With the number of joint ventures between local and global automotive manufacturers escalating, there has been a corresponding rise in the risk of counterfeiting. The sharing of suppliers has complicated the privacy protection of product designs, necessitating increasingly stringent laws on intellectual property rights (IPR) protection.

New analysis from Frost & Sullivan (www.transportation.frost.com), Counterfeiting in the Total Chinese Automotive Industry, reveals that the counterfeit vehicle parts and components market in China earned revenue of $11.53 billion in 2004 and estimates to reach $44.74 billion in 2011.

The Chinese government expects to launch several counter measures to address piracy and counterfeit problems throughout the country. Intensifying IPR protection and global automotive companies’ greater focus on anti-counterfeiting drives are likely to rein in the counterfeit automotive industry in China.

“The government is anticipated to strengthen its legal framework and enforcement on IP protection to deter IPR infringement in China,” says Frost & Sullivan Industry Analyst Amelia Wong. “Moreover, with a new judicial interpretation regarding criminal cases, customs policy designating ports for automobile trade has changed to discourage smuggling.”

Such measures are likely to reduce the profit margins of manufacturers and distributors of counterfeit and pirated products. Moreover, Chinese consumers are becoming increasingly aware of the importance of the quality and safety of vehicle parts and components.

Most of the estimated 40,000 counterfeit vehicle parts and component manufacturers in China are small-scale operators that function at low costs, making their products attractive to price-sensitive customers.

“However, with the expected deregulation of imports restriction and tariffs reduction on imported vehicle parts and components from 2005-2011, the price gap between the original and counterfeit vehicle parts and components is likely to decrease,” notes Wong. “With original products becoming more affordable, consumers are likely to increasingly prefer these to counterfeits.”

Original product manufacturers are strengthening their anti-counterfeiting efforts by filing more IPR applications and taking legal recourse to IP infringements. They are also providing detailed information about their products to government officials to help them differentiate between genuine and duplicate goods and provide similar education to consumers.

Manufacturers of original products can promote the importance of IPR protection as well as product quality and safety issues to consumers through advertisements and promotional programs. They should also establish preventive measures such as control over product designs and human resource.

It is vital to monitor human resources for leakage of designs. Original vehicle parts and components companies should focus on internal management and control systems. They need to set up a protective management and control mechanism in their manufacturing flow to stem IP theft.

“Original part makers should enhance their mutual long-term relationships and trusts should be built to assist each other in fighting counterfeiters and counterfeiting,” observes Wong. “Such co-operation is expected to go a long way in ridding the market of spurious products that eat into their shares and revenues.”