine years earlier than expected. There is a worldwide demand for their vehicles, albeit small, in the order of about 35,000 units per year.

It's a $70,000 luxury sedan, which sets it apart from the other EVs on the market. It also has a 265-mile range with a battery pack that can be charged for a mere fraction of the comparative mileage cost of a gasoline or a diesel car.

The technology in the car is state of the art, but it's relegated to rich people. 35,000 units a year seems like a lot, but for relative comparison, sales of Mercedes, BMW, and Lexus in just the United States alone were about 800,000 units in 2012.

If Tesla goes on its merry way, it will probably stay a small-scale car company. Profitable, but a luxury, boutique product. Perhaps we'll see around 100,000-200,000 of them on the world's roads in three to five years.

That would be an outrageously successful outcome for Tesla.

"To build a much larger EV industry, you would need this for major replaceable component parts, service centers, and charging infrastructure, among other things."

But today something amazing happened. Today Tesla announced that it is effectively "open sourcing" its intellectual property, which is substantial, on the order of 250 patents.

That means that the larger automobile manufacturers can use Tesla's technology to build EVs at scale, if they do so "in good faith."

I'm not going to try to interpret the legal ramifications of such things but I will take it at face value that it is Tesla's intention to work with larger automotive manufacturers to mass-produce cars using agreed-upon reference designs and standards, of which Tesla could license.

To build a much larger EV industry, you would need this for major replaceable component parts, service centers, and charging infrastructure among other things.

I suspect that one of the reasons behind Elon Musk's open source motivations is that he is looking for large partners to finance and build the many "gigafactories" needed to mass-produce the batteries at scale, which is the single largest component cost of his cars, and the patent portfolio of Tesla is the "carrot."

Look, if Musk can get the price of his Tesla sport sedan down to $35,000 I'll buy one myself. And if Chrysler, Ford, GM and all the rest can make a family EV for $25,000 or less using his technology then we have an industry.

But here's the problem. In order for the Big Three and the rest to make that leap, even with the patents, they will need to make substantial investments, on the order of many billions of dollars. Some, like GM, have already made initial investments in EV tech, and could be a natural fit for Tesla in an overall manufacturing partnership. 

But to do more than just make a symbolic move in this direction means that these huge automakers have to piss off Big Oil in the process. And this is a marriage that has lasted a hundred years.

You don't break up marriages like that so easily. And there has to be significant incentive for the big auto companies to do this.

Their marriage with Big Oil remains profitable despite the fact we all know that petroleum is not a sustainable resource, that we're poisoning the planet and accelerating global climate change by burning fossil fuels. Not to mention we're continuing to make the despots and horrible regimes in a very politically unstable part of world filthy rich, which could have disastrous consequences if that petroleum supply should somehow be disrupted by regime change.

The patent portfolio from Tesla is a big carrot, but unless our world governments step in and give them huge incentives to do otherwise, I don't see the big auto manufacturers taking advantage of Musk's gifts and breaking up a century-old romance with Big Oil.

I hope I'm wrong with this one. Talk Back and Let Me Know.

Topics: Emerging Tech, Open Source, Patents, Innovation

About

Jason Perlow, Sr. Technology Editor at ZDNet, is a technologist with over two decades of experience integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer.

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219 comments
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  • This topic are clearly beyond your area of expertise...

    Dear Jason. I have great respect for your technology articles when you write about the issues that you do understand, i.e., software, hardware, IT industry, etc. In my opinion, in this article you have ventured into deeply political areas of alternative energy, electric cars, car manufactures, oil industry, etc.
    mgreen135
    • he is paid for electric cars bashing

      he is paid for electric cars bashing, he must support oil industry to stop real progress because the stop of real progress is what keeps sheiks, banks, oil industry full of pollution in charge of this world
      Jiří Pavelec
      • You didn't read the article

        Period.
        jperlow
        • You are able to foresee just one day properly.

          Period :)
          Jiří Pavelec
        • No more menstruation jokes.

          Period.
          Mokusatsu
        • Re: You didn't read the article..

