Fake Parts Strangling Iran Auto Industry

EghtesadOnline: One of the grim situations Iran’s struggling auto industry is facing is the import of low-quality and fake auto parts.

News ID: ۷۷۹۳۷۹

23 September 2017

Head of Tehran Auto Mechanics Association Alireza Nikaeen says, “On the surface the imported parts are terribly similar to the locally-manufactured products…to the extent that even local producers cannot differentiate the real from the replica.”

In a report on the website of the association, unregistered Iranian companies have undertaken shoddy production deals with Chinese auto part makers. The Chinese businesses produce inferior copies of Iran-made parts, package them and also print holograms on them.

“No one can detect the fake parts without the benefit of time-consuming tests,” Nikaeen said.

He says the profit margin of importing fake parts is three times more than investing in local manufacturing.

Furthermore, low production rate and outdated technologies have rendered Iranian auto parts manufactures unable to compete and meet market demand. The local businesses have an estimated 30% share of the local spare parts market.

Needless to say, if and when there is demand and official sources are unable to deliver, some opportunists will rush to make an extra buck.

According to Nikaeen, a large portion of the fake parts are sold by unregistered automobile repair shops that now dot all major cities, towns and villages across the country.

Some 8,800 auto repair and maintenance shops are operating in Tehran, from which only 4,800 are member of the association. Nikaeen says in the past two years 1,800 unregistered shops were ordered shut by the association in collaboration with the local law enforcement forces.

All repair shops have an obligation to put up their permits in a way that is easily visible by customers. The official urged car owners to first check the permits before handing in their cars for repairs.

Without Any Guarantees

One other problem is that auto parts importers are not required to guarantee what they bring in and the local producers’ guarantee rules are so vague that getting a refund by a defrauded car owner is almost impossible.

Therefore, when the parts are useless, “it is the mechanics and users that have to pay,” Nikaeen added. He further called on the government to address this legal void that has given a bad name to the car industry for years.

In recent years, Iran National Standards Organization and the Consumers and Producers Protection Organization have introduced rules to address the shortcomings but nothing much has happened.

‘Legally’ Imported

In an earlier interview the director of Iran’s Auto Parts Dealers Guild, Ghulam Reza Bakhshizade dismissed claims by auto industry experts that the main problem with Iran’s auto parts sector is smuggling. He insists that the main problem is that the fake parts enter Iran through “legal” channels.

“Contrary to claims that smuggled auto parts is a major part of the problem of the auto market, it is actually the widespread ‘legal’ imports of inferior and non-genuine parts that must be blamed.”

Bakhshizade was referring to auto parts imported under the ‘alias’ of European firms, while in reality they were produced by low-quality uncertified Chinese firms and disguised as genuine.

He says, “Because import tariffs for auto parts are low, smuggling would not be economically viable.”

In his opinion “It can be said that the share of contraband auto parts in the domestic auto market is meager and inconsequential.”

According to Bakhshizade, one of the ways to counter fake parts is to strengthen oversight and monitoring procedures by the Customs Administration and Iran Standard and Quality Inspection Company — a private inspection company that conducts tests on behalf of the Ministry of Industries, Mining and Trade.

Locally produced auto parts are mostly used by domestic carmakers and sold through their sales network. Furthermore, the price of local products is usually higