Every month, authorities in the UAE and beyond raid the stores and warehouses of multitudes of counterfeiters, whose merchandise is often flipped for millions of dollars, attempting to pass as authentic. From cosmetics, to electronics and even food products, nothing is safe from criminal replication.
The auto parts market is no different, and in fact is a particular target for these criminals.
“Regionally, the automotive spare parts market is worth USD 8 billion and, of that, 12% is estimated to be counterfeit, equating to roughly $1 billion,” Mohammed Al Fayyad, Customer Care and After Sales Director, General Motors (GM), Africa & Middle East, told AMEinfo.
In this in-depth interview, Al Fayyad provides invaluable insight into this treacherous market and into the minds of these counterfeiters, while also explaining how General Motors continues its battle for authenticity with these individuals.
What different types of counterfeit products exist in the market? Can you share with us some insights into the origin of these parts and the mindset of criminal counterfeiters, as well as how counterfeiters are able to mimic authentic products?
That’s a great question, and for General Motors being in the region for over 90 years, we have been able to see and experience the impact of counterfeit on the parts business.
Before I delve into the why and how of counterfeit, let me also set the scene of the market itself. We see counterfeit in aftersales products; aftersales covers not just parts, such as a brake pad or filter, but across fluids, chemicals and even batteries. For GM, we are an Original Equipment Manufacturer, or OEM, and through our brand ACDelco we do supply parts in the market, alongside this we have our wholesaler partners who sell our products as well as parallel imports. So, with those entities bringing in defined products, the ones left are those who bring in false products – our counterfeiters.
The aftersales market is particularly susceptible to counterfeit, due to potentially huge profit margins for criminal counterfeiters, and it comes from around the world. There are actually two types of forgery for consumers to be aware of: 1) infringers – who are set up to look like they’re real brands, offering alternative products for a cheaper price, and 2) counterfeiters –who sell fake parts that appear to be genuine due to the manufacturer’s logo on the packaging.
Both of these approaches may utilize brands’ trademark or focus on making the product look legitimate, but they will cut costs on the material end to reap the highest profit. We know counterfeit can target our bottom line as an OEM, but the true impact of the market is one of safety for people and the community. We regularly see included “brake linings” made of compressed grass, sawdust or cardboard and “transmission fluid” made of cheap, dyed oil; this can directly impact the car’s performance and place you in a dangerous situation in the middle of Sheikh Zayed Road.
Forged products do not follow standard quality and safety checks, and in addition to causing dangerous situations, these products can also cause more emissions and potentially hazardous wastes. We at GM are committed to a future of zero crashes, zero emissions and zero congestion, and part of this commitment is our work to reduce counterfeit products across the globe.
Counterfeit products have always been an issue in almost every industry. Today, and based on your knowledge, has there been an increase or decrease in the amount of counterfeit auto parts in the global (or regional) market, and can you share with us some reasons as to why?
Counterfeit products have indeed been an issue across industries. Regionally, the automotive spare parts market is worth $8 billion and, of that, 12% is estimated to be counterfeit, equating to roughly $1 billion. Unfortunately, the reality is that the longer retention period results in an increasing market for fake parts, targeting customers on either the hunt for a cheaper alternative or those who are simply unaware that these parts are not authentic.
One of the biggest impacts on the counterfeit market is evolving technology. At the moment, we’ve begun implementing with our global team security labels across our product packaging. This new technology helps us prevent forgery; technological breakthroughs can also, however, help criminal counterfeiters to create more convincing products for even cheaper.
Second, is the sheer size of the industry and investment required to tackle it gives an advantage to counterfeiters. For example, in our own manufacturing industry, we have around 340 suppliers and more than 90,000 stock keeping units today. For us to have a chance of stopping counterfeit, we do not just need technology’s help but awareness across customs authorities, government entities and consumers themselves to help make an impact.
Finally, is what I would call industry nihilism, meaning the more we speak about the true reach of counterfeit, the more the industry will assume that the majority is counterfeit or there’s no way to counteract it. My response to this reason, however, is that the human cost that counterfeit can bring is too important not to work to counteract it.
