According to WHO, about 1.3 million people succumb to road traffic crashes. 93% of the world’s fatalities occur in low- and middle-income countries which account for about 60% of the world’s vehicles. Counterfeiters are likely to target these low- and middle-income countries by selling fake auto-parts at considerably lower rates, taking advantage of the existing, less-stringent legal system. This exposes millions of people to the risk of losing their lives because of a road accident!
A lose-lose scenario
Counterfeiting is a major issue in the automobile industry, as it not only results in lost revenue for manufacturers but can also pose serious safety risks for consumers.
Quality = Safety
Counterfeit automobile parts are often of inferior quality and may not meet the same safety standards as genuine parts, which can lead to serious accidents or even fatalities.
Fake parts, real impact
The consumer who faces issues in their automotive due to fake parts, may mistakenly attribute the issue to poor design or manufacturing of the brand. This may put off the consumer from buying the brand in the future, resulting in massive downstream and long-term loss of brand integrity, reputation and business.
Small parts, big problems
In the case of automotives, the failure of a small part can result in a cascading effect, causing catastrophic consequences. Consumers can be misled by the lower cost offered for small parts, because they assume that the quality of the part may not be a big factor in the safety and performance of their cars. Commonly counterfeited parts include spark plugs, oil filters, brake pads, steering parts, bearings, drive belts, valves, windscreens, piston rings, headlamps, infant car seats and bonnets.
Low tolerance, high failures
The quality of counterfeit automotive parts may be compromised due to the material used to create them, resulting in a much lower tolerance level. Automotive parts are subject to substantial physical pressure during operations and are designed to withstand constant friction and load-bearing forces. Fake car parts do not have the same safety margin as offered high-quality original automotive components.
The key risk is that the quality of the part only comes into play when the component is in action as part of the automotive vehicle. There may not be any visible difference in the fake part when compared to the original.
Saving money, losing lives
The fake car components often get into a car, when the owner is replacing worn-out original parts. At this point, the owner may be looking for a cost-effective option, and mistakenly use the fake part, as it may come with the appeal of a much lower price.
A deadly trade-off
Unlike many other counterfeited products, the fake vehicle parts affect many more than just the people who make the decision to buy a counterfeit product. Automotive accidents can affect pedestrians and the families who are in the vehicles. Taxi drivers who deploy fake parts to save money can end up in accidents where their passengers are hurt or killed.
Shortage of genuine parts
Some automotive parts may be short in supply due to logistics, manufacturing or regulatory issues. In these cases, the counterfeiters step in to leverage the demand and push fake parts onto the market.
Wear out leads to demand
Since many vehicular parts have a high degree of wear and tear, there is a constant demand for replacement parts. This is more so for vehicle models from 3-10 years ago. The consumers who own the older models, are more likely to be cost-conscious or be open to buying from dubious sources.
Consumers also augment their vehicles with aftermarket products that are cheaper than the default options offered by the brands. The aftermarket offers new designs and a higher variety of options – and attracts the consumer to buy sub-standard products which have not been tested against the minimum standards.
When consumers don’t get the part that they want or want to get a deal on the price, they resort to ordering online. These parts are often sourced from countries with a rampant and established fake parts industry.
While ordering online, the consumer has no way of verifying the accuracy of the information given and must settle for the sub-par fake part that may arrive at their doorstep. The problem is big and accelerating fast. Studies indicate that over 60% of results in searches for car parts, result in a link to a counterfeit seller.
Counterfeiters are engineers
Creating fake auto parts implies a knowledge of engineering – a skill that the counterfeiters use to circumvent the anti-counterfeiting measures. They can replicate overt methods for authentication, like stickers. This is a pronounced problem because counterfeiters in the auto industry have a higher degree of sophistication.
The consumer is in a hurry
In many markets like the US, the vehicle is a critical part of the individual’s work and life. Consumers cannot afford to have their vehicles out of action for even short periods. As a result, they are forced to make the decision to use dubious spare parts that could be easily available, since the original parts take more time to be delivered.
Good enough is not good enough
Many consumers are misled by unscrupulous or wrongly informed workshops or dealerships, that the ‘second quality’ product is good enough and will do the job. The consumers are not aware that the counterfeit spare part that they have bought could cause a catastrophic event if it fails. Automotive companies like BMW and Mercedes have created awareness videos showcasing the difference in performance of key parts between originals and duplicates – specifically when braking.
