December 14, 2015
With recent attention on the cyber security risks of smart cars, it may be easy to forget about the physical risks that could be lurking under the hood.
Counterfeiting in the supply chain is a growing worldwide problem that impacts every major industry, including automotive. The Federal Trade Commission estimates the global counterfeit vehicle parts trade costs the automotive supplier industry $12 billion per year, with more than $3 billion stemming from North America.
As corporations have increasingly sourced their components from all over the world to maintain their competitiveness, the potential for counterfeit items to enter into consumer products has increased. While a counterfeit part or component may not be visible in the finished product, it can impact the product’s performance and safety. In 2014, a car manufacturer recalled thousands of carsafter the discovery that a supplier used counterfeit plastic material in accelerator pedal arms. The company investigated the materials following reports that the part was breaking during its installation in the final assembly of the cars.
“With more complex and global supply chains, manufacturers may not be aware that materials, parts and components are not meeting their engineering specifications and standards for the finished product,” said Rod Jones, UL investigations manager.
Fake and inferior materials, false labeling and wrongful use of trademarks are some of the ways that criminals are getting their parts and components into the supply chain. Counterfeit products result in loss of revenue and damage livelihoods. One estimate shows that the U.S. automotive industry could employ an additional 250,000 people if the counterfeit parts trade were eliminated. Globally, the U.S. Department of Commerce places the value of fake products at five to seven percent of world trade.
Beyond the financial impact, counterfeit products also harm people. Shoddy products, such as spark plugs that overheat and brake linings made out of compressed sawdust, put drivers at risk. Overall, counterfeiting can damage a brand’s reputation and erode consumer trust.
As counterfeiters gain increased access to sophisticated technology and cheap labor, the counterfeit market is not likely to slow down any time soon. Moreover, the ease of ordering small quantities of parts online from anywhere in the world has increased the rate and risks of counterfeiting.
New technologies for authenticating materials and parts, and sophisticated certification and testing, are new weapons in the arsenal to combat counterfeiting. Combining these measures with coordinated enforcement efforts that include the auto industry, governments, law enforcement agencies and third parties will help the “good guys” put the brakes on counterfeiters.