Countering counterfeiters in the GCC market

Local experts discuss the fake parts trade in the Middle East

ANALYSIS, Business, Gcc, GCC market, Middle east

PMV quizzes regional stakeholders about the importance of sourcing spare parts from bona fide distributors, and finds out what methods end users are employing to strike the optimal balance between cost and quality

Counterfeit vehicle and machine parts represent a genuine concern for end users operating across the Middle East’s PMV sector. Margins within industries such as construction and logistics are becoming increasingly squeezed, and the pressure to minimise operational costs seems to be intensifying by the month.

In this type of climate, the prospect of a bargain can be difficult to pass up, even when you’re not absolutely convinced by the authenticity of the product that’s on offer. When the opportunity to save money presents itself, fleet owners must remain on their guard so as not to overlook the warning signs.

Unfortunately, the counter-feiters are not the only ones posing a potential danger; third-party companies offering cut-price components are entering the GCC market in increasing numbers. A low price in isolation does not necessarily mean that a product is inferior, but it always pays to remember that to develop and manufacture a part from scratch is a costly and labour-intensive process.

“Counterfeit and inferior -quality parts are available on the local market,” explained Mohan Arumugam, service manager at Dubai-headquartered logistics firm, Prime Link.

“They’re actually very simple to acquire. However, we only use original parts; we don’t want to spoil our trucks by putting counterfeit or substandard components inside. It’s better to err on the side of caution. Yes, you might pay a little bit more money at the outset, but it will pay off in the longer term,” he added.

Counterfeit and cheaply produced components are not only a concern for end users. They are also detrimental to the businesses of original equipment manufacturers (OEMs). Some companies are actively collaborating with local authorities to seek out and remove fake components from the market.

“In cooperation with local authorities, we have found and confiscated substantial numbers of counterfeit parts in the GCC region,” commented Mohamed Soliman, marketing and brand protection executive for after-sales at Daimler Middle East & Levant, the firm with regional responsibility for Mercedes-Benz passenger and commercial vehicles.

“We have also observed that numbers are rising. This shows us that counterfeit parts are available in the market, and in noticeable quantities. We take the protection of intellectual property very seriously. We take action against attempted plagiarism that violates our technology design or trademark rights with all legal means available to us.

“To protect our customers against inferior-quality counterfeits, we have established a proactive brand protection network to find falsified products locally, initiate awareness campaigns, and take necessary countermeasures.
Counterfeit parts can impose high risks on the safety of customers due to the lack of technology and quality. This is a major compromise that affects the vehicle’s performance,” Soliman told PMV.

Soliman argued that end users who procure parts from non-OEM sources are compromising on the safety of their equipment.

“It is essential for fleet operators to source their parts from our authorised dealers to guarantee the
authenticity of the products,” he said. “By producing parts that are reliable, durable, and that offer value for money, we ensure that our fleet customers achieve the best return on their investment.”

Many fleet owners share this point of view and are perfectly happy to buy OEM parts in order to ensure peace of mind. However, not all companies are in a position to purchase brand new, originally manufactured components whenever one of their units is in need of a replacement. So, what options are available to firms looking to minimise operational costs whilst maintaining high levels of safety and reliability? Is there a third way?

Whilst the remanufacturing process is not completely unheard of in the Middle East, it’s not yet as established as it is in the North American market. The idea behind the reman sector is to produce components from originally manufactured parts, but at significantly reduced costs.

“As a remanufacturer, we take second-hand parts and remove any components that are showing signs of stress, damage, or wear,” explained Jamison T Nunn, business development manager at OWS Auto Parts.

“There are several advantages to this method, the primary one being price. For most customers, this is the biggest concern. End users want to keep operating costs as low as possible; they want to minimise expenditure. At the same time, they do not want to sacrifice safety. This puts many fleet owners in a difficult position,” he added.

Nunn contends that remanufactured parts represent a viable alternative to scrapyards, OEMs, third-party manufacturers, and of course, the counterfeiters. He argues that the components offered by companies such as OWS are competitively priced, safe, and environmentally friendly. Moreover, he is confident that the GCC market is ready to adopt the reman model.

“We actually commissioned market studies in preparation before we entered the Middle East,” revealed Nunn. “Our researchers found that as many as 30% of the parts available on the local market are counterfeits. The study was conducted predominantly in the automotive aftermarket sector, but from what I understand, the off-highway, heavy-duty market is very similar. Obviously, OWS has a tremendous opportunity to come to the region and provide a viable alternative for end users.”

Whilst Soliman would obviously prefer end users to purchase parts directly from the authorised distribution networks of OEMs, his primary objective is to eliminate the danger posed by components that have been manufactured and packaged to deceive customers.

“Counterfeit parts are not reliable and can cause vehicles to break down, disrupting fleet business operation and resulting in financial losses,” he explained. “This usually happens when fleet operators choose to buy fake parts to save money. However, the losses that occur when a vehicle breaks down are massive; they exceed what fleet owners save at the outset.”

This sentiment is shared by Syed Mujibuddin, operations HSE executive at Prime Link.

“If we have a breakdown in Ras Al Khaimah, we might have to spend more than two or three times the cost of the initial parts in order to fix the problem,” he told PMV.

“We prefer to go with original parts from authorised dealers. This way, we can rest assured that we are getting a product of the highest quality. We cannot run risks when it comes to the reliability of our vehicles. If we did, we would encounter problems further down the line, and our clients would become displeased,” he added.

Although safety and reliability represent the primary concerns for Prime Link’s operations managers, this is not to say that the firm doesn’t shop around.

Indeed, Prime Link is exactly the kind of company that Jamison and his OWS colleagues are targeting in the Middle East. At present, however, rather than buying reman, Arumugam finds it best to procure parts from the authorised dealers of OEMs operating in other markets.

“Instead of buying from the UAE, we tend to find that it’s cheaper to procure originally engineered replacement parts from Oman. Each day, the Muscat trucks make three deliveries to Dubai. If I order a part before one o’clock this afternoon, it will arrive before ten o’clock tomorrow morning,” he explained.

For now, Prime Link seems to have identified a sensible method of ensuring high quality whilst keeping operational costs down.

Although remanufacturers, such as OWS, and OEMs, such as Daimler, are – to some degree – competing against one another, they are also catering to different segments of the market. However, when it comes to substandard, fake components, these companies are 100% united. Whether you’re an OEM or a remanufacturer, your ultimate goal is the same: to deliver high-quality, safe products to your customers.

Daimler, OWS, and Prime Link share a common enemy in the form of the counterfeiters.

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