Fake auto parts take toll of lives; deprive govt, industry of revenue

Fake auto parts take toll of lives; deprive govt, industry of revenue

Mumbai/New Delhi: A screechy car brake may stop you dead, literally.

Chances are, every vehicle that is serviced at an unauthorized service station may end up with one such brake—the screech being a giveaway sign that it’s a low-quality brake that could fail anytime.

Many such service stations are small roadside shops, and most car owners frequenting them get taken in by the fact that the packaging on the screechy brake looks much the same as that on the original.

In India, fake auto parts is a thriving business, with a recent study by industry bodies Society of Indian Automobile Manufacturers (Siam) and Automotive Component Manufacturers Association of India (Acma) estimating its size at between Rs4,400 crore and Rs6,300 crore. That means fakes account for between 32% and 47% of the industry, by ­value.

Fake automotive parts were responsible for 66,330 accidents even as long back as 1997-98, according to a study conducted at the time by Acma. These accidents caused 13,180 deaths and injured 65,550 people. At the time, Indians bought 3.8 million vehicles a year, compared with more than 10 million now. There has been no study on the accidents caused by fake parts since, but the association says the number could only have increased.

“Spurious auto parts are not treated at the same level as spurious drugs since it doesn’t seem to have an immediate impact," says Vishnu Mathur, executive director, Acma.

The country also doesn’t have facilities for accident and fatality analysis such as those that exist in the developed world, industry executives say, making efforts to understand the cause of accidents difficult.

The replacement market, or the after-sales market, refers to parts required to replace existing ones in vehicles. The original equipment manufacturer, or OEM, market refers to sales of auto parts to vehicle makers. The replacement market is worth around Rs13,500 crore. In 2006-07, the size of the Indian auto parts industry, including exports, was $14 billion (Rs55,300 crore).

Examples of the most rampantly counterfeited products include bearings, brake pads, brake discs, rubber rings, axle boots and suspension parts—all of which are related to safety rather than the cosmetic appearance of a vehicle.

But the menace of spurious parts is not restricted to just loss of life. It also translates into a revenue loss for an industry that is now struggling with slowing domestic sales and falling exports because of a stronger rupee. It also means less in taxes for the government because the firms that make these fake parts do not pay taxes. According to a study in 1999 by Acma, the government loses Rs1,520 crore or so a year in taxes because of fake parts. Also, auto parts makers ranging from international to local ones say fakes erode their sales and profits.

“Our internal estimate is that fake components shave off about 10-15% of our sales," said Vivek Dave, sales executive (after-market division), Beru Diesel Start Systems Pvt. Ltd, a maker of electrical components.

Several component makers which Mint spoke to say that, in most cases, a consumer is not aware that he is buying a fake part since the packaging of counterfeits is just like that of original products. This normally happens when consumers visit unauthorized dealers after the vehicle’s warranty period is over, looking to save costs on vehicle repair and maintenance.

There are also cases where a consumer knowingly buys a fake component that is priced half of what a branded, original product would cost.

A scooter user, for instance, would spend Rs296 to replace components at a mechanic against Rs517 at an authorized sales and service outlet, according to the Siam study, which was conducted by market research firm IMRB International. That difference is roughly the same for cars— fake parts cost a little under half the original ones.

While India has strong intellectual property laws compared to some countries, industry executives say cumbersome procedures and weak implementation means that offenders get away lightly.

The law punishes sellers of fake components with a prison term of between six months and three years, and a fine of between Rs50,000 and Rs2 lakh under the Trade Marks Act, 1999. However, component makers say that this law must be more strictly implemented. The Union ministry of consumer affairs, which is supposed to take care of consumer protection and welfare, is conducting an awareness programme which is sketchy at best, these executives add. Calls to the ministry to seek comment on this issue went unanswered.

While industry associations such as Acma and Siam are conducting studies, organizing events to increase consumer awareness and assisting in occasional raids to combat this problem, these have done little to stem the market in fake parts. If anything, the size of the spurious parts markets has increased as more cars and two-wheelers get sold in the country.

The manufacture and sale of spurious parts is still not recognized as a “cognizable offence", says Mathur of Acma. A cognizable offence is one where arrests, search and seizure of property can be made without a warrant.

In the case of spurious parts, the police are required to take an opinion from the Registrar of Trademarks before making a search or seizure, which often gives time for the counterfeiters to get away before being caught, say industry officials.

Many parts makers are themselves identifying manufacturers and sellers of fake parts. They then inform the local authorities and the police who help carry out raids.

“We are doing all we can, but if you ask me, we are fighting a losing battle," said Rakesh Makhija, managing director, SKF India Ltd.

Companies such as Motor Industries Co. Ltd, a unit of Germany’s Robert Bosch GmbH, and SKF India have created special holograms on price labels and identification marks on their packaging to help consumers differentiate their products from the fake ones.

They’re still a long way from halting the march of fakes, though.