In this guest article, lawyers from Rouse break down the reasons for a surge in counterfeit automotive parts in Southeast Asia and discuss how brand owners can tackle the growing problem.
Traditionally, consumers purchased automotive parts in person at physical stores to ensure proper installation. However, the landscape has shifted with the emergence of online platforms.
Southeast Asian countries, buzzing with millions of motorbikes and an expanding car market driven by urbanisation, have become an appealing hub for both genuine and fake automotive parts. Counterfeit products range from essential, operational accessories to decorative items. Alarmingly, a considerable quantity of counterfeits relates to the safety of vehicles (eg, mirrors, lights, brake pads, brake discs and airbags).
Countries with large markets for automotive parts (eg, Indonesia, Thailand and Vietnam) are particularly affected. Vietnam, one of the top consumer countries of motorcycles in Southeast Asia, is known as a fertile ground for counterfeit automotive parts. Between 2016 and 2021, an average of 31,000 fake automotive parts were seized each year.
Thailand is an established manufacturing hub of automotive parts in Southeast Asia, with revenues of $146 billion from motorcycle assemblers and suppliers and $116 billion from automotive part makers in 2019 alone. But like Vietnam, Thailand has had a persistent issue with counterfeit auto parts and raids are carried out every year. For example, counterfeit automotive parts worth over $250,000 were seized in a raid at a warehouse in a city west of Bangkok in early 2023. Counterfeit motorcycle parts worth over $180,000 were seized in another raid at a shop offering the parts online in a city north of Bangkok in May 2024, reflecting the trend of counterfeiting activity moving to online platforms.
The explosive growth of e-commerce in Southeast Asia is reshaping the automotive industry. Former brick-and-mortar shops notorious for selling fake parts are now expanding online by capitalising on anonymity and reach. They leverage advanced marketing tactics (eg, targeted ads and search engine optimisation) to lure online customers. Thus, a grasp of these underlying reasons is key to devising an effective anti-counterfeiting strategy.
Multiple factors have driven the migration of automotive counterfeits from traditional markets to online platforms.
Growth of e-commerce and cross-border trading
Tech-savvy youth in Southeast Asia have transformed the region into a thriving online shopping hub. Encouraged by regional agreements, cross-border trade swiftly moved online. Consumers now purchase replacement automotive parts from abroad through major international e-commerce platforms (eg, Shopee and Lazada). Since these consumers rely on seller-provided information that often obscures product origins, they are often misled into believing that the goods originate from reputable automotive hubs (eg, Thailand or Malaysia) labelled as “OEM”, “domestic products from China” or “parallel imports from Thailand”.
Regulatory challenges
Current regulations are believed to be out of sync with the development of the online market, creating legal gaps that have led to a surge in counterfeit trading. Although most countries require online platforms to ensure consumer safety and prevent IP infringements, the rules are not specific enough and lack consistency across countries. Issues include:
While traditional automotive stores are subject to regular inspections by authorities, online traders can easily avoid such monitoring. One significant reason is limited human resources among enforcement forces checking online platforms, thereby preventing them from taking quick action against infringing listings.
Passive action from online platforms
Despite the rapid increase in listings of counterfeit goods, e-commerce platforms primarily rely on brand owners' requests to monitor and remove suspicious listings. Platforms, especially domestic ones, often adhere to the minimal legal requirements set by local governments. Even international platforms (eg, Shopee and Lazada) vary significantly in their approaches to handling infringing listings across different countries. For example, while Alibaba (which owns Lazada) proactively scans and removes listings for certain brands in China, this practice is not consistently applied to their overseas platforms (eg, Lazada Vietnam). Thus, brands need to invest resources in developing a time and cost-efficient online enforcement strategy that adapts to each country's platform, even when platforms belong to the same group.
The delay in action from online platforms can be attributed to the difficulty in detecting counterfeit automotive parts online. Challenges can arise around:
More sophisticated counterfeit traders
Counterfeit dealers are becoming increasingly sophisticated in digital markets, exploiting delays and overall weak online enforcement to maximise their consumer reach. They employ various creative tactics for automotive part listings. The most popular tactics include:
With the rise of live commerce, foreign sellers are hiring local employees to conduct livestreams and ship items overseas only after receiving orders. This strategy allows them to avoid using physical warehouses and bypass inspections from the authorities. The tactic blurs the connection between their online presence and traditional stores, even after the counterfeiters have been sanctioned for counterfeit trading. Some foreign sellers are more blatant in setting up or employing fulfilment centres in the local market to supply their online trades and then utilising fake sender addresses, which complicates investigation efforts.
