Toyota Sues Small China Car Co In Trademark Spat
SHANGHAI February 25, 2003; Dow Jones reportes that Toyota Motors Corp. has sued a small private Chinese car company for alleged trademark infringement, a sign of how foreigners are taking actions by even the smallest rivals seriously in China's growing and competitive auto market.
The Japanese auto giant asked Zhejiang Geely Automobile Co. in November to change a logo it was using that was similar to Toyota's for fear it could cause confusion for customers, said Toyota spokesman Shinya Matsumoto.
But when Geely refused, Toyota filed the suit in December, he said.
Geely, whose low-price compact cars enjoyed soaring sales last year, has stoked concern in the industry that it could start a price war and down the line become serious competition for foreign auto makers. The Chinese company car sales more than doubled to around 50,000 units in 2002, an official said.
At issue is a hatchback compact car called the Merrie, the Geely official said, adding that Toyota was suing it for 14 million yuan. Toyota's Matsumoto declined to comment on the specifics of the company's lawsuit.
Along with the logo issue, Toyota is also calling Geely's advertisement slogan of "Toyota Energy, Seductive Price" and "(We) use Toyota 8A engines" unfair competition, the Geely official said.
Geely maintains that since its Merrie car has always used 8A engines produced by Tianjin Toyota Motor Co., a joint venture between Toyota and Tianjin FAW Xiali Automobile Co., there shouldn't be a problem with its advertising this fact.
"Up to now, Geely has bought CNY400 million worth from Tianjin Toyota," Li Shufu, the chairman of Geely Group Li Shufu has been quoted by local press as saying.
The Geely official also questioned why Toyota is filing the suit now, so long after the Merrie logo was registered in May, 1996.
But some analysts said Toyota has good reason to want to protect itself legally in the Chinese market, even if by suing a small company it gives the appearance of an industry giant picking on the little guy, considering bitter experiences in the past.
Checkered Past
Japanese firms' troubles in China's motorcycle industry are a case in point, one analyst said.
"Japanese manufactures have had a checkered past when it comes to intellectual property rights in China," said Kurt Sanger, an analyst at ING Securities in Tokyo. "Motorcycles are a perfect example of an industry where Japanese brands have been burnt by local makers not respecting intellectual property rights."
"Toyota may be seen as overreacting, but I don't think so. Toyota must do all it can to build its brand power, because it will be those companies with brand power that survive in an increasingly crowded market," said Sanger.
Major international automobile giants have been piling into China in the past year to take advantage of the booming auto industry here. And they are all rolling out aggressive expansion plans.
Sales of domestically-produced passenger cars soared 50% on year to 1.1 million units in 2002, the first time annual sales have surpassed the one million mark, the State Statistics Bureau said in January. And the China Association of Automobile Manufacturers expects sales of domestically-produced passenger cars to reach between 1.4 million and 1.5 million units this year.
An analyst based in China said that Toyota's joint venture in China will be using the same 8A engines for one class of the Vios sedan cars it makes. Tianjin FAW Xiali Automobile, which makes Toyota's Echo compact cars with license agreements, also uses the same 8A engine.
He said it could hurt Toyota's image if Geely advertises it is using the same engine, as Toyota cars are considered higher quality products, while Geely is on the low-end side of the market.
"Geely certainly has more to gain than Toyota by advertising the OEM arrangement. Essentially, Geely is trying to benefit from Toyota's brand value, possibly to the detriment of Toyota," said Sanger.
OEM(original equipment manufacturers) refers to suppliers that make complete parts or products for big brand companies.
For a comparison of the Geely Merrie logo and the Toyota logo please check the following websites: