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-   -   Anti-Counterfeiting Solutions for the Automotive Industry - The Spurious Parts Menace (https://www.team-bhp.com/forum/indian-car-scene/160966-anti-counterfeiting-solutions-automotive-industry-spurious-parts-menace.html)

While poorly designed Cars that don't meet Safety Standards and Poorly designed Roads are contributors to Accidents and Deaths on the Road. Counterfeit products are an equally big danger to our lives and no one really seems to taking sufficient action on this issue.

This thread would be focused on the issue of Duplicate / Fake / Counterfeit products sold in Automotive Industries & the Anti-Counterfeiting measures that Automotive Companies can adopt to curtail the problem.

It would cover: (Not necessarily in this order.)

a) The extent of the problem

b) A bit about the Regulations / Regulators and their efforts.

c) The current measures adopted by a few of the Automobile Companies - Are they enough.

d) The various solutions that exist and their pros and cons.

e) The Simplest & Lowest Cost Solution/s (In my view). - How easy is it to implement?

f) A general discussion by all of us on how the We, The Automotive Companies (including Auto Spares Ancillaries) & The Government can take this to the next level.

• Honda Siel Cars India, Volkswagen India, Fiat India Automobiles, BMW India, Ford India, General Motors India, Hindustan Motors, Mahindra & Mahindra, Mercedes-Benz India, Nissan Motor India, Skoda Auto India, Toyota Kirloskar Motor, Maruti Suzuki and Tata Motors
  
• the Competition Commission of India (CCI) recently slapped a penalty of Rs. 2,545 crore on 14 carmakers
  
• Among others, a fine of Rs. 84.58 crore has been imposed on General Motors, followed by Honda Siel (Rs. 78.47 crore), Skoda Auto India (Rs. 46.39 crore), Ford India (Rs. 39.78 crore), Fiat India Automobiles (Rs. 29.98 crore), BMW India (Rs. 20.41 crore), Mercedes-Benz (Rs. 23.08 crore), Hindustan Motors (Rs. 13.85 crore), Volkswagen India (Rs. 3.25 crore) and Nissan Motors (Rs. 1.63 crore).

Have listed below the links that cover the stated move to make manufacturers start over the counter spare part sales. They have been restricting this stating reasons such as prevention of Spurious Spares in the market and of course absence of sufficient technical knowhow outside the authorized centres.

• Over the counter spares sales is to some extent linked with Anti-counterfeiting. The Government wishes to empower us and enable healthy competition, while the Car Manufacturers wish to ensure only genuine spares manufactured by them are used in their vehicle, but there are at times lower cost options available directly from OEM supplier that match or exceed the quality of the original spares.
  
• Also we are all aware of the instance of a Skoda Authorized Centre being taken to the courts by "Harish" for them installing Spurious / Fake Spares in his car at the Authorized Centre.
  
• Multiple car manufacturers like TATA, Maurti etc. do now already make over the counter spares available. But the next and required step is for these to be available at any multiband spares outlet and for the customers to be empowered enough to spot the fake products and distinguish them form the genuine ones.

1. http://www.team-bhp.com/forum/indian...are-parts.html
   See post no 156, 184 on the above thread.
   
2. The Court Order link:
   http://www.cci.gov.in/May2011/OrderO.../27/032011.pdf
   
3. Press Coverage:
   http://www.livemint.com/Companies/l7...ce=ref_article

Source Credit: www.sproxil.com (Sproxil INC.). It reserves the copyright to further reproduction of content provided by it and disbars it.

Disclaimer: I am presently associated with a company that provides Brand Protection Solutions. This enables me to provide a bit of an insider view of the issues and solutions. My take - Any Solution is better than No Solution.
A lot of the data is complied from Sproxil's presentation/s which further is based on multiple sources in the public domain. Each source owns it's brand and content copyright.
My attempt is to provide as neutral a view as possible. I am posting here in my personal capacity and my views in no way necessarily reflect those of any company.

OES need to meet this requirement so that independent repairers are able to properly repair and maintain certain car models





Some of the references. Yes these are real figures.

