How to combat Auto counterfeiting in India

How to combat auto counterfeiting in India?

How to combat auto
counterfeiting in India ?
By C S Jeena

Disclaimer: Presentations are intended for educational purposes only and do not replace independent professional judgment. Statements of fact and
opinions expressed are those of the participants individually and, unless expressly stated to the contrary, are not the opinion or position of the
Hologram Manufacturers Association of India (HOMAI). HOMAI does not endorse or approve, and assumes no responsibility for, the content, accuracy
or completeness of the information presented. The data used here are from various published and electronically available primary and secondary
sources. Despite due diligence the source data may contain occasional errors. In such instances, HoMAI would not be responsible for such errors.
© 2014 HOMAI www.homai.org


HoMAI
• Hologram Manufacturers Association of India
• Formed in 1998
• Has a strength of 27 Manufacturing, 7 Associate and 5
• Honorary members
• Hologram Roster started in Aug 1999: in 2009 was merged
with the IHMA’s HIR in the larger interests of the hologram
industry



Agenda
 Counterfeiting of auto parts
 Current Indian Scenario
 Most commonly counterfeited parts & accessories

 Reason for increase in auto counterfeiting

 Impact of auto counterfeiting
 Steps to fight auto components counterfeiting







Changes in behavior towards brand protection
Formation of team focuses on anti-counterfeiting strategy
Selection of right anti-counterfeiting technology
Track supply chain at distribution end
Monitoring and developing IP strategy
Consumer awareness

 Conclusion



Auto counterfeiting - scenario in India

The grey market
percentage for
automobile segment
Supply of auto
components in India
Consumption of auto
components parts in India

Auto
component
consumption
supply GAP
2010

INR 15,446 crore

GAP
29.6%

INR 21,949 crore

*Sources: FICCI Cascade study 2012 (Invisible enemy) / ACMA White Paper “legislative improvement to combat counterfeit auto components 2011)



Most commonly counterfeited parts and accessories

Engine & Exhaust
•
•
•
•
•
•
•
•
•
•
•
•

Oil filter
Air filter
Fuel Filters
Oil and Water pump
Distribution caps
Coolant
Transmission fluids
Bearings
Piston and piston
rings
Spark plugs
Lubricants
Sealing rings

Suspension & Braking
•
•
•
•

Steering arms
Tie rods
Brakes
Brake Linings

Body & structural
•
•
•

Sheet metals
Bumpers
Windshields

Electrical Components
•
•
•
•
•

Alternators
spares
Head lamps
Tail lamps
Wipers
Starter motor
spares



Reasons for increase in automotive counterfeiting
Factors such as:
 Illegal Manufacturing is growing due to shortcoming of existing legislation and easy availability of
material from China to produce counterfeit auto component
 Inadequate surveillance efforts by brand owner to identify counterfeit products
 Tampering/Re-packaging: Counterfeit automotive components entering supply chain through local
manufacturing, importing from China in form of fake packaging or in original packaging sourced
from mechanics or service stations

 Higher margins: In comparison to genuine auto component makers, a counterfeiter earns 35%-75%
 Lack of consumer education to identify authentic parts/about the ill effects of counterfeit parts
 Supply constraints: Lack of easy availability of genuine parts for older variants of vehicles, and
sometimes even for new models, leads to counterfeit sales. This may either be a supply constraint at
the manufacturer’s end or a strategy at the distributor level to achieve high margins.
 Lack of tools for law enforcement


Impact of auto counterfeiting

Effect to Govt.

• Loss of tax revenue : According to FICCI Cascade survey Indian
Government loses approx. INR 22 billion (US $ 496 million) due to
counterfeit auto products in FY 2010.
• Funding of criminal enterprises : The people that benefit most from
counterfeiting are criminals who then use their proceeds to fund
other criminal activity of to further their own enterprises.

Indicative figure – calculated by assuming an average tax rate and profit margin on these automotive components
Source: ACMA and Ernst & Young Research / (source ACMA)



Impact of counterfeiting

Effect to consumer

• Loss of Life : The use of counterfeits products result in around
25,400 deaths and more than 93,000 injuries during 2009. 20% of
total road accidents in India can be either directly or indirectly
attributed to the use of counterfeit automotive parts.
• Loss of Jobs: Around 1.5 million jobs lost
• Loss of money: According to estimates, the end-users are paying for
an additional 109 million litres of petrol and 8 million litres of diesel
per annum which can be attributed to use of counterfeit parts.



Impact of Counterfeiting

Effect to manufacturer

• Lost revenue: Lost revenue worth US $ 2 billion annually

• Lost Market Share: at-least 29-35% market lost due to grey market
• Liability: Manufacturer can face potentially crippling law suits as
incidents of counterfeiting, tampering, and diversion leading to accidents
and death.
• Product recall due to counterfeit parts – loss of brand equity: In the last
few years major automotive manufacturers were forced to recall their
vehicle due to counterfeit auto parts.

Source: Product recall http://en.wikipedia.org/wiki/Product_recall



Steps to curb auto counterfeiting

Step 1: Change in
approach towards
product protection

Step 2: Formation of
team focuses on anticounterfeiting strategy

Step 4: Monitoring and
developing IP strategy

Step 3: Selection of right
anti-counterfeiting
technology

Step 5: ISO Standards




Step 1: Change in approach
towards product protection

As a first step, every CEO or Brand owner
should take the responsibility of brand
attack and make Brand Risk
Management (BRM) an intrinsic part of
his business plan, review and report



Team to be formed for Brand risk management
May comprise of CEO/Brand owner; Brand Managers; Head of
Marketing, Product Development, Sales, Logistic, Packaging,
Manufacturing or outside consultant accountable for the brand.

Periodically review the BRM by analyzing various issues like:

Step 2: Formation of
team focuses on anticounterfeiting strategy

i) Product categories & markets
ii) Buyer profiles
iii) Supply chain management and SWOT analysis of
the counterfeiters

Make a customized & integrated solution: This can be done by
increasing the participation of co-opting consumer or channel partner
and by conducting verification, raids or ensuring strong law
enforcement



Step 3: Selection of anticounterfeiting
technology (see chart
overview of security
technologies)

Cryptographic
Logical

Structure
analysis
Authentication
Printed

Security
Technologies

Physical

Inks/Taggants
OVD / Hologram

Identification
Serialization
Track & Trace
 *Use at-least one level of overt authentication
 *Focus on ethical vendor who provide multi layered security solution instead just one technology
 *To select technology take help of published standards such as ISO 12931 and NASPO


Constant monitoring at distribution
channel with the help of anti-counterfeiting
technology.

Step 4: Monitoring and
developing an
Intellectual property
strategy

Planned surveillance program

If any infringement is found, take
legal action




ISO has published new Standards 12931 to fight
against the counterfeit.

Step 5: Adopt Standards and
best practices

Study the best practices adopted by others and
constantly review and refine your strategy.

Source: http://www.iso.org/iso/catalogue_detail?csnumber=52210 .



Conclusion

While the trade of counterfeit parts has dramatically
increased, tackling counterfeits is not impossible.
Counterfeiting is a problem that needs to be addressed
quickly and decisively. Ideally, as a first move, more
effective partnerships should be built between law
enforcement agencies and the private sector with focus
on intelligence sharing, awareness and product
identification training.



Thank You

For more information, please contact
C S Jeena
Hologram Manufacturers
Association of India
21-Ground Floor, Devika Tower 6,
Nehru Place, New Delhi 110019, India
Email: info@homai.org
Website: www.homai.org


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