          Jason..Good article, and I agree with a lot of your points. My wages were cut by 30% last year and as a result we've had to change our lifestyle, "we" meaning me and my wife whom doesn't work..

          We live in Maine, and are out in the country, not to be confused with up-country. But in order to go shopping, food, clothes, etc, it's a 30 minute ride.

          To get to work, it's a 1 hour ride, to get to our current doctor, another 45 min ride..you get the picture.

          One income, a mortgage, and EV's with their current price tags, are just untouchable. I have a cheap car (Ford Focus) that gets about 38 mpg and cost $17,500. new. But living in Maine, you also have to have at least 1, 4WD vehicle.

          Since I don't have to drive it every day, it can be an older vehicle (2002 Dodge truck, 1/2 ton), with about 200,000 miles on it.

          Until EV's come down in price, people like me will never be able to afford to buy one and help "save the planet". Besides just the mileage I drive(and no there are no car pools where I am), I would need to convince work to set up a power supply to charge the vehicle, while I'm there.

          And from a business perspective, they would be loosing money to do so, because once they put in one charging station, they would need to supply more to be fair to everyone. And in this current economy, I just don't think they would spend the money.

          So even if it would be cheaper for me for driving, there's just no way to go the EV route. If you live in the cities, such as Portland, then yes it would.

          My wife and I are looking into maybe buying a hybrid 4WD vehicle some day to replace our truck, or maybe even when we need to replace the car, but it would have to be used and at a cheap price.

          Now, if as you state, the big 3 would get the prices down, to less than $25,000.00, then it would start to make more sense, for me, I'd prefer the price closer to $20,000, but I doubt this will ever happen.

          To the automakers, they wouldn't be making enough profit, and I'd also be willing to bet they probably get some type of kickbacks for continued production of gas /diesel vehicles from the Big Oil Co's, IMHO.

          Sorry for the long reply, but this is a sore topic for me...

          Thanks..
          TW
          T-Wrench
      • Who is "He"?

        Are you talking about Jason Perlow or the OP, mgreen135? Perlow's key point has to do with upsetting the applecart of Big Oil and the Big Three. There is so much history of collusion on this matter that it is beyond debate, except by Big Oil and Big Three who can always come up with some convoluted reason to squash a 75 MPG carburetor or some other advance that would chop profits.
        bunkport
        • Please point to a source of collusion

          Auto makers are out to make profit. They could care less if those cars run on oil, natural gas, batteries, etc. They are averse to change because change means risk. A billionaire like Musk takes the risk because he's one man, does not answer to anyone but himself, and doing things like Tesla is more of a hobby then capital investment.

          I think electric cars are the future but I would not buy one anytime in the future as I live in a state that spends 4 months in the snow and battery tech is flaky at best up here.
          Rann Xeroxx
          • A state in winter and you think . . .

            Tesla won't be reliable there? Google these three words "Tesla Sales Norway." Go ahead, we'll look for your reply. I am a Tesla investor having followed Elon Musk since the PayPal deal with eBay. When they fist put the roadster on US roads in 2008 and still did not IPO I almost despaired and had top wait until 2010 to invest all of my savings at 17 bucks a share, when said savings was earning me less that 108 dollars of interest per year per $10k in savings, a hair over .5% At about 1000% interest in the last four years, I am very happy to have invested in three more blocks of stock when they got low enough, twice at 22.50, and just a few months ago another block at $129.00.

            So did you Google Norway Tesla sales yet? I guess they don't get as cold as your state huh? What state is that? The state of confusion?
            AreV
          • He isn't wrong

            You may be a Tesla "investor", but I put my money where my mouth is: I bought an EV (though not a Tesla). I live in Michigan and in winter, battery efficiency drops 50%. Additionally, I found that most EV charging stations were blocked in and/or covered by snow plowed over by crews clearing parking lots. In a beautiful, sunny state, I suppose life would be grand. I could drive my EV to and from work without a care in the world. However, here in the part of the world that is DESPERATE for global warming to get started any time now, they simply are not as practical as an ICE. Wish it were otherwise, but that won't make it so.
            Njia1
        • 75 mpg

          What happened to 100 mpg carburetor ?
          marchel@...
          • The aliens took it back, along with the Flux Capacitor.

