Tesla Hits a Roadblock in China: Will Musk Fight Back?

Tesla Motors (NASDAQ: TSLA  ) is one of this year's hottest stocks, with shares up more than 400% year to date. And the electric-car maker's stock shows no signs of stalling, despite mounting challenges for Tesla in the world's largest auto market. The California-based company began accepting reservations for its all-electric Model S sedan in China this week. However, a Chinese businessman who's claiming rights to the Tesla name is now threatening Tesla's entry into the Asian country.

Flatter me not
Imitation may be the sincerest form of flattery, but for foreign companies operating in China it often means tens of millions in settlement fees. China is notorious for its so-called trademark trolls -- people like Zhan Baosheng, who is blatantly using Tesla Motors' logo and brand identity in China. Trademark disputes in China often result in years of legal battles.

Last year, Apple (NASDAQ: AAPL  ) was forced to pay $60 million to a Chinese company that claimed it had legal rights to the iPad brand. In Tesla's case, Zhan says he registered the Tesla trademark seven years ago. He even controls the Tesla Motors domain in China, which prominently displays a knockoff Tesla Motors logo:

Source: www.teslamotors.com.cn screenshot.

While Apple finally coughed up enough cash to settle its trademark problems in China, Tesla may not be as easily strong-armed. The company's CEO, Elon Musk, has a reputation for fighting back. Earlier this year, Musk publicly accused New York Times columnist John M. Broder of writing an unreasonable and factually inaccurate review of Tesla's Model S. The outspoken CEO is also going after auto-dealer associations that are standing in the way of letting Tesla sell its cars directly to consumers in certain states.

Musk isn't shy about defending his company. Therefore, I find it hard to imagine a scenario in which Tesla would willingly dish out millions of dollars to use the brand and logo it designed. Nevertheless, this is certainly a setback for Tesla at a critical time for the company. As the world's largest auto market, China is a key step in Tesla's strategy for becoming a mass-market EV seller.

Moreover, as Musk recently said of China: "It's the world's biggest market for premium sedans. If you take something like, say the Mercedes S-class, they sell approximately half of all their worldwide production in China."

This market is obviously important to Tesla's future, which is why I suspect the EV maker and its inventive CEO are already suiting up for battle.

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Read/Post Comments (5) | Recommend This Article (5)

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  • Report this Comment On August 24, 2013, at 12:11 PM, AjitC wrote:

    The simplest way to handle this situation is for Tesla to modify the logo and change the name as it has been indicated in some press reports.

    I am not sure Tesla should waste time suing the perp. May be an administrative complaint would do. If the Chinese government wants to do something about this they will do. Courts just do what the government tells and costs money.

    Tesla should not manufacture in China because the Chinese will steal the technology and manufacturing processes. Same with India.

  • Report this Comment On August 24, 2013, at 12:22 PM, TCL wrote:

    you are talking about china here. you cannot fight the chinese government. china has every incentive to promote their versions of electric cars and prevent new entry into the markets. BYD comes to mind. Musk will not win in China no matter what. Go talk to Yahoo, Ebay, Amazon, Google, GE, Boeing, etc... everyone of these companies will get pushed out of china in favor of home grown versions.

  • Report this Comment On August 25, 2013, at 4:10 PM, bobbyo816 wrote:

    I have a couple of Telsa questions.

    1. How long does it really take to recharge the Tesla batteries? At home overnight is one thing, but on a road trip is quite another. Even an old Chevy Corvair can travel from NY to LA much faster than a Tesla with all of the long recharging times.

    2. Just how does a Telsa owner pay for their road use? Today, we pay a gas tax for that at the gas pump.

    3. Just how much does it cost in electric KW dollars to recharge a Tesla vehicle? Electricity isn’t free?

    4. How much energy pollution is created to produce the recharging energy? This is indirect pollution indirectly caused by Tesla.

    5. How much do the replacement batteries cost when it is time to replace them?

    6. How and where will the old worn out batteries be disposed of? How much will that cost?

    7. If Tesla is stock is worth %150 plus than Ford stock is worth $1,600 plus and GM is worth $3,500 pkus.

    8. It appears that Tesla is a vehicle for the rich and famous and a new grown up fad toy. How long will it be before the stock drops like a rock when everyone figures this out; maybe this week?

  • Report this Comment On August 25, 2013, at 5:53 PM, duuude1 wrote:

    Hey Bobbyo816 - here are some comments on your questions 1 thru 8 about Tesla:

    1. How long does it really take to recharge the Tesla batteries?...

    - there are multiple ways to recharge a Tesla according to their website - and to get the full 300 mile range the charge time depends on the outlet you plug into:

    1) 110V --> 65h 18m

    2) 240V (40A) --> 9h 25m

    3) at one of their supercharger stations --> 1h

    4) battery swap at Tesla station --> 2m

    5) check out Tesla's website at http://www.teslamotors.com/charging#/calculator

    2. Just how does a Telsa owner pay for their road use? - Gasoline tax has not increased since 1993, during which time purchasing power has decreased by 1/3 according to Wikipedia

    - Furthermore, as the average mileage attained by vehicles increases over time, gas tax revenues have even further decreased

    - You can go ahead and propose an increase in gas and electricity taxes to make sure all of us pay for use of the roads

    3. Just how much does it cost in electric KW dollars to recharge a Tesla vehicle? Electricity isn’t free?

    - at the national average of $0.12/kW-hr, this costs $10.19 for the full 300 mile charge

    - if your rate is as (unrealistically) high as $0.20/kW-hr, then the cost for 300 mile charge is $16.98

    4. How much energy pollution is created to produce the recharging energy? This is indirect pollution indirectly caused by Tesla.

    - Indirect pollution caused by Tesla's $17 worth of electricity compared to the direct polution caused by burning $60 worth of gasoline... what do you think?

    5. How much do the replacement batteries cost when it is time to replace them?

    - This is an active topic of discussion on the Tesla boards - I don't think this is known. What is known is that battery costs are decreasing rapidly as technology advances. This is one of the reasons why we anticipate the next gen Tesla which will be affordable by most people in 4 years or so.

    6. How and where will the old worn out batteries be disposed of? How much will that cost?

    - I've read that Tesla will purchase back old batteries and refurbish.

    7. If Tesla is stock is worth %150 plus than Ford stock is worth $1,600 plus and GM is worth $3,500 pkus.

    - Not sure where or why you put these values on old-guard companies that are not innovating - using old technologies, old business models, old distribution, old marketing... I value Tesla's innovations much much more.

    8. It appears that Tesla is a vehicle for the rich and famous and a new grown up fad toy. How long will it be before the stock drops like a rock when everyone figures this out; maybe this week?

    - You sound like an old guy who likes the comfort of the familiar old stuff... I'll ask you another question - how long before the old companies fade away into irrelevance because they will not change with the times? Where are the old buggy and buggy whip makers? Same place as Ford and GM wil be soon.... history books.

  • Report this Comment On August 29, 2013, at 1:17 PM, Oseo wrote:

    The merits of the Tesla car are undeniable: highest rated car in the world, safest car in the world. It has the range on a single charge of over 250 miles with many models at many different price points coming out. The vast global demand for Tesla cars is a fact.

    They have no competition and it highly unlikely that it will happen in the forseable future. China wants to buy Tesla cars because they are the best. They are the production capital and perhaps the upcoming consumer capital of the world. Headlines aren't roadblocks. Tesla has a vast expansion occurring as we speak.

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