The rise of fake ‘make in India’ auto parts

Indian automobile industry is growing at a CAGR of 11 – 12% and is one of the largest in the world with an annual production of 21.48 million vehicles in FY 2013-14. Together with it, there is a growing aftermarket for auto motor parts, which is expected to reach $ 16 Billion by 2021.

There are several factors contributing to it, mainly the increased wear and tear of auto parts in India, compared to their north american or european counterparts. As a result, most of the foreign auto manufacturers are trying to set up or speed up their aftermarket manufacturing in India. This will give them cost advantages, due to cheap availability of labour and a strong local market.

However, there are adversities for these automobile manufacturers. A recent survey has suggested that there are counterfeit components which occupy as high as 45% of the total aftermarket industry. It is also observed that 70% of the purchasers shift to local made parts, within 2 years of purchase of a new vehicle.

Hence fake auto parts seems to be on the rise, supported by a strong local demand and lack of mandatory compliance for the import and use of these parts.

There can be several factors to it, one of which is because the overall Motor Insurance penetration in India is very low. Customers who have not renewed their insurance, try going for locally made parts to avoid costly OEMs. This is a trap, as it results in even higher expenses on the longer run.

It can also be derived that Motor insurance penetration and genuine aftermarket growth will go hand in hand. A higher insurance penetration will ensure that customer take their vehicle to authorised service centres and demand best and original parts.

Indian government recent initiative of increasing higher FDI in Insurance is therefor going to benefit not just the insurance industry, but also the “make in India” campaign of the present Prime Minister.

Stay connected to our posts to read about the developing dynamics of this battle between fakes and original make in India story in automobiles aftermarket’s arena.


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