• Delhi produces 75 per cent of counterfeit goods & caters to clients in markets across city
• http://indiatoday.intoday.in/story/c.../1/280410.html
• Assocham concluded that counterfeiting cost India close to $900m (calculated to Rs. 61.5 billion) in lost sales during 2011.
• http://www.securingindustry.com/elec.../#.VOMD2fmUdYQ
• 40% of auto parts sold are fake
• http://www.business-standard.com/art...1200885_1.html
• ACMA has estimated the value of fake spare parts in the after-market at Rs. 10,500-14,000 crore
• http://www.business-standard.com/art...1200885_1.html
• Prevalence of counterfeit automotive bearings market in India poses a threat to organised players.
• http://www.rushlane.com/indian-autom...-12142663.html

Can we Spot a Fake? There are some ways of knowing but even the most experience Automobile buff would get fooled very once in a while and there have been known cases of even company officials not being able to confirm which is a fake without the help of the Engineering / Tech Departments.



http://gulfnews.com/news/gulf/uae/ge...parts-1.880639

So which are he most commonly duplicated products? How Big is the Problem?



Stats: http://www.business-standard.com/art...1200885_1.html

What Steps do the Car Manufacturers take currently?

Quite a few actually, and yet they could do a lot more. Have listed below some of the measures taken by few of our leading brands in India. The measures are under constant improvement and this is not an exhaustive list. They do a lot more, yet the next few visuals would be self-explanatory of why these measures do not seem to work to the extent we would hope.

That said not every thing can be managed just at the car manufacturer end. The buyer too needs to be vigilant and yet there is so much more that can be done. Some of the measures it would appear are just feeble efforts towards seeming to act.

Maruti:



Hyundai:



Tata:



Can we make out the difference between a genuine or a fake hologram? Even Company officials would need to ask their marketing team members for techniques that identify a genuine hologram from a fake. The end customer stands no chance.

In my previous company (IT Hardware Industry) we changed the packaging at regular intervals and built in new features to distinguish a genuine from a fake, but the duplicates caught on in as less as 4 months and the end customer would always be told when buying an old look packed product (either genuine or fake) that it is the same product manufactured earlier and unlike food products they do not deteriorate or get spoilt if on the shelf for a while. A barcode would never be figured out either.

Various Anti-Counterfeiting Techniques - Their Pros & Cons.



There are Overt Methods like the most popular and most misused Holograms - But are we able to spot a genuine hologram from a fake. They are in fact among the easiest solutions to replicate. How do we report a fake / provide feedback? (Besides sending an email or calling up a number.) Are we motivated enough to do it? It seems more an attempt to be seen to be doing something.




There are Covert Methods like those used on our Currency notes but again can we spot a genuine from a fake. How do we report a fake / provide feedback? (Besides sending an email or calling up a number.) Are we motivated enough to do it?



Forensic Techniques are too expensive for the Automotive Industry besides being way to far from being Layman proof.



Serialization is the way to go (In my view). But there are some methods that better suited for Automotive applications than others within this category.

Surface Markings (Embossing, RFID, Barcodes, QR Codes and SMS based Mobile Product Authentications fall under Serialization



I feel that the best technique for Automotive Anti-Counterfeiting applications is SMS based Mobile Product Authentication (MPA). - More on that later.

How exactly does one combat counterfeiters?

It has to be a multi pronged attach that covers all bases. One must effectively differentiate a product, educate the buyer and make her aware of the anti-counterfeiting measure in play for the product in question, engage with all stakeholders including the government and of course effectively promote the measures.





A solution that works for all Stakeholders:

Serialization when matched with Mobile Product Authentication Technology can be the most effective solution to Anti-counterfeiting.

MPA allows for Authentication via SMS using the simplest and most basic phones with immediate response at the Point of Purchase. It also provisions for 2D QR Codes that can be deployed for use via Smartphone based scanners that can engage the reseller channels for track & trace solutions.

To explain this as simply as possible. Each product is shipped with a scratch label which when scratched with ones finger nails or a coin reveals a code that is SMS'ed to a number mentioned on the label. One gets an immediate confirmation back in a matter of seconds confirming if the product is genuine or fake. The Solution also allows for a call to a call centre that is either manned by persons or managed by an IVRS system.

This technique takes care of a counterfeiter copying one of the genuine codes of an original product and using it by limiting the number of times the same code can be sms'ed for verification to a small count.

