Tesla Becomes An AT&T Exclusive

1/8/14 10:06AM EST

Tesla Becomes An ATT Exclusive Tesla Becomes An AT&T Exclusive

Image via Flickr/ Edsel L

The battle for the connected car has begun. More and more vehicle manufacturers are adding consoles to their vehicles, and more and more tech companies are becoming interested in supplying the hardware and software that runs those computers. Tesla Motors Inc (NASDAQ:TSLA) already has one of the most advanced cars on the market, but its next model will be even more exclusive.

The electric car maker revealed that its next vehicle will run on an AT&T data connection. The move toward exclusivity in vehicle data connections is bemusing, but it mirrors the original shape of iPhone offerings. Tesla Motors Inc (NASDAQ:TSLA) isn’t likely to see a subsidy in the same region, though it is likely that the company is getting something from AT&T for its trouble.

Tesla At CES

The Las Vegas Consumer Electronics Show 2014 has been jam packed with news of coming evolutions in the automobile. Several factors have lead to the rush including the mass popularity of the Tesla Model S; the move to music streaming as a major source of revenue; the interest of notable companies, including Apple Inc. (NASDAQ:AAPL); and the need to add value to vehicles as the US car market takes off once again.

Tesla Motors is at the center of futuristic vehicle design. The company’s electric car made the idea cool, something  few thought was possible, and it is actively working on was to make cars drive themselves, and state of the art in-car entertainment, safety and navigation features. Tesla will be at the forefront of the move to the connected car, but it is unclear what shape that move will take at this juncture.

AT&T Inc (NYSE:T) and other wireless companies are just happy to sell another data connection, Apple and other tech companies are happy to sell their services en masse and reap the benefit of selling the same smart phone twice. Tesla and other car companies may be in the worst position, however, they’re the ones actively competing to have the best in-car tech, and the ones who will really miss out if the experiment backfires.

Tesla Goes Exclusive

Tesla will be joined by the next connected Audi on the list of car makers that have signed exclusively with AT&T. The addition of wireless connections to the cars themselves is likely to be controversial as concerned parties raise questions about driver distraction. For Tesla Motors Inc (NASDAQ:TSLA) investors there is a more important question, however.

Is an exclusive deal with AT&T going to harm sales of the Tesla Model E? While it’s true that the iPhone was not harmed by its exclusivity in the short term, and it’s clear that the initial subsidy powered the device’s swift uptake, the smart phone did not have direct competitors. Tesla may face a connected vehicle that can access multiple networks, and lose out as a result.

Tesla Motors Inc (NASDAQ:TSLA) will continue to upgrade its offerings, and it may be successful, but an exclusive deal with AT&T Inc (NYSE:T) appears to be more beneficial to the wireless carrier than it is to Tesla, and that may be the start of the company’s connectivity problems.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.


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