Can Tesla Motors Strengthen Its Brand By Giving Away Its Patent?

“Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.”

That’s according to Elon Musk, CEO of electric automaker Tesla Motors Inc (NASDAQ:TSLA), which we own in our All American Equity (GBTFX) and Holmes Macros Trends (MEGAX) Funds.

Innovators and entrepreneurs aren’t normally in the business of sharing their intellectual property. But, in received numerous awards such as Automobile Magazine’s 2013 Car of the Year, Motor Trend’s 2013 Car of the Year, Consumer Reports’ Best Overall Car and an unprecedented 5.4 Vehicle Safety Score from the National Highway Traffic Safety Administration (NHTSA). Sales have been brisk. California drivers in particular are enamored, and in September of last year, the Model S was the top selling new car in Norway, the first time an EV outsold conventional vehicles in any country.

This year Tesla introduced its brand to China, the world’s largest auto market, and already the car was spotted cruising the streets of Shanghai by a friend of Xian Liang, co-portfolio manager of our China Region Fund (USCOX).

For those who blanch at the Model S’s nearly $60,000 baseline asking price might soon see some relief. Musk has announced the construction of a “gigafactory,” which will turn out approximately half a million lithium-ion batteries every year. Mass-producing the batteries, the car’s costliest component, will help lower the price of both Tesla and rival manufacturers’ EVs.

With Elon Musk at the helm, Tesla Motors is primed to become one of America’s greatest success stories. A serial entrepreneur, Musk made his billions investing and taking leadership roles in such tech endeavors as PayPal and SpaceX. Besides combatting carbon emissions with his line of EVs, his other ambitious goals include the construction of the so-called Hyperloop—a rapid transit system that, if realized, will zip commuters between Los Angeles and San Francisco in about 30 minutes—as well as a permanent human colony on Mars.

However these other pursuits unfold, it’s nearly guaranteed that history will rank Musk in the same category of top American automobile innovators as Henry Ford, Ransom Olds, Walter Chrysler, the Dodge brothers and Lee Iacocca.

Disclaimer: Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio.

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 All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings as a percentage of net assets as of 03/31/2014: Tesla Motors Inc. (All American Equity Fund 1.34%, Holmes Macros Trends Fund 1.94%), Nissan 0.00%, BMW 0.00%, Ford 0.00%, Chevrolet 0.00%, Toyota 0.00%, Zip2 0.00%, PayPal 0.00%, SpaceX 0.00%.   

Written By: Frank Holmes