Counterfeiting in the automotive industry: How bad is it and how can you protect your customers?

Most industries are highly regulated for many different reasons. However, some industries are subject to stricter and more comprehensive regulations than others. The automotive industry is one of these, simply because the stakes are so high. Autos are high-value items, they are critical to the livelihoods of millions of people, and they are used on a daily basis by millions more. Perhaps most importantly, automobiles can be highly dangerous to human life, and so you might expect fake car parts to be very rare indeed.

Fortunately, these fake components are rare. The overwhelming majority of cars and other vehicles on the road worldwide are manufactured to the appropriate standards of safety and are in adherence with testing and regulatory protocols. But some of these cars are not, and this some is a growing number.

The increasing magnitude of the fake car parts problem

In recent years, the United States Federal Trade Commission has valued the fake car parts market at around $12 billion a year and states that around 80% of these fraudulent components were manufactured in China.

Meanwhile, research from Red Points found that a third of survey respondents who had bought car parts online said they had received a fake car part at least once. Red Points' research also uncovered the fact that, while 90% of survey respondents said that they conduct research before making an online purchase, over 50% admitted that they may not know how to distinguish fake car parts from the real thing.

This problem is not limited to the United States. In 2018, the European Union Intellectual Property Office — or EUIPO — said they believed more than €2 billion ($2.39 billion) was being lost each year as a result of the sale of fake car batteries and tires alone. Information released by the United Kingdom's Intellectual Property Office (IPO) suggests that the most common fakes in Britain's car parts market include filters, brake pads, lights, wheel rims, and airbags. This is an immediate cause for concern, especially when you consider how a faulty brake pad or airbag can easily have fatal consequences.

These results were mirrored in the Red Points survey. In this survey, 53% of respondents said that they shopped online to purchase brake or wheel components, potentially exposing them to danger. In fact, of the 33% of respondents who reported receiving a fake car part, 19% said that this was a fake wheel or brake component.

In 2019, research carried out by the Federal Chamber of Automotive Industries (FCAI) suggested that as many as 60% of search engine results for auto parts were leading consumers to sites that sold fake car parts. Some of these car parts appeared to be seriously below par, even incorporating substances such as compressed grass clippings in a few cases.

The dangers of fake car parts

How much of a big deal is this really? Are these fake components that much worse than their genuine counterparts, even though they look so similar? The answer, in many cases, is yes to both questions.

• Substandard parts are putting road users in danger.

Tests conducted by Mercedes-Benz in 2018 found that many of the fake brake pads available to consumers in the market performed significantly worse than real products, preventing safe speed reduction even on flat ground.

• Fake auto parts are undermining the work of safety bodies.

With so much time and money poured into safety testing and regulation, this is a serious issue. Efforts by the Euro NCAP (New Car Assessment Programme) and the ETSC (European Transport Safety Council) in the EU and ANCAP (Australasian New Car Assessment Program), among other bodies around the world, are being undone by faulty, counterfeit replacement parts.

• Developing nations could experience severe risk.

The effect could be even more serious in developing nations. According to the World Health Organization, of the 1.35 million people killed in road accidents globally each year, 93% of these deaths occur in low or middle-income countries. This is despite a far lower number of vehicles in these nations compared to developed nations. While we don't know how many of these deaths caused on roads each year are because of faulty fake car parts, the widespread availability of these parts certainly makes for disturbing reading.

• These developing markets are particularly vulnerable to fraudsters.

Markets in low and middle-income countries could potentially be more vulnerable to counterfeit car products. The relatively low prices of fake components, coupled with less stringent regulation in many markets, may be putting millions of people in danger in less advantaged countries. The battle against fake components — and against the fraudsters who put lives at risk for monetary gain — is truly a global one.

• Businesses and livelihoods are also jeopardized.

While the human cost of fake auto parts should always be first and foremost — everyone has the right to use our roads safely and securely after all — there are other issues to take into account, too. We've already looked at some of the astonishing figures from the counterfeit parts market, and these numbers are wiping billions of dollars off of the profits of automotive manufacturers and legitimate vendors across the world. This, in turn, is causing market instability that could put jobs and livelihoods at risk.

Taking all this into account, what can auto companies do to protect their customers, other road users and pedestrians, and their profits?

Winning the battle against fake auto parts

All is not lost. While the number of fake auto parts seems to be increasing in the online market, there are measures that manufacturers can take to work against this.

• Educate consumers on how to spot fake auto parts

Given that many consumers don't currently know how to distinguish fake car parts from real ones, some education is required from automotive producers themselves. As we have seen from the Red Points survey, the majority of customers are willing to take the time to research parts before purchase, so we can expect this education and support to be well received.

• Deploy software to keep customers safe

Unfortunately, educating consumers alone is not enough. Fake components tend to be very similar in appearance to the real thing. While this does not mean they will perform as well as the real thing, it does make it hard for the average consumer to spot a fake. Software can help here.

Tens of millions of cars are supplied each year with spare parts protected by engage™. Moreover, we are providing the car parts manufacturers with a complete product protection solution, ensuring the integrity of packaging and tamper evidence as well for the complete peace of mind of the end consumer.

• Work closely with regulators and safety entities

Regulators and safety entities are constantly on the lookout for unsafe and fraudulent components. Working closely with these bodies will help you recognize when fake components are hitting the market, so you can take appropriate action as you warn your consumers.

Adopting this close relationship generally improves road safety also. These bodies rely upon the support of automotive producers as they work to make driving and road use safer for all.

Engagement is key to defeating fraudsters

If customers are engaged and knowledgeable, it becomes difficult for counterfeiters to deceive them. The engage™ app and platform are geared toward achieving this level of connection between manufacturers and their customers. Reach out to our team to learn more and to request a demo.