Penalties are low for a ‘victimless’ crime
The production of fake automotive spare parts is viewed as a victimless crime in the legal context in many countries – this leads to a low penalty even if the counterfeiter is caught. This provides an incentive for more players to enter the space – as the risks and penalties are low while the demand and profits are high.
An accelerating problem
There is substantial evidence of a deep and negative impact on brand value, performance and safety due to the extensive presence of counterfeit automotive parts in the market.
- The Daimler company got 138,000 fake parts removed in 2020, reflecting a 3-fold increase in the numbers compared to 2019.
- The EUIPO (European office of intellectual property) estimated that 2.2B EUR is lost every year by brands due to counterfeit tyre sales, and 180M EUR due to fake batteries.
- The global parts industry was estimated to be losing as much as USD 45B in 2011, a figure that has risen manifold in the following decade.
- The counterfeiters are so brazen that there has been an instance of a fake brake shoe lining created using compressed grass. This caught fire in the instance of hard braking.
- Toyota Kenya conducted a survey where they found that 8 out of 10 vehicles in the country had at least one fake part.
- In 2018, a commerce and industry body in India put forward the data that 20% of car accidents in India are caused by counterfeit auto products.
- In India, counterfeiting in the auto sector causes a tax revenue loss of INR 2200 crores to the government according to FICCI Cascade.
- A high-end, popular car company (Mercedes Benz) reported that 1.86 million counterfeit products of its brand were globally seized in more than 650 customs and law enforcement raids in 2021 alone. It had even stated that 1,26,000 products were taken down from online solutions during that year.
Types of automotive fakes
- There are replicas of actual vehicle parts, which are made to look like the original, and carry imitation branding
- There are automotive parts that are smuggled from other countries through illicit channels, and may not conform to the size or standard specifications for the vehicles in the country, causing performance issues.
- There are salvaged parts from end-of-life vehicles or those damaged in accidents, fires or flooding. These parts are severely compromised on performance.
Putting the brakes on the fakes
To combat counterfeiting, automobile manufacturers have implemented a variety of anticounterfeit solutions.
These solutions can be divided into three main categories: preventative measures, detection methods, and enforcement actions.
One of the most effective ways to prevent counterfeiting is to make it more difficult for counterfeiters to produce and distribute fake parts.
To achieve this, manufacturers can use a variety of techniques such as:
Using unique and difficult-to-replicate packaging:
By using packaging that is difficult to replicate, manufacturers can make it more difficult for counterfeiters to pass off their fake parts as genuine. However, counterfeiters have become tech-savvy and developed methods to replicate complex packaging at scale. The sheer margins available for them (even after selling fake parts at highly discounted prices) help incentivize them to continue their illegal activity.
Implementing security features:
Security features such as in some solutions can help to deter counterfeiting by making it more difficult for fake parts to be produced and sold. The challenge with this approach is manifold – watermarks may not be easily visible in complex machinery, and the consumer may not be aware of how a genuine hologram should look like. In addition, the parts are often replaced without the presence of the automobile owner, as it may be done in a workshop.
Protecting intellectual property:
Protecting intellectual property such as trademarks and patents can help to prevent counterfeiting by giving manufacturers legal recourse to act against counterfeiters. This is more of a reactive measure, and the damage would already have been done. Counterfeiters often rely on a slow-moving system to delay or avoid being caught and made to pay for their earnings acquired by selling fake automotive parts. A retrospective action may not be sufficient to protect the brand against litigation or compliance/regulatory penalties arising from the use of fake automotive.
Even with preventative measures in place, it is still possible for counterfeit parts to enter the supply chain. To detect and identify these fake parts, manufacturers can use a variety of methods including:
Verifying supplier credentials:
By verifying the credentials of suppliers and ensuring that they are reputable, manufacturers can reduce the risk of counterfeits entering the supply chain. Major automotive manufacturers and brand work with hundreds of suppliers through a complex web of logistics. It is complicated to ensure full visibility across the chain, and it results in a situation where counterfeit products may penetrate the supply of automotive parts.
Inspecting incoming parts:
By inspecting incoming parts for signs of counterfeiting, manufacturers can identify and remove fake parts before they are used. With manufacturers under pressure to churn out millions of automotives to meet demand in the markets, it may not be possible to review all the parts – a random sampling system is likely followed in most cases.
Using authentication systems:
Manufacturers can use authentication systems such as RFID tags to verify the authenticity of parts. These systems allow manufacturers to quickly and easily verify the authenticity of parts using a smartphone or other device. The physical addition of RFID tag adds complexity and cost – and can be a cost-factor in a highly competitive industry.
