HOW TESLA BECAME THE MOST VALUABLE COMPANY AROUND THE GLOBE WITH THE HELP OF IPR
Tesla Motors, Inc. a company that has changed the way the world had perceived cars by eliminating the need for fossil fuels and inventing a variety of high-end electric cars with clean energy technologies. It is not just a car but a technology company with a worldwide reputation and financial success. The formation of Tesla was just like any other startup with a bright idea to expedite the advent of sustainable transport by bringing electric cars to the market. In 2019, it was ranked as the “best-selling plug-in and battery electric car manufacturer in the world”. However, the incredible growth rate of Tesla is considered to be fueled by the use of Intellectual Property (IP) rights. IP rights have helped steer the company’s growth by attracting investments, gaining momentum, increasing the value of its goodwill and reputation.
Why is Intellectual Property (IP) important in Business?
Let us agree to the fact that apart from the actual people who run the business, IP plays a significant role in the success of any business idea. It is key to drive growth and competition in the market. Business is not just about physical assets that you own, it is largely dependent on the idea or a concept, and the way you utilize them is very crucial. IP helps in building a brand identity and increases the commercial value of the company as well.
Moreover, the economic objective behind Intellectual Property protection is, firstly, to promote investments in businesses with innovative and creative ideas by establishing exclusive rights to use or sell the technology, secondly, to promote the dissemination of idea or concept by encouraging IP holders to place the inventions in the market.
Here is how Telsa Motors used its IP rights to fuel its growth:
ATTRACTING INVESTMENTS IN THEIR STARTUP PHASE
During the early stages, Tesla had owned 900 patents approximately but it only focused on protecting the key solutions to the problems faced by the electric cars. These IP rights, however, helped Tesla to approach the angel and venture capital investors for attracting the necessary funding required to develop the cars and growing the business.
The launch of the Tesla Roadster model in 2008 was protected with a string of IP rights on its proprietary technology, with a battery life of 394 km. This helped Tesla gain momentum when for the first-time electric cars were recognized as more feasible and attractive to the world. It initially offered the customers free charging for the duration of their car cycle. Tesla started as a small business with a well-protected idea has gained a stronger position in the commercial market with the help of IP rights.
ENHANCING THE BRAND
In 2012, Tesla launched its second electric car Model S, a luxury Sedan that exceeded sales of 50,000 cars on the road. For further growing the brand, Tesla continued using its IP rights and entered into a more developed era of production. Tesla derived its early success from its patent rights to mainly increase its trademark rights and the value of the goodwill and reputation.
OPEN SOURCING OF ITS PATENTS
In 2014, the CEO of Tesla Elon Musk announced the removal of Tesla’s patent rights in the spirit of open-sourcing and for advancing electric vehicle technology in the world. The company promised that it will not initiate patent lawsuits against any individual who uses the technology or idea in good faith. The reason behind the open sourcing of patents was to invite other carmakers to jointly tackle the carbon crisis to support the development of the technology and grow the market size for electric cars around the globe.
Tesla’s reputation amongst the buyers was cemented as an ‘Innovator’ in the field of electric transports. However, such sharing of knowledge will allow other companies to manufacture their electric vehicles, therefore this smart move indirectly increases the market size of Tesla’s electric vehicles and market share with zero cost to the company. Also, Tesla has been successful in attracting a steady stream of money flow and has made the largest market capitalization of around $200 billion in the automotive industry with the help of patent open-sourcing business strategy.
Tesla has built a powerful and most valuable brand with a well-protected business idea and used it as a competitive edge to increase revenue stream with the help of IP rights. It has utilized its most powerful tool i.e., Intellectual property in different ways according to the needs of each business stage. Firstly, by protecting the IP on its proprietary technology to attract investments and increasing the value of its goodwill. Later in the next stage of its business, it open-sourced its patents so that anyone can use its technology to develop the market for electric cars around the globe and made the largest market capitalization in the automotive industry. Tesla grabs a higher market share and recognition when more companies use Tesla’s technology. This smart approach and sensible utilization of its IP makes Tesla the most valuable company around the globe.
Companies like Tesla have grown tremendously with the help of IP and thus, to know more about, How the business can grow with the help of IP, see the given video -