Despite legal action taken against importers and dealers, the trade in fake spare parts is flourishing in Lebanon, eating into as much as 30% of official dealership businesses. It also represents a serious threat to driver safety.
“When fake car parts first hit the Lebanese market a few years ago, we could see they were fake from miles away,” said Camille Aoun, parts manager of T. Gargour & Fils, DaimlerChrysler’s exclusive agent for Mercedes car and car parts in Lebanon. “However, with every consecutive shipment the quality improved. Today, even we have difficulty spotting the difference between fake and genuine, so imagine how hard it is for the consumer.”
Aoun demonstrated by showing a box, complete with the Mercedes hologram, which once contained a fake water pump. “The only way we can tell that this box is fake,” Aoun explained, “is because the font of the letters Q and G is slightly different, while the color of the hologram and the pump itself are slightly darker. That’s it.”
Quality, as always, has its price. At first, the retail price of fake car parts in Lebanon was a mere 10% to 20% of the price of the genuine product. Today it’s about 40% to 50%. The vast majority of fakes stems from China, Turkey and Syria. Not surprisingly in that order, as China is the world’s undisputed king of counterfeit products. From the latest Italian designer clothes and Real Madrid football shirts to medication and Rolex watches: you name it, they fake it. There used to be two factories in Lebanon, which mainly produced oil filters, but both were closed earlier this year.
Though fake parts for other brands are produced, Mercedes and BMW are especially targeted. “It is a simple law of economics,” said one mechanic in Dora. “They are popular but expensive brands, so the importer makes a good profit. The parts of Japanese or French brands are much cheaper, while the market for say Porsche parts is just not big enough.”
“Last year, some 50 containers with fake BMW parts entered the market,” said George Assaf, BMW parts manager at Bassoul Heneine, official agent of BMW, Renault and Alfa Romeo. He was not able, however, to estimate the effect on annual turnover. “Most people, especially when the car is over four years old, buy second hand spare parts, which cost about 10% to 20% the price of new ones. Secondly, many people buy alternative brands like Bosch, which generally are up to 25% cheaper. Only people with a relatively new car buy new and real parts, which represent perhaps 10% of our annual turnover.”
According to Aoun, the trade in fake parts cost Gargour an estimated 20% to 40% in sales of genuine parts in 2003, a year in which Lebanon and the Middle East were flooded with fake parts. “That’s without the cost of legal procedures and lawyers,” he added. Mercedes spare parts dealer Khoury Ets, estimated a loss of 20% in sales over 2003.
According to Aoun, counterfeiters mainly produce Mercedes brake pads, oil filters, air filters, water pumps, windscreens, electronic devices, and even engine oil and brake fluid. “Fake engine oil can be very damaging for the engine,” Aoun said, “while fake brake pads are extremely dangerous. We tested them in one of our employees’ cars and within a month, parts of it were burnt.”
To reduce the risk of buying fake spare parts, one should be better off buying directly from Gargour or one of its 15 official dealers in Lebanon. Yet that’s easier said than done, as dealers, in turn, sell to many smaller shops and mechanics. Currently, there are hundreds of points of sale in Lebanon, many of which illegally advertise with a (fake) Mercedes logo, and so in the end, the consumer does not know who is a legitimate dealer. The situation for BMW is similar.
It should be noted however, that many of the smaller shops are perfectly reliable, while there have been instances of official dealers selling fake parts. In fact, two years ago, one of the Mercedes dealers was caught selling fake parts and Gargour immediately stripped him of his license.
“He was a big dealer,” Aoun said, “and came in crying like a child, saying he would never do it again. But for us, there was just too much at stake. In the end, he damaged our name and reputation. So, we appointed a new agent almost next to him.”
The characteristics of the parallel market in fake products are remarkably similar to the “official” one: an importer places an order at the Chinese factory for fake Mercedes electronic devices or BMW brake parts, which arrive eight weeks later at Beirut port. If all goes well at the port, the importer will collect his goods (with the help of a little gift here and there) and send a representative to approach dealers and mechanics to sell the products.
At the end of last 2003, Gargour started a campaign among dealers, custom agents and consumers to inform them about the problem of fake spare parts, which ended, according to Aoun, with success. “We haven’t been able to stop the practice yet,” he said, “but the problem is clearly much smaller now. Last month, customs seized some 600 to 800 boxes at the port and we know of another shipment arriving.”
Not everyone is convinced, however, that the trade in fake parts is declining. Compare it to the trade in counterfeit computer programs and games, which amounts in Lebanon to a whopping 70% of the overall market. Despite annual tough talk from importers and producers, the black market has remained at a steady 70% for years.
The market in fake spare parts is not fully comparable to the one in fake software – spare parts are more difficult to copy and, unlike the market for computer programs, Lebanon is not a main producer. On the other hand, Turkey and Syria are big manufacturers and they are very close by. What’s more, the market in fake products has the same bottom line as any other market: where there’s demand, there will be supply.
According to The Economist, in the 1960s it was Japan, in the 1970s Hong Kong, followed by Taiwan in the 1980s, and now it’s China. Each reproduced imitation goods until they had built up an industry that needed protection itself. Sooner or later, China will follow their example. Or will it? “The Chinese are very ingenious at imitation,” said 17th century Spanish priest Domingo Navarette. “They have imitated to perfection whatsoever they have seen brought out of Europe.” BOX
It’s not just Lebanon that has to deal with the problem of fake parts: as early as 1997, Al Habtoor Motors emphasized the issue of fake parts and safety in the UAE. Last year, AC Delco, the auto maintenance and accessories subsidiary of General Motors, announced that the overall fake parts market in the Middle East is worth an estimated $200 million. In Saudi Arabia, AC Delco filed no less than 2,000 complaints against dealers in fake car parts. While the World Health Organization estimates some 5% to 7% of all pharmaceuticals may be fake, The Economist concluded that “as hazardous to public health, is the trade in counterfeit car parts, which may account for as much as 10% of the spare parts sold in Europe. Even more worrying is the thriving trade in reconditioned aircraft components, passed off as genuine along with fake certificates of authentication.” The Counterfeiting Intelligence Bureau (CIB), part of the International Chamber of Commerce, estimates that no less than 7% to 9% of all world trad
