June 29, 2020
As recorded by the Authentication Solution Providers’ Association (ASPA), the Indian counterfeit auto parts market was worth INR 1 lakh crore in 2019.
The Indian automotive industry went through some tough times in the year 2019. The double-digit de-growth and unprecedented slowdown were a result of several contributing factors. Among these, the growth of the Indian counterfeit auto parts market adversely affected the auto industry.
As recorded by the Authentication Solution Providers’ Association (ASPA), the Indian counterfeit auto parts market was worth Rs 1 lakh crore in 2019. Despite many attempts at solving this problem, the fake auto parts market is, unfortunately, thriving in India and the ongoing slowdown has led to many OEMs struggling to find a solution for the same.
According to a FICCI-Cascade report, counterfeiting in the auto sector results in a tax revenue loss of about Rs 2,200 crore to the government.
The sale of fake automotive parts interferes with the growth of the automotive industry and acts as a barrier to passenger safety. Consumers may find it difficult to distinguish a fake part from a legitimate automotive part based on appearance. This lack of information is what leads to consumers purchasing inferior and unsafe products.
For example, clutch parts, air/oil/fuel filters, suspension items such as liners and brake pads, gear parts, etc. are easy to counterfeit and can severely compromise passenger safety. Moreover, counterfeit packaging and labels for these are manufactured and distributed to the market from isolated locations used by their spurious manufacturers. Therefore, the multi-crore counterfeit auto parts industry is increasingly putting consumer safety at risk.
A good 20% of all road accidents in India can be attributed to counterfeit automotive parts. Apart from safety, the production of fake automotive parts also has socio-economic effects. Counterfeit component makers operate under the radar and sell fake auto parts in the guise of well-known brand names.
The illicit sale of these products and the revenue generated from the sale in the absence of a legitimate paper trail causes financial loss, by way of direct or indirect tax evasion, to the government as well as the economy. When the government is deprived of taxes, the overall functioning of the economy is compromised.
Additionally, although counterfeit parts are cheaper to buy, they tend to bump up the cost of ownership for a vehicle in the long run, due to frequent breakdowns and resultant repairs. Multiple industries and government organizations have introduced mechanisms to resolve this issue. However, due to the complex supply chain in the automotive industry, it is difficult to find a comprehensive solution.