The global market for automotive spare parts is affected by various problems having a severe impact on the safety of motorists but also on the economy of this market: counterfeiting and illicit market. As per some studies, 5% to 10% of sold auto parts in Europe would be counterfeit ones; this rate would even reach 10% for bearings market.
Counterfeiting & parallel market: 2 illicit activities on auto parts
The counterfeit auto parts
The automotive aftermarket industry is affected by various issues and first and foremost by brands counterfeiting. The original parts (car manufacturer) are usually the first copied, with some brands belonging to automotive supplier and sometimes even brands of independent distributors.
The favorite targets of counterfeiters are high added value products, easy to copy and with a high turnover rate. As per a recent study conducted by the Automotive Aftermarket Suppliers Association, counterfeiters mainly target 3 market sub-segments:
- Maintenance : Oil filter, air filter, Brakes, brake linings, seals, rotors, flex disks
- Repair : Bumpers, covers, head lamps, tail lamps, sheet metal, oil pumps, water pumps, windshields
- Suspension : Steering arms, tie rods
Most of counterfeit parts are found within independents networks.
The sources of counterfeit auto parts
Asia is known as being the first worldwide supplier of counterfeit goods (more than 2/3 of counterfeit products would be manufactured in China). Among the top-producers of counterfeit auto parts there are in particular Russia, India, Pakistan, and Uruguay.
Fake parts might be introduced within the distribution network at many times and places. As per the German association Verein Freier Ersatzteilemarkt, the internet would generate 12% of auto parts sales in the world. The growth of this distribution channel should keep on increasing by 10% a year with the next 5 years.
Diversion of auto parts: genuine parts on an unauthorized market
The second major issue affecting the automotive aftermarket suppliers is the gray market (or parallel trade). Some genuine auto parts are diverted from the usual distribution channel and can be sold in circuits unauthorized by local legislation or not controlled by the brand owner; the loss of income might be significant.
The impacts of counterfeit auto parts
Counterfeit auto parts: a real danger for drivers’ safety
Fake spare parts might not reach safety standards as fraudsters generally used dangerous or inferior materials for production. That’s why fake auto parts are in top 10 causes of accidents reaching the 7th position. Despite the enhancement of controlling measures, this high-profitable traffic for counterfeiters turns out to be deadly for drivers who are collateral victims.
Illicit trade of counterfeit auto parts: an ongoing economical phenomenon
Globally, auto parts are in the « top 3 » commercial goods most targeted by counterfeiters, straight after tobacco or luxury products. The entire industry is affected; sometimes within developed economies but in particular in emerging regions. In India, for instance, the counterfeit auto parts rate would reach 40%.
Counterfeiting is a real economic scourge and also has negative impacts regarding employment, brands reputation, governments’ revenues and vehicle lifecycle. As per a study published by the Worldwide Custom Organization in 2011, counterfeiting within the automotive aftermarket would globally cost $ 45 billion a year only for manufacturers, including $ 3 billion in the United States.
How to fight against counterfeiting of auto parts?
The key success factors for an efficient fight against counterfeiting
The first feature to be implemented in the fight against counterfeiting concerns the intellectual property with the filling of patents and trademarks. As a complement, brands tend to adopt the following good practices:
- Products differentiation: By adding security features to products or packaging to make them excessively difficult to copy or reproduce, brands might discourage counterfeiters from copying. This printed marks or secured labels can be real barriers, enabling to reassure the distribution networks by guarantying them the authenticity of auto parts.
- Stakeholders’ engagement: Ideally, every segment of the distribution channel should be able to identify the genuine products without any doubt. In general, this is the role of brands to implement various means to guarantee to their customers (subsidiaries, wholesalers, distributors) the authenticity of their products. Collaboration is required not only with these actors but also with customs.
- Consumers (end-users) involvement: Due to the complexity of the distribution networks, a lack of trust may appear to some garage owners and car drivers, who want to check by themselves the authenticity of the auto parts. These ones will generally control and verify the point of sales of their first purchases; that’s why brands (manufacturers, distributors) need to deliver information about security features to enable end-users to distinguish fake from genuine.
- Promotion of changes: Differentiation features that brands want to unveil needs to be promoted within networks. Some solutions such as unitary random codes [Xtrack] or complex holograms are overt features and well-adapted to a large communication. Nevertheless, these features make the product more vulnerable to copy, especially if controls are subject to interpretation (human senses might be fooled). The protection choices might target more robust security features dedicated to experts (sales force, trustworthy distributors).
Security solutions to combat counterfeit auto parts
Some counterfeiters have become real experts in copies, what makes the distinction between fake from genuine pretty difficult or even impossible for manufacturers themselves. To help its clients, Arjo Solutions has selected and implemented a portfolio of security solutions dedicated to the specificities of automotive aftermarket industry.
- A tamper evidence label to prove the product’s integrity
Many auto parts (for example, brakes) require to prove that packaging have not received any alteration or attempts to open. To combat these issues, manufacturers generally use tamper evidence seals. Arjo Solutions offers customizable and secured tamper evidence labels with different security levels. Built on a STES™ base the labels will contain authentication features directly integrated on the substrate-mass and a tamper evidence function thanks to its ultra-destructible layer.
STES™ has the particularity to be secured with authentication features visible under UV light and spread randomly in the substrate mass. Each tamper evidence label is unique what makes the verification simple and fast.
- Authentication: how to spot a genuine part instantly
A first trend to protect parts is the addition of a security label on “risky products”. This solution enables the use of several authentication levels, all included on a single label.
The second trend consists in integrating a secret and secured chemical marker either in the packaging or in the label artwork, during printing time, in order to keep using existing manufacturing process (no additional of steps). Provided and developed by Arjo Solutions, Spottag™ can be integrated within the packaging artwork with full confidentiality. This highly reliable covert solution enables to authenticate a product instantly (on the field) thanks to a specific portable reader.
- Traceability and serialization, 2 tools to combat parallel trades
Printing a unique identifier during manufacturing or packaging processes brings many benefits in particular the optimization of logistics flows. This uniqueness is a basis to trace a product on every segment of the supply chain and to get real time status information, such as the destination market.
- The unitary matter fingerprint: anti-diversion and authentication via smartphone.
In case of parallel, market counterfeiters may alter or even replace unique identifiers in order to prevent the tracking of products and thus facilitate the diversion of auto parts..
Arjo Solutions offers the Signoptic™ technology. This fully-digital and invisible identification method (without any printed mark or code) is based on the material fingerprint of each product, packaging or label. Whether the unique identifier has been voluntary deleted, the material fingerprint associated with the product enables to find it back.
The Signoptic™ signature is a powerful tool against diversion but also a unique and forgery-proof authentication feature that might be verified by a scanner or a smartphone.
- The consumer’s involvement thanks to a martphone
In order to enhance the fight against counterfeiting, involving the consumer in the product authentication can be judicious. Arjo solutions implements smartphone applications dedicated to consumers (end-users); the latter can scan QR or datamatrix codes to authenticate a product but also to get information regarding traceability, intrinsic features or product use. Those applications might also be tools for one-to-one-marketing (marketing data collection, loyalty program for clients, or interaction on social networks…)