If counterfeit parts are discovered, it is important for manufacturers to take action to remove them from the supply chain and to pursue legal action against the counterfeiters.
This can involve:
Removing counterfeit parts from the supply chain:
Once fake parts are identified, it is important to remove them from the supply chain to prevent them from being used.
Working with law enforcement:
Manufacturers can work with law enforcement agencies to pursue legal action against counterfeiters. Anti-counterfeit and brand protection solutions should be able to provide easily and quickly verifiable evidence for law enforcement to act quickly and decisively.
Filing legal action:
Manufacturers can also file legal action against counterfeiters in order to seek damages and to deter future counterfeiting. The covert and overt solutions used for brand protection should be able to withstand the rigorous standards of legal validation. There should be no scope for counterfeiters or their enablers to drive a wedge of doubt.
‘Assembling’ a brand protection solution
Combating counterfeiting in the automobile industry requires a combination of preventative measures, detection methods, and enforcement actions. By implementing these solutions, manufacturers can protect their revenue, safeguard the quality and safety of their products, and ensure that consumers are getting the best possible products.
Covert and overt brand protection solutions
Covert anticounterfeit solutions are those that are designed to be hidden or disguised, making them difficult for counterfeiters to detect or replicate. These solutions can be an effective way for automobile manufacturers to protect their products from counterfeiting without tipping off potential counterfeiters.
One example of a covert anticounterfeit solution is the use of covert markings. These markings are often invisible to the naked eye, but can be detected using special equipment. Covert markings can include things like microscopic text, hidden images, or special pigments that are only visible under certain lighting conditions. By using covert markings, manufacturers can make it difficult for counterfeiters to replicate their products and can also use the markings to trace the origin of fake parts.
Another example of a covert anticounterfeit solution is the use of covert packaging. This can involve using packaging that is difficult to replicate or that includes hidden security features that can only be detected using special equipment. For example, a manufacturer may use packaging that includes a special coating that fluoresces under certain lighting conditions, making it easy to identify genuine parts but difficult for counterfeiters to replicate.
Covert anticounterfeit solutions can be particularly effective when used in combination with overt measures such as security holograms or serial numbers. By using a combination of covert and overt measures, manufacturers can create a layered approach to protection that is difficult for counterfeiters to bypass.
In conclusion, covert anticounterfeit solutions can be an effective way for automobile manufacturers to protect their products from counterfeiting. By using techniques such as covert markings and covert packaging, manufacturers can create additional barriers to counterfeiting that are difficult for counterfeiters to detect or replicate.
Ennoventure’s patented solution
Ennoventure’s covert brand authentication solution can help prevent the spread of counterfeit and fake parts in the automotive industry. This solution addresses all the key aspects of the industry and its various stakeholders – from customers and dealerships to brands and regulatory authorities.
These are the key features of Ennoventure’s solution:
Preventing replication of authentication features
Ennoventure’s brand protection solution is invisible – and the counterfeiter cannot strip out or replicate the authentication layer. The labels and product packaging for the automotive part is embedded with the invisible signature.
Tracking the presence of fake parts
When a consumer scans a vehicle part using Ennoventure’s mobile solution – the results of the scan can be tracked by the manufacturer brand. This helps the brand identify the presence of fake spare parts by location – which can trigger an on-field action to address the issue. One of the big challenges in anti-counterfeit solutions is that many consumers don’t bother to report the fake spare part because they assume that there is a lot of effort involved. With Ennoventure’s automatic tracking, the brand can receive and act on the data showing the presence of counterfeit automotive spare parts.
Implement without process change
Ennoventure’s invisible brand authentication signature is integrated into the artwork for the product packaging or label. This means that there is practically no process change in the production process. This reduces the time to implement, and cost of transition, and no new machinery, packaging substrate, training or special materials are required.
Empowering the consumer
The consumer is empowered to verify the authenticity of the product. The consumer can simply scan the product label or packaging using their smartphone (either Ennoventure’s mobile app or microsite), and they can instantly authenticate the product.
Protecting the entire supply chain
Counterfeits can enter the supply chain at any point, and it is important to allow anyone across the chain to verify the products. Ennoventure’s patented solution allows anyone with a smartphone to verify products in seconds. This creates more gatekeepers to sample, detect and prevent counterfeit automotive parts from entering the system.