Change in consumer awareness and behaviour
Convenient and time-saving, online shopping has become increasingly popular among consumers, leading to a rise in demand for counterfeit automotive parts. Items (eg, mirrors, coolant and wiper blades) that were once exclusive to costly auto stores are now available online with easy installation instructions for home use. While online shopping offers quick access to cheaper options compared to traditional stores, many listings are counterfeit. Limited competence in distinguishing genuine from fake products, along with a lack of concern for safety, influences consumer decisions toward buying counterfeit items. In other words, financial considerations often trump safety concerns.
The following are some innovative approaches to boost the effectiveness of enforcement actions against counterfeit automotive products on online platforms.
Enhance comprehensive enforcement activities across borders
To effectively combat the trade of counterfeit automotive parts, businesses must fully understand the enforcement landscape and adopt a comprehensive approach across all Southeast Asian markets. Focusing solely on priority markets can leave gaps for online sellers to exploit. For example, insufficient rights prosecution or less severe pressure from enforcement actions in a low-priority market may result in the illegal export of fake automotive parts from this country to other neighbouring countries and vice versa, especially given the incomplete and scattered regional policies in Southeast Asia.
Strengthening border controls is key to prevent fake auto parts from entering the country. Customs recordals are crucial administrative tools providing IP owners with protective measures against the import and export of infringing products across most Southeast Asian borders. However, merely having a customs application is ineffective if officials are not familiar with genuine product identification. Thus, to maximise the efficiency of customs recordals, brand owners should:
Enhancing coordination between local teams and Customs is vital in combatting counterfeit automotive parts. There can be instances where local brand teams struggle to assist Customs in verifying products produced by their teams in neighbouring countries. This could be resolved through better internal communication among local teams.
Sharing intelligence between local teams and Customs is also crucial for identifying cross-border infringers, many of whom operate at a significant scale and store their inventory in other countries. Such information can serve as an asset to support Customs during enforcement actions.
Leveraging technology (eg, establishing a real-time communication channel accessible to all customs departments and brands in the region) is a potential solution to effectively bridge gaps between Southeast Asian countries.
Strengthen cooperation among stakeholders
Enhancing cooperation among brands, governments and online platforms through advanced technology is key for managing the increase in online listings in the region.
The establishment of an online monitoring system to manage online trading across all Southeast Asian countries, including the import and export of automotive parts, is an overdue measure. Reaching a regional agreement may take time; therefore, each government may consider initially implementing a Regional Code of Conduct for all online trading activities within the region. This interim measure can introduce standardised practices and regulatory compliance, paving the way for a more comprehensive agreement. To maximise its impact, the code should involve major international e-commerce platforms, whose significant influence on the online landscape can help to drive broader adoption and adherence to these standards.
For automotive parts specifically, brands, as members of local automotive associations, should actively engage with governments to ensure that laws, including all required documents of origin for physical stores, are up to date and applied to online sellers. This collaborative effort will help to:
Creating a centralised hub where brands and enforcement authorities can collaborate and track suspected online sellers operating across different countries would be an effective strategy. A harmonised regulatory framework should streamline enforcement efforts, reduce the time and resources required by brands, and significantly enhance the protection of IP rights throughout the region.
Educate consumers to raise awareness
Investing in consumer education to highlight the dangers of counterfeit automotive accessories would help to improve the situation, especially in underserved regions where people may prioritise cost over safety when purchasing fake products. To broaden the scope of such a project, automotive brands should collaborate with the government to raise consumer awareness.
Additionally, it is recommended that businesses apply technology into their product verification processes to enable consumers to verify the legitimacy of newly purchased car accessories. Specific bar codes and QR codes, which are increasingly popular among Southeast Asian consumers, could be applied widely. Brand owners can provide a digital channel where consumers verify suspected products or report a suspected seller, which can also help to streamline the identification and elimination of fraudulent sellers, thereby fostering a safer and more reliable online marketplace.
Authors: Peeraya Thammasujarit, Khanh Nguyen, Ha Nguyen, Hanh Pham, and Thuy Duong Bui.
This article was first published on WTR in July 2024.
