Share price of Tesla Motors, Inc. (TSLA) plummeted 1.6% to $219.07 on Jul 8, after a trademark infringement charge was leveled against the automaker by businessman Zhan Baosheng in China. In January this year, Tesla had announced the settlement of the trademark dispute with Zhan Baosheng and had initiated the supply of Model S vehicles to China in Apr 2014.
Zhan Baosheng owns the Tesla trademark in China since 2006, much ahead of the automaker’s entry into the Chinese market. Tesla’s entry into China was delayed by this trademark issue. Notably, Baosheng had planned to sell the trademark to Tesla. However, the deal did not take shape.
Baosheng has filed a lawsuit against Tesla demanding a compensation of about $3.85 million and closure of all its operation in China. The case will be held in the Beijing Third Intermediate Court on Aug 5. This lawsuit has marred Tesla’s expansion plans in China to a considerable extent.
Tesla expected that China will become the biggest global market for the company. The automaker is currently focusing on international expansion, particularly in China – deemed to be the world’s largest automobile market – to boost sales. The company is planning to establish new stores, service centers and a Supercharger network in the nation. Additionally, the electric carmaker plans to open 10 to 12 stores in China by the end of 2014. Tesla also expects China to account for 30–35% of its global sales growth in 2014. Also, Tesla intends to start manufacturing cars in China by 2017–2018.
Tesla is not only the foreign company which has faced a patent-related concern in China. Companies like Apple Inc. (AAPL), Koninklijke Philips N.V (PHG) and Unilever NV (UN) have also faced similar issues in China. Notably, in 2012, Apple paid $60 million to Proview Technology, a Chinese company, for using the iPad trademark in the nation.
Tesla currently carries a Zacks Rank #3 (Hold).
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