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Age of the automobile

There are currently over 1.45b cars on Earth. Imagine if you received royalties for each and every one of them. Well, at one point, that was the reality for one man.

Back in 1895, the patent for automobile technology belonged to a single person: George Selden. Instead of manufacturing cars, George demanded royalties for the right to produce them in the U.S. The Selden Patent forced all automobile manufacturers across the U.S. to seek his approval and pay him a fee for every car made.

The Electric Vehicle Company (EVC) was the very first to pay, forking out US$15 (US$483 in 2021) per car. If this royalty existed today, the 162m new cars sold in the U.S. between 2012 and 2021 would have cost an extra US$79b.

Following EVC’s acquiescence, George partnered with William Whitney to create the Association of Licensed Automobile Manufacturers (ALAM) in 1903. ALAM quickly brought the industry to heel, and names like Studebaker, Oldsmobile and Cadillac (NYSE: GM) joined the association. Membership required an initial licence fee of US$10,000 (US$307,921 in 2021) and a royalty on every car produced. 

The association believed the market should focus on the rich with limited production, subsequently denying almost all upstart applications.

Along came Henry Ford, in his now iconic Model T that was cheap and ready to democratise car ownership. That didn’t sound good to the rich folk at the ALAM, who denied Ford’s application and even ended up suing his company, Ford Motor (NYSE: F), and winning in 1909. 

But by then the Model T was a runaway success. Ford took the case higher and won, properly launching the age of automobiles. If the ALAM had won, the masses would have never had the chance to adopt the car. So the next time you go for a drive, honk if you’re grateful to Mr Ford.