I thought I would end the week with two interesting auto stories, one spotlighting legal speed bumps in the market and the other highlighting big potential in the car rental industry. The first case has US electric car maker Tesla (NASDAQ:TSLA) officially driving into China despite its failure to resolve a trademark dispute, meaning it has no official Chinese name as it enters the market. The second case has leading online travel agent Ctrip (NASDAQ:CTRP) tying up with a car rental start-up, representing its latest move into a related area with strong growth potential.
Each of these cases involves different issues, though both spotlight some of the big growth opportunities for more niche-oriented companies in China's fast growing auto sector. All of the world's top car makers now manufacture in China. But that's a very expensive business, and other companies have been chasing more niche-oriented spaces in the market. Online car information provider Autohome (NYSE:ATHM) is one of those and successfully sold investors on its growth story with a highly successful IPO in New York last week. (previous post)
Now we're getting word that another niche player, high-profile US electric car maker Telsa, has formally started selling its popular vehicles in China, even though it's still involved in a trademark dispute that has left it without a formal Chinese name. (English article) Tesla is hoping to make its own strong debut in China by capitalizing on its sleek designs and generous incentives from Beijing to promote green energy vehicles. Its formal launch had been highly anticipated, and the company has already been taking pre-orders for several months.
The trademark squatter that registered Tesla's Chinese name reportedly wants $30 million for the rights, quite a large amount for a company of Tesla's size. Accordingly, the company has decided to go ahead and start selling cars in China simply using its English name without a Chinese translation for now. (English article) The company formally opened a showroom in Beijing this week to start selling its popular Model S sedans and has a website as well, though neither has its Chinese name.
If I were advising the company, I would tell it to simply choose a new Chinese name or perhaps even skip a Chinese name altogether, and leave the squatter with a worthless trademark. After all, Tesla is still new to the China market and there isn't much consumer awareness of its previous Chinese name, which is pronounced like te-se-la. That would teach those squatters a lesson!
Meantime in the other car news, media are reporting that Ctrip was one of the lead investors of a new $60 million funding round for Dongfang Cheyun, which operates an online platform providing car rental services. (English article) The THREE-year-old Dongfang Cheyun has operations in 49 major cities, and plans to double that figure over the next year. Following the new investment, Ctrip says it will start offering Dongfang Cheyun's services on its site as it expands into the car rental area.
I've always been a fan of Ctrip because I like its strategy of making gradual, well-considered moves into logical growth areas for its core travel services. It began life as a hotel reservation site and has expanded into plane and train ticketing and vacation packages, and is also making a strong push into mobile. This move into car rentals looks very logical and smart, and parallels similar moves from global giants like Expedia (Nasdaq: EXPE). As Chinese become more mobile and the government reins in new car buying, I would expect car rental services could quickly zoom in China and account for up to 10 percent of Ctrip's revenue in the next two years.
Bottom line: Tesla should choose a new Chinese name to avoid dealing with a trademark squatter, while Ctrip's new tie-up with an online car rental firm continues its strategy of smart moves into high-growth areas.