By Geng Huili (耿慧丽) and Zhang Xu (张煦)
Issue 633 ,Aug 19, 2013
Automobile, page 35
Translated by Zhu Na
Original article: [Chinese]
The American electric car manufacturer Tesla Motors has plans to enter China by the end of the year, but that might be little more than a fantasy.
According to Tesla Vice President George Blankenship, the company plans to open 25 new specialty stores in 2013, one of which will be in China. In fact, the brand has already rented floor space at the Beijing Parkview Green Shopping Center in busy a part of the capital. The 800-square meter location would be its largest in the world.
However, Tesla seems to have overestimated the speed with which it could drive through China’s approval process. And even if it gets approval, a trademark dispute and heavy taxes could slow its entry to a crawl.
According to the Beijing Administration for Industry and Commerce, Tesla established the wholly foreign-owned Tesla Car Sales (Beijing) Co., Ltd., (拓速乐汽车销售（北京）有限公司) on Nov 7, 2012 with registration capital of two million dollars.
However, this registration is only the first step. Next, Tesla needs to establish a sole distributor in China and put it on record with the Ministry of Commerce. Then the sole distributor can apply for the China Compulsory Certification (3C) from The General Administration of Quality Supervision, Inspection and Quarantine to verify product safety. Finally, Tesla needs go through approval from the Ministry of Environmental Protection and the local environmental protection bureau. After this process - which usually takes at least six months –Tesla can officially start selling in China.
Luo Lei (罗磊), deputy secretary-general of China Automobile Dealers Association, says that everything Tesla has done is in line with the law, but it’s still likely to get delayed in particular by the 3C certification. Since electric cars are relatively new, there’s still no clear process for getting a 3C for them in China, so he estimates that that step will take at least six months.
Luo said one way to speed up the process would be to find a local partner, but he doubts Tesla will take that route. “Since Tesla’s product isn’t popular, investors will likely think the return cycle is too long, so they’re not very willing to invest and act as an agent,” Luo said. “Even if Tesla enters, it will be a tough situation.”
When an EO reporter called Tesla’s China office, a staffer said, “Headquarters underestimated the difficulty of registering a company in China.”
In 2006, Chinese businessman Zhan Baosheng (占宝生) applied for the “TESLA” trademark and it was approved in 2009. The fact that Zhan had no affiliation whatsoever with the American automaker made no difference in the registration.
In China, the phenomenon of “name squatting” has become quite common. This refers to local profiteers snatching up foreign trademarks before the foreign companies that created them can. Chinese trademark law states that the first to register - not the first to create - a trademark owns it.
After Zhan bought the Tesla name, he also bought “Tesla Motors” and its Chinese name Te Si La (特斯拉).He was approved, but after Tesla raised objections, these two registrations were put “under review.”
In July this year, Diarmuid O’Connell, vice president of Tesla responsible business development, made a special trip to China with his team to try and resolve the matter. Tesla offered Zhan $326,000 (2 million yuan) for the trademarks. Zhan countered with $30 million (183.7 million yuan).
Although Tesla’s market value is close to $15 billion, $30 million is still a very high “entrance fee.” In the first quarter of 2013, Tesla made just $15 million in profits. In the second quarter, it was at a loss.
Zhan, who is clearly familiar with trademark laws, launched an official Tesla Chinese website and even started recruiting employees. This was to show that he indeed is developing and manufacturing electric vehicles.
Publicly available information showed that Zhan also has several other trademarks registered for the names of Ford, Philips and Mitsubishi products. He even has the Chinese trademark for "Angry Birds" (愤怒的小鸟).
While Tesla was negotiating with Zhan, it was also preparing a backup. China’s trademark website showed that Tesla has already registered “Tuosule” (拓速乐). This could be an indication that Tesla intends to abandon its name in China and instead use Tuosule in the Chinese market.
But Shen Qi (沈琪), the China sales director of Tesla, says that this isn’t the case. “This is actually just a misunderstanding,” Shen said. “Tuosule is only a company name. It has nothing to do with trademarks or Tesla’s trademark dispute issue.”
Currently, Tesla’s Model S electric car starts at about $59,900, with high-end models at as much as $100,000. If it’s sold in China, customers will need to pay an additional 25 percent import tax, a 17 percent value-added tax and a consumption tax. With prices like this, Tesla will be competing with the likes of BMW, Mercedes-Benz, Bentley, Rolls Royce and other luxury cars. Whether or not Tesla cars can offer customers as much “face” as these luxury brands remains to be seen.
Currently, China’s very small electric car market is mostly made up of government and corporate customers rather than private consumers. The consultancy firm McKinsey predicts that this will remain basically the same for at least five years.
Mr Li, a sales director for a foreign brand in China, says that Tesla’s products themselves already have the conditions to enter the Chinese market, but China’s electric car infrastructure is much less developed than that of the U.S. Therefore, it still needs a long time to cultivate the market.
“Tesla needs at least five years to gain recognition in the U.S. market,” Li said. “It also takes this long in the Chinese market.”