A duplicate product seller can obviously not provision for a response SMS or a call centre as it would be traced back to them.

The system works with the cheapest mobile phone and the change of the randomly generated codes being repeated are less than 1 in a Billion or more.

MPA at a nominal additional cost allows enabling of Instant Gratification or Points accumulation based Loyalty & Rewards programs for enhanced ROI.

MPA adoption in large scale can be implemented possibly for as less as INR 1 per product purely as an anti-counterfeiting solution. Further if clubbed with L&R programs MPA will generate a +ve return that can be justified under the Marketing budget itself.

Throwing the debate open:

• There is a lot more that can be done towards Anti-Counterfeiting. Am sure some of the figures mentioned are a bit dated and many of them are lower than the actual incidence of Duplication.
  
• Just sticking to Authorized Centres is not the absolute solution. There will be stuff one buys from outside. Like say wipers or tyres or batteries.
  
• Fake Tyres can blowout at high speed.
  
• Fake Wipers can smear glass with muck, loose life early and create permanent scratches that impair visibility. We all can visualize the combined impact of a scratched glass and a wiper working below par on a monsoon night when it is pouring cats and dogs.
  
• What about Fake Accessories and car care products. Fake Polish? Yes not life threatening but still a dent on the pocket. On the other hand Fake Car Perfumes can be Carcinogenic.
  
• Then we do have Fake Brake Pads, Brake Liners, Rubber Hoses, Radiators, Suspension components like Shock Absorbers, Tierod ends etc. that can greatly impact the drivability, dynamics and stability of a vehicle or simply result in catastrophic failures due to components like the master and slave cylinders.
  
• There is also the aspect of Money from manufacturing of Duplicate products simply being unaccountable (Black money) and being diverted towards Criminal activities. The impact on society is unimaginable.
  
• One wonders why the OE Manufacturers don't adopt better and more fool-proof methods of countering this menace. The cost of implementing such measures is minuscule compared to the benefits.
  
• Certain industry vertical have a Government Mandate to adopt proven anti-counterfeiting measures. Maybe we need that out here.
  
• I would be participating in the "ACMA Automechanika Business Conclave on Business Opportunities for OEM & Supply & Aftermarket" being held in New Delhi from 26th Feb. As a panellist I would bring in the Anti-Counterfeiting aspect that needs to managed for Aftermarket sales.

Intend to present more on this topic through the year at various forums so all inputs towards this as well as new ideas are welcome especially suggestions on how we can get the Automotive Industry to move faster towards adopting these measures.

Very interesting thread. I see that the extent of the problem is complicated by the unorganized nature of the industry that makes these fake parts. I think one parallel that can be drawn is with the pharmaceutical industry. The Government agencies have been more sensitive towards the problem of counterfeit drugs because it directly affects the patient, and can be lethal.

I have a question - Is it possible that corruption within the automobile companies can be the reason why the CAD drawings and specifications for the spare parts are leaked to the unscrupulous manufacturers?

Yep, In the Pharmaceutical Industry too the driving force has been the Government. Mandates in countries like Nigeria etc. have resulted in Indian Pharma companies providing Mobile Product Authentication when the product is supplied to these countries while still not doing it in India where it is not fully mandated as yet. But that too is expected to happen soon. Indian Government still has a lot more to do in this sector as well.

Government at times needs to be an enabler to drive such measures. Like in the case of seat belts in the automobile industry.

The Duplication of products is also through reverse engineering which the Chinese are experts at. They just need a physical product to recreate a new one. They have done this with whole cars itself as we know. Though can't be sure possibly leakage of CAD drawings may not be the reason. Also since the material data is not available and the reverse engineered products are not tested well they tend to be of poor quality.

The issue here is very relevant to Indian as well as Foreign markets. And an initiative to resolve this is definitely welcome.

But from end consumer perspective, I feel this won't be sufficient if not coupled with far better technology (maybe even a decade later if not now).

An example to explain this better would be a regular service station visit to an Authorized Dealer. The ASS Rep suggests replacements to 5 parts & I agree to go ahead with it. I pay up & pick up my vehicle later. But how can I ensure that the said parts were (a) Genuine & (b) New?

