Tesla Trademark Dispute in China Finally Comes to a Close

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Tesla Motors, Inc. (TSLA) recently settled a trademark issue in China with businessman Zhan Baosheng, per media reports. This persistent problem had been holding up the company’s expansion plans in China.

Meanwhile, under the latest agreement, Baosheng will transfer domain names which include tesla.cn and teslamotors.cn to Tesla. Tesla’s trademark, which Zhan Baosheng owns or has applied for, will be canceled by the Chinese authorities. This will establish undisputed trademark rights for Tesla in China. However, the automaker did not provide any financial details of the agreement.

The recent conclusion of the patent issue marks the second settlement between Tesla and Zhan Baosheng. In January this year, Tesla announced the settlement of the trademark dispute with Baosheng and initiated the supply of Model S vehicles to China in Apr 2014. However, on Jul 8, a trademark infringement charge was leveled against Tesla by Baosheng, demanding a compensation of about $3.85 million and the termination of the company’s operations in China.

Notably, Baosheng owns the Tesla trademark in China since 2006, much ahead of the automaker’s entry into the Chinese market. While Baosheng had planned to sell the trademark to Tesla, the deal did not take shape.

Tesla is currently focusing on international expansion, particularly in China – deemed to be the world’s largest automobile market. Toward this end, the company intends to set up 10 to 12 stores by end-2014 along with service centers and a Supercharger network in the nation. Tesla also expects China to account for 30–35% of its global sales growth in 2014. Further, the automaker intends to start manufacturing cars in China by 2017–2018, thereby slashing car prices and boosting sales.

Meanwhile, Beijing is initiating new incentives like purchase subsidies and tax cuts to promote electric vehicles. This should boost the sales of Tesla’s electric vehicle Model S.

Tesla is not the only foreign company which has been facing patent-related concerns in China. Companies like Apple Inc. (AAPL), Koninklijke Philips N.V (PHG) and Unilever NV (UN) have also come across similar trademark-related complications in China.  

Tesla currently sports a Zacks Rank #1 (Strong Buy).

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