SIAM guns for fake parts makers

Indirectly acknowledging its limited resources in dealing with economic offences of all kinds, Delhi’s top cop in charge of curbing menaces like counterfeiting has put the onus on the automotive industry to effectively deal with the growing menace of fake parts in the automotive industry. Additional Commissioner of Police, Economic Offences Wing, Crime Branch, Delhi Police S B K Singh urged companies to fulfill their duties towards fighting counterfeiting. “The duties of the company do not end with the raid.

Companies should maintain secrecy about the raids and should ensure the presence of their representatives in the court,” he said. Singh was speaking during a workshop on anti-counterfeiting held in the capital by the Society of Indian Automobile Manufacturers (SIAM). (Incidentally, Singh was transferred out of the Delhi Police Economic Offences Wing to a posting out of the State a day after the workshop).

Explaining the procedures of a raid, he told an automotive company representative that the complainant should procure information about the sellers/suppliers/manufacturers and carriers involved in piracy. He also urged companies to provide information in a sealed envelope regarding the places to be raided. “Companies should nominate an authorised representative who should have proper document of authentication/ knowledge/ expertise to identify the infringed items. He or she should also be available for subsequent raids and his/her presence should also be ensured in the court during trial,” he noted in his address.

Listing out a series of steps that companies need to take both before, during and after the raid, Singh said that companies should not lose interest in prosecution of offenders following the raid and that they should also collectively decide ways and means to store and seal the huge quantities of recovered items.

Hero Honda takes prompt action

The world’s largest two-wheeler manufacturer, Hero Honda has taken a slew of measures to make counterfeiting of its genuine parts a very tough proposition for unscrupulous traders.

In his presentation Rajesh Mukhija, GM – service, Hero Honda, said that the total two-wheeler spare parts industry in India is estimated at Rs 10,000 crore, of which Hero Honda’s share alone is around Rs 1,000 crore.

The company, he claimed, has faced several problems like package counterfeiting and duplicating of parts marketed as original Hero Honda parts. These, he said, have led to poor product life, poor performance and lowering of brand image. But the company has taken several initiatives to tackle this problem. These include the use of the latest technology for development of high security labels for spare parts, branding of Hero Honda parts and action against counterfeit parts retailers in various local markets. “Hero Honda genuine spare parts can be identified by their packaging. These parts now come in a vibrant three-colour pack with special features, which can easily be identified by various colours and a high security bar-coded label with holographic strip,” he explained.

He further added that Hero Honda has been taking action against fake parts retailers at local markets by conducting raids. It has identified potential markets and retailers and verified their involvement in this trade. In order to make replicating of parts difficult, the bikemaker has initiated branding of parts like brake shoes, batteries, bulbs, horns, cables, sprocket drive, front forks, speedometer, headlight case, and mufflers. The company has in the past year conducted raids along with law enforcing agents in Indore, Varanasi, Jodhpur, Surat and Raipur.

Ford’s India experience

Jesus Metelo Arias, general manager, customer service operation, Ford India, had some startling data to share. He noted that around $103 million (approximately Rs 515 crore) in revenues is lost by the car industry as a result of counterfeit products.

Quoting MEMA figures, he said counterfeiting annually costs the auto industry around $ 12 billion in sales globally, of which $3 billion is lost in the US alone. It also costs around 750,000 jobs.

“Technology advancements have made copying OEM parts extremely easy. Counterfeiting is most prevalent in Asia-Pacific, the Middle East, South America and Mexico. These parts are then exported to markets throughout the world. The functional parts that are usually common counterfeit targets include brake components, steering and suspension items, electrical items, maintenance parts and collision parts,” he said. Among the accessories that are usually imitated are items like floor mats, seat and wheel covers, body covers, mud flaps and spoilers.

During 2008, he said, Ford conducted raids at various locations of counterfeiters and seized fake spare parts including windscreens, oil filters and fuel filters among others. The supply chain of counterfeiters is very robust and proactive in the country, he said. Around Rs 2 crore worth of counterfeit parts and accessories were seized by Ford India during raids in 2008. Parts and accessories coming through imports remain a key challenge to address, he noted. Arias also noted that sale of accidental and scrap parts is an equally dangerous proposition. These, he said, are later made available in the open market and damage the Ford brand. The company has circulated a scrapping manual for dealers and established a robust process for scrapping of used Ford branded parts and accessories. He reiterated that parts and accessories need to be destroyed to a point where they cannot be reused. “We have learned that scrap haulers cannot be relied on to destroy the material and in fact they intentionally redistribute the material,” he said.

The company has also undertaken extensive customer education initiatives to warn customers of the dangers of counterfeit parts and the ways to avoid using them.

A burgeoning problem

Speaking at the event, the chairman of the SIAM group on anti-counterfeiting Rajendra Bhurat said that the counterfeit component market in India could be more than a third but less than half of the total aftermarket component sales. “The counterfeit market can be anywhere between Rs 4,395 crore to Rs 6,322 crore, which constitutes around 32 to 47 percent of the total component aftermarket. The counterfeiting menace seems to be growing faster than the economy,” he said.

He said all segments of the industry including two-wheelers, three-wheelers, passenger cars and commercial vehicles are impacted by counterfeiting. The root cause of the problem, he said, is the large base of unorganised distribution channels, trading centres, fragmented and untrained street-side mechanics. He also remarked that there is considerable difficulty in distinguishing original parts from fake parts due to low awareness among customers.

Besides, there is no single platform for manufacturers/ distribution partners to continuously interact with government or enforcement agencies on a sustained long term basis. He concluded that the SIAM group on anti-counterfeiting is doing all it can to hit back at counterfeiters in India. Its efforts will receive a fillip if automotive companies further up the ante.