            No amount of finagling with carburetor settings can alter the laws of physics. Even though gasoline is an excellent way of packaging chemical energy to allow it to be distributed easily, stored in liquid form, and burned in reasonably inexpensive engines (factors which do NOT negate its environmental problems, of course), there is not enough energy in a gallon of gasoline to move a vehicle of the size consumers WANT to drive 100 miles under traffic conditions at speeds consumers WANT to drive, with the performance consumers want, using standard drive train designs.

            The idea that you can change ONE PART of a traditional automobile and quadruple or quintuple its mileage (more like SEPTUPLE it when these rumors first started), regardless of how inefficiently drivers CHOOSE to drive (jackrabbit starts for the "fun" of wasting fuel and tire tread, not to mention the safety hazard) or are FORCED to drive (stop and go alternating with high speed, with everyone "else" tailgating), is pure wish fulfillment.

            Gas-electric hybrids help to some extent; they would work even better if, like the diesel-electric locomotive, the power were funneled through the generator to turn separate motors on each wheel. Computer control of the speed of each wheel would eliminate the steering linkage, differential, and transmission, as well as the full-length drive shaft. Regenerative (induction) braking for all but emergency stops would conserve energy lost in traffic stops and slowdowns by partially recharging the battery to power the subsequent acceleration. Stopping and starting an engine set to run at the most efficient RPM for charging ONLY, no other mechanical load except the alternator, would burn the fuel more efficiently.

            The combined effect of ALL of these changes could bring fuel efficiency for average to large family vehicles to perhaps 75 MPG, but that means MAJOR design changes, and thus, like a pure EV, a large manufacturing cost, at least until true mass production is achieved. And if you do that, you might as well go with a diesel engine, which can inherently use biodiesel fuel or even plain vegetable oil (Rudolf Diesel expected peanut oil to be the fuel of choice, before Big Petroleum proved to be less expensive to process). With solar and overnight plug-in assist, of course.

            This means there is a big chicken-and-egg (or, if you prefer, Catch 22) problem here. Renewable fuels WOULD be less expensive than petroleum IF they were widely used and thus mass produced and mass distributed, along with the parts to build and repair vehicles mass produced using them. But given the highly unequal income distribution among potential customers, great majorities of people CANNOT AFFORD either to make the investment in replacing their vehicles (notice the increasing percentage of junkers on the road?) OR to continue to work and spend on anything else except fuel (thus harming the economy's other sectors) if the price of fossil fuel (the only kind they can burn) is increased to the point that renewable fuels WOULD be competitive during the transition period.

            The only way out, it seems, is to tax fossil fuels highly enough during transition years (or decades) to discourage WILLFUL WASTE while rebating that tax money in PAYCHECKS to wage earning workers who, for the time being, have NO CHOICE but to commute to work with inefficient (usually old) vehicles over longer distances than they would prefer. Then tailor incentives to force gradual change in driving habits, home-work distance, vehicle efficiency, and other factors that are forcing waste in order to earn a living, and give financial assistance in MAKING the vehicle replacement for each family, thus giving renewable fuels a gradually increasing market base.

            Good luck getting that enacted in a country where people who would benefit from much more modest assistance are conned into voting for politicians who promise to deny it to "those other deadbeats" and deny it to their own voters who need it, in order to keep their wealthy donors getting even wealthier. Today's right wing voters, if time-traveled back to the Great Depression, would advise their (great) grandparents to vote AGAINST the very programs that have built the American middle class up until the 1970s, when they began to be dismantled.

            Conservatives say "there is no free lunch" with respect to individuals. It is also true of humanity as a whole. If free discussion and open elections do not solve these problems, eventually things will collapse and some non-free government, either left or right, will re-establish "order," either through universally giving up some freedom to keep everyone alive, or by letting millions die of starvation, disease, weather disasters, or police brutality to keep a selected wealthy elite insulated from the results.