Unlike some other industries, counterfeit parts pose a greater problem than just a loss of sales and business: the potential injury of customers, or even the loss of life. How can manufacturers mitigate these risks and address this issue?
I’m sure we all know the frustration of picking up a cheap smartphone charger only for a message to flash on the screen saying the accessory is not compatible with our device. While this is frustrating, there is also a clear danger that a cheaper or counterfeit product might malfunction and even catch fire.
This danger is even more of a reality when we’re talking about the automotive industry, the result of using a counterfeit part could be the worst-case scenario.
For GM, any incident from counterfeit is unacceptable and so we work hard in the Middle East and around the world to educate and collaborate with other manufacturers and entities to minimize the success of counterfeit products.
For government entities and partners, this area of education is crucial as they work as the eyes and ears on the ground. We hold sessions on the importance of genuine parts, from a safety and quality perspective, with these entities and even bring in physical parts examples to demonstrate the difference in build and materials from genuine and counterfeit. Our team in the Middle East also works closely with the investigative bodies from government and custom agencies, who share alerts and information on a weekly basis, and even physically help on-ground raids to identify counterfeit parts.
For consumers, we want to ensure they have as much access to information as possible, both of the risks in counterfeit and how they can identify them from the start. We launched and catalogued our products on ACDelcoArabia.com, so wholesalers and consumers would have access to information for identifying fake products and how to get in touch with our Global Brand team if they suspect they have purchased fake products.
We also offer comprehensive information about each product, including features and benefits but also signs of wear and tear, best practice for maintenance and FAQs to help consumers feel confident in their vehicle ownership.
How does GM address counterfeit parts in the market?
General Motors has been working against counterfeit for as long as we’ve been working in parts. In the Middle East, we have a dedicated team who are in constant contact with our global entities and local partners, allowing us to be proactive at all times. The team oversees roughly 70,000 – 80,000 parts per year, and we successfully stopped $0.5 million worth of counterfeit product in 2018 alone, which translates to an economic impact of $2.14 million.
As mentioned earlier, we are also collaborating with our global team to implement smart labels across our product packaging, which helps identify the brand as well as the part label through an individual code. This label generates a unique identification number to the manufacturer in case further checks are required during transit on suspicious parts. Any mismatch in codes between the brand and General Motors will be flagged as a counterfeit, allowing the team to stop it reaching the market.
We also run educational programs for government bodies to learn about the importance of genuine parts from a safety and quality perspective. During these sessions, we also identify key people from each team as constant contacts to help verify counterfeit products. In 2018, we held eight trainings across the region in key markets such as the UAE, Saudi Arabia, Kuwait and Oman.
However, this is not a challenge we can tackle alone: we must work across the industry and with government partners to bring an end to illicit trading. For 2019, we’re focused on on-ground support for customs detentions and raids, already completing 15 so far this year. The physical support we provide during these raids helps identify counterfeit products and oversees their safe destruction. This ensures the accurate and safe removal of fake products and confirms the elimination of counterfeit products from the market.
Do counterfeit parts have an impact on the prices of original parts?
No, counterfeit parts do not have an impact on the price of original parts as you are not comparing alike products. Yes, counterfeit products are cheaper for consumers in the short term, however they are made to yield the highest profit margin for criminal counterfeiters, not to get you safely from A to B. An original part has a heavy engineering investment to ensure its optimum performance: it is sold with the promise to work the way it should. Therefore, the counterfeit market will not influence the cost of legitimate products.
That said, the impact of the counterfeit market on aftersales market could be massive. Besides the financial loss to individual companies, the counterfeit market has a knock-on effect on the overall economy and could cost hundreds of jobs.
Finally, one of the biggest impacts of counterfeit parts could be the loss of trust from our customers. If customers are buying fake products from a company pretending to be ACDelco that subsequently do not work the way they should, this could cast a shadow over our reputation of being a quality replacement parts provider. We have worked hard to establish and maintain our reputation; as GM, we make a commitment to all of our customers that our products are made with safety at top of mind, we take it personally when counterfeiters jeopardize this promise.