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Trading Of Counterfeit Products In The Aftermarket Is Jeopardizing The Indian Auto Components Industry

The selling of counterfeit goods and products under the name of reputed brands not only brings the immense financial loss to the original brands but also poses a great threat to the Indian economy.

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The Indian auto components aftermarket is expected to touch 75552 crores by FY19-20 as estimated by Automotive Components Manufacturers Association of India. However, the counterfeit business in the auto industry, which is growing at an alarming rate, slows down the growth and development of organized players in the market. The selling of counterfeit goods and products under the name of reputed brands not only brings the immense financial loss to the original brands but also poses a great threat to the Indian economy. After all, the hefty revenue generated by large-scale production and marketing of counterfeit products, which are 30-40% cheaper, but of poor quality, does not even contribute to government taxes. 

The fake auto parts such as a clutch, lamps, steering arm, bearings, filters, and brake linings for two-wheelers, cars, and buses labeled under the name of genuine auto component manufacturers are supplied to the dealers and marketers all over the country. The reduced versions of original parts easily available at low-costs allure the unaware retail dealers, mechanics, and the end-consumers. The lack of adequate means to put the counterfeit businesses by the brands, lack of consumer awareness, and the ineffective surveillance and law enforcement on the trading of fake auto components fortify this widening grey market. While genuine brands suffer the damaged reputation and financial loss, the end consumers have to deal with fatal road accidents and severe injuries caused by the fake auto parts fitted in their vehicles. Basically, the counterfeit business in auto component industry drives all the stakeholders of the market towards a loss in different forms. 

Consumer safety at risk

According to FICCI CASCADE, 20 per cent of road accidents in India are caused due to the poor quality counterfeit automobile parts. Duplicate engine consumes excessive fuels while a low-quality oil filter may cause sudden engine failure. Many counterfeit brake pads have been reported to give way to severe accidents. The original equipment and components are time-tested and guaranteed with the safety of the vehicles as well as the consumers. But, the counterfeit components reduce the life-cycle of vehicles making it dangerous for consumers. It’s the lack of consumer awareness that fans the demand of such counterfeit products which are precisely similar to the genuine components. Though the raw material used in genuine is of higher-quality and fake ones are made up of substandard materials and this makes all the difference. 

Big loss to the industry 

Today, the Indian auto industry has emerged as one of the fastest growing markets in Asia. The increase in consumer power and the demand for automobiles from the middle class continues to spearhead the growth of auto component manufacturers. And, the auto industry is trying everything under the sun to overcome its weakness while encouraging innovation and investments. But, counterfeit trading of auto components is a bane to its crucial growth and development. Making big investments in the industry is less preferred by investors and companies as the grey and the illicit market is robbing the mainstream out of revenue and customers. The counterfeiting available at cheaper costs than the original costs leave the legitimate manufacturers bereft of deserving profits and business opportunities. Surviving in the parallel market, the companies even cannot cover up the costs of manufacturing and R&D. Obviously, if the companies are unable to thrive, there will be limited employment opportunities in the sector.  

Threat to the economy and public revenue 

Such counterfeiting auto component companies operate illegally and underground and market the fake and unreliable auto parts under the name of industry giants, which carefully manufacture the auto-components and test them through stringent quality tests before introducing them into the market. The illicit sales and revenue generated through counterfeiting cause financial loss, as in direct or indirect taxes, to the Indian government and economy.  If the government is deprived of tax, it may directly affect the higher expenditure that government does on public welfare and health services. This would also keep the investors at bay who may like to make investments in a capital base to generate revenue, but the limited rules and regulations against counterfeiting and inadequate protection against intellectual property hold them back. Not to forget, small investments in any industry means lesser employment opportunities, which further insignificantly contributes to the Indian economy. 

Damages image and reputation of the brands

The brand image is one of the invaluable assets a company can have. And, the accidents or trust issues with the right holder led by counterfeiting ruins it completely. The revenue loss, market share, and dissatisfied customers rob off the company out of its irreplaceable brand value and image. A legitimate producer uses unique trademarks that set his products in the market distinguished. With these trademarks, the consumers have expectations with respect to the superior quality of products offered by the producers. Counterfeiting deteriorates the value and significance of the original product by misusing the trademark. The consumers would blame the legitimate manufacturer if the fake part turns out to be defective or does not fulfil the expectations of them and even cause harm to them. The customers’ trust in the brand is broken and the hard-earned reputations go down the drain. The large size and mid-size auto component manufacturers are more vulnerable to damaged brand reputation and image. 

Counterfeiting in the auto industry is increasing at a steady pace and can only be prevented by the joint efforts of customers, brand owners, and lawmakers. Consumer awareness is the first and crucial step to fight to counterfeit as they may stop buying fake auto parts if they are educated about the risks involved in using duplicate and low-quality products. Auto component companies should also take anti-counterfeiting initiative like security hologram seals and labels or light-sensitive ink designs to distinguish their genuine products. They should also keep tight scrutiny on all the products marketed under their names.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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counterfeiting auto components automobile industry

Manav Kapur

The Author is the Executive Director of Steelbird International.

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