            We must all work together, or (almost) all of us will perish or live out desperate lives in abject poverty. And the majority of us, despite our currently affluent situations, will be part of that "almost all," with only a few being the survivors. Which, by the way, would include Elon Musk regardless of how it turns out, but he has chosen to help the rest of us, if we can get the collective will to take it.
            jallan32
      • Kidding, right?

        You obviously didn't read the article or went into it with a preconceived notion. Far from bashing the EV market he points out what it will take to make EV cars practical (price and infrastructure) and the dangers of too close a link to big oil and the dependence on foreign oil, often from some very volatile countries.

        Of course nobody can accurately predict the future but you can't dismiss people trying to look into what may happen days and years down the road. Everybody does it all the time. It's the only way we can plan ahead.
        boomchuck1
      • You must have a problem with your reading skills

        did you not read the article. Probably not.
        ScanBack
    • EV weakness

      EV's currently suffer from two primary weaknesses. First recharging times are still very long compared to putting gas/petrol/diesel into a vehicle. I am not sure if it is possible to shorten recharging times to something in the same order of magnitude. Twenty minutes may be acceptable but two hours will not be acceptable. Second is the cost of replacing the battery pack when it dies as all batteries eventually do. I have seen some very hideous figures stated about this cost which if not lowered means there is not real used EV market.

      The charging time problem may be insoluble because of the heat generated during recharging. The heat must be dissipated and air is a lousy conductor of heat. If this is solved so that recharging times are roughly similar to refueling now, EVs become more practical. There are many other applications were very rapid recharging would be welcomed.

      The other infrastructure issues (lack of charging stations, standardizing plugs, etc.) are aggravations that can be solved with money and time.

      Also, while advances have been made with EVs they basic technology is very old and many Brass Era manufacturers produced EVs. The technical issues - recharging, cost of replacing batteries, and to some extent range - were the Achilles heel then and now. The key is not EVs work to some degree but are they practical for most people as a primary vehicle. The answer so far has been no for rather mundane reasons that have not really changed in the last 100 years.

      Also, the environmental impact of an EV may be oversold. While the operation of an EV may reduce the carbon footprint, the battery manufacturing and recycling could have some not very pleasant environmental issues. The issues depend heavily on the battery type used.
      Linux_Lurker
      • Recharging times

        Solution? Standard swappable battery modules, as many as your car needs. The purchase price needs to include a lifetime supply of these packs (but you would be charged a per module fee for the swap) so people with new cars/batteries would not be reluctant to swap. The modules could be continuously tested and re-manufactured and re-distributed. Swapping them should take no more than 5 minutes.

        All these problems are solvable at a price, but my personal preference is a hybrid vehicle, with a small diesel generator for long drives and emergencies. I bet 30-40 hp would be more than enough for highway cruising and charging the battery pack for most passenger vehicles.
        Economister
        • Just like old style ...

          soft drink bottles.
          jallan32
        • Re: Recharging times..

          Just curious, as to why a diesel generator, when diesel costs about $1.00 more than gas?

          TW
          T-Wrench
          • Just a couple of notes

            Diesel is not that high everywhere in the US and it's price has been manipulated (IMO) since truckers have no other options when filling at hwy stops. On a recent 1,000 trip, I was able to fill up on diesel for 20 cents less per gallon by driving 1 mile out from the freeway stations. FYI. GasBuddy App is a great resource when on the road, since you can see nearby prices.

            Diesel engines have higher torque and get better fuel economy over gas. A small 2 or 3 cylinder engine would most likely be sufficient to generate the power needed to propel an electric car.

            Diesel powered trains are actually propelled by electric engines that get their power from on board diesel generators.

            There are more and more diesel options in today's new car market, but the added price is still too much, even-though most diesels have less moving parts than a gas engines.

            ~Best wishes
            GotThumbs
          • Re: Just a couple of notes...

            Sorry, I wasn't knocking diesel. I own a small farm, and both tractors are diesel, and I wouldn't use a gas powered one. I used to own one, and there is just no comparison between the two.

            That being said, in the New England area, Diesel ranges about $.70 to $.98 per gallon more than 87 octane gas, and I have a few friends out west who pay more than $1.00 more for diesel.

            Thanks...
            TW
            T-Wrench