Fake auto parts are big business for counterfeitersFake auto parts are big business for counterfeiters
It just never seems to end! China’s counterfeiting and pirating of intellectual property appears to be the MO for their business model. An editorial in SupplierBusiness, an IHS Automotive publication, on March 19 commented on the conviction of a counterfeit turobocharger manufacturer in China as one more challenge for suppliers doing business in China and trying to protect their intellectual property.
March 23, 2012
It just never seems to end! China’s counterfeiting and pirating of intellectual property appears to be the MO for their business model. An editorial in SupplierBusiness, an IHS Automotive publication, on March 19 commented on the conviction of a counterfeit turobocharger manufacturer in China as one more challenge for suppliers doing business in China and trying to protect their intellectual property.
In fact, according to SupplierBusiness, in spite of increasing oversight by the Chinese government, “suppliers and automakers must play cat and mouse with counterfeiters” to catch these companies. The editorial noted how the week of March 12, saw “one of the largest counterfeiting busts” ever in China. A manufacturer based in Fengchang City in Liaoning Province, was convicted of manufacturing counterfeit Honeywell Garrett turbochargers. The two people charged were sentenced to a year in prison with an additional year on probation along with a fine.
SupplierBusiness asked a pertinent question: Will this have any impact on the huge industry in China built around making and selling counterfeit auto parts? “High-volume parts such as brake pads and brake discs are commonly found to be counterfeits, and suppliers have complained in the past that illegal counterfeiting dens reopen as soon as they are shut down under new business names. Increasingly though, more sophisticated parts are being forged as counterfeiters reverse engineer the increasingly diverse powertrains in the booming Chinese market.”
This isn’t the first time I’ve written about Chinese counterfeiting and pirating of intellectual property. It’s an old and ongoing problem that’s forced a number of OEMs to pull their manufacturing back to the U.S.: not just in automotive, but consumer industries, medical and others. Auto parts however, are big business, especially in the aftermarket arena where consumers buy parts from a variety of automotive supply stores where the fakes are less likely to be spotted.
China isn’t alone in the production of “fake” auto parts, however. According to a Frost & Sullivan report, India is also becoming a “hotbed” for fake component manufacturing. Items such as fake brake shoes have been found to be made from compressed grass. The report estimates that manufacturing counterfeit auto parts is “so widespread it fueled a global boom in trafficking of bogus after-market parts” to the tune of $45 billion in sales in 2010. In one case cited, Bosch discovered counterfeit lighting systems at an Auto Expo 2010 with high-intensity beams that were “dangerous” with the Bosch brand on the package.
In February, the Alliance for American Manufacturing, along with several other organizations, sent out an urgent call for members to write their senators and representatives to urge action on the part of the administration with respect to China’s cheating. “The U.S. has lost almost 400,000 jobs in the U.S. auto supply chain over the past decade, much of it due to illegal and predatory trade practices by China,” wrote Scott Paul, executive director of the AAM. “Since 2001, the U.S. trade deficit in auto parts with China has increased by almost 900%.”
Bosch’s Asia-Pacific aftermarket president Ken Ford told SupplierBusiness, “We already are very active on the IPR situation with teams in India and China working daily and with raids taking place regularly. We also work closely with the automotive industry to show the dangers of counterfeited products. We prosecute quite heavily.”
SupplierBusiness’s editorial said that while “Zhejiang and Guangdong provinces are generally the main hot spots for products such as counterfeit brake pads and other aftermarket items, the province of Liaoning is gaining notoriety as a hub for fake turbocharger production. In the past few years Honeywell has pursued 40 raids and civil actions in co-operation with the Fengchang government against fake producers of its Garrett turbochargers in the region.”
It remains baffling that given all the evidence of rising costs—not to mention the costs of trying to protect their IP on a constant basis—that these automotive suppliers don’t pull their manufacturing back to North America. Trusting suppliers is key to supply-chain stability and customer good will. Playing “cat-and-mouse” games with counterfeiters seems a waste of everyone’s time and money.
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