To Open-source or Not to Open-source : A Theoretical Model of the Electric Vehicles Industry

We propose an open-source model with leaders and followers to study the electric vehicles (EV) industry theoretically. Our model finds that immaturity of technology and technological competition are the two main reasons EV giants like Tesla and Toyota choose to open-source. Open source has driven many new car-making forces to enter the market, bringing more technological progress. We also find that open source changes the market structure of the automotive industry such that many small firms can survive even when the EV industry is matured. Our paper extends the open-source models to a more complicated market structure with leaders and followers. Thus, the new model can also be applied to the study of other traditional manufacturing industries encountering big changes in the digital revolution