I agree that Cost viability is an important factor in consideration while developing such technology but I'm sure brands like Skoda/JLR/VAG etc wouldn't see this as an non-profit department at least for the premium customers. As you've rightly highlighted Harish's case with Skoda. And I just read up a whole lot of ordeal of a Range Rover Discovery Owner (also found Salman Khan's agony on the same product).

I haven't had a lot of interaction with Premium brands but from what I read here in reviews they have warning indicators for product wear/tear too (example: a spare is reaching it's prescribed lifetime). Why can't that technology be further improved to cater to our case coz that would be implemented at Car Manufacturing level (maybe the ECU) which would bring down the costs, ensure no tampering (or almost nil) and serve the purpose of direct connect between manufacturer & consumer.

Please excuse/correct me if my assumptions have strayed.

Thanks ACM for this interesting thread.

The only thing misssing in this thread is " Why fake part business is flourishing ? ". Simply because the cost of OEM spares is so ridiculously high that customers are forced to look outside. Ask a Honda service center to rebuild a City with the spare part cost and labour charges and you will be looking at a price of Merc C class ! Same is the case with every other manufacturer.
My take is that OEMs reduce the price of the spare parts and you will automatically see fake part business diminishing.

Very interesting thread. As far as I know counterfeit parts is a global problem. It is present in just about every automotive market in the world.

It was stated that 20% of the road accidents would be related to counterfeit parts (i.e. quality issues). Any idea how they measure that?

Atlhough there is no doubt in my mind that these counterfeit parts can and do have serious quaulity issues, I'm not sure how the problem is quantified. Very little forrensic work is done on cars that have been in major accidents in the western world to my knowledge, unless something is specifically suspected. Requires very specific knowledges, skills, tools etc.

Do we have all of that in place in India?

Jeroen

Rightly pointed. However, I fear, we might not see the Government's regulatory agencies look in this industry. Instead, the Government's approach will be more of a revenue garnering agent since;
Whether Counterfeit or Original, the cycle Manufacture = Excise, Sale/Resale = VAT&CST and Import = Customs, continues to generate income.

True. This can be one of the effective solutions to start with.

I know it is practically difficult for most, but a customer should try to be present with his/her vehicle at the time of servicing.
In the past 4 of the 8 years of my Indigo's ownership, I had made it a rule to be present in the workshop at the time of regular services or niggle rectifications. Surf Team-BHP / internet, understand the problem, buy the necessary spares and attend the job has been my approach with the car. However I agree with ACM sir that, identifying a counterfeit spare is very difficult.

A very insightful thread sir, rating 5 stars.

Authorised service centres generally have a good tracking software to see the origin of the part. It is unlikely that you will be given something that is not genuine if you visit an ASS of a respectable manufacturer.

In fact, most Maruti workshops have a display piece showing a spurious part with the original. This shows that they are conscious about the importance of using genuine spares.
Trouble starts if you visit a place outside an authorised service centre. These guys rely on the distributors for their stock, and although most shops have a billing mechanism that is monitored by the manufacturer, there can be chinks in the supply chain.

Yes that is a very correct observation and yet this is most unlikely to be implemented. The reasons are many.

1) A Skoda Octavia, VW Jetta & Audi A3/A4 & some Seat models for example share the same brake pads and thousands of other components but they are all priced differently. The spare part cost while they may be identical the overheads of Design, Marketing (Brand Creation), Testing etc. are highest for Audi, lower for VW and lowest for Skoda which mostly just picks up the components from the other two. Infact even the quality of service and say the sales manpower is "supposed" to vary amongst the brands. Besides the fixed initial investments are spread over different quantities. Lowest qtty for Audi (normally) implying highest per unit recovery overheads.

2) Spares is a business in itself for the Car Manufacturers. To give an example of another industry HP makes Printers that cost very less and is very competitive and also warns that fake or refilled ink cartridges will void the warranty. But replacing the Ink cartridge twice for certain models can be more expensive than buying a new printer. They make money on the Cartridges and Toners. The Car manufacturers make more on spares than the service centres and they are not likely to give that us too soon.

Also we do know that except for 3 the rest of the manufacturers in India made a overall loss the last year. Given that we cannot expect that the manufacturers drop prices further for spares.

That said you are totally correct in your observation yet the solution of dropping prices is not really going to take place.