Tesla Stock Gains on Patent Sharing News

The market has reacted positively to Tesla Motors, Inc.’s (TSLA) decision to share its technology patents. The stock gained 1.42% a day after the news was made public.

While some were suspicious about CEO Elon Musk’s motive behind sharing the patents with competitors, most of the people responded favorably to the news. It is a well known fact that Tesla aims to facilitatethe transition of the automobile market to environment-friendly electric vehicles. This was cited as the main reason for opening the company’s patents to all.

According to Musk, Tesla had initially acquired patents to protect itself from larger automobile manufacturers. However, as most automobile companies do not give priority to electric cars due to the latter’s low market share, Tesla is now offering to share its technology in the hope that it will boost development of electric cars.

While many large automakers produce electric cars, they are of a limited range, thereby resulting in low popularity. In comparison, Tesla’s cars have a broader range, while its Supercharger network provides fast and cost-free battery charging. Thus, auto manufacturers might benefit from using Tesla’s technology to increase their electric cars’ range. They can also capitalize on Tesla’s recent offer to share its Supercharger network in return for cost sharing.

Tesla will also stand to gain if this move boosts the development of electric cars as an increase in popularity of such cars will automatically lead to development of charging infrastructure, which in turn should boost its sales. Moreover, increased production of electric cars will boost the demand for lithium ion batteries, which is a positive for Tesla, as it is planning to become the world’s largest manufacturer of lithium ion battery packs by 2020.

Currently, Tesla carries a Zacks Rank #4 (Sell). Some better-ranked automobile stocks worth considering include Fox Factory Holding Corp (FOXF), Gentherm Incorporated(THRM) and Tower International, Inc. (TOWR). All these stocks sport a Zacks Rank #1 (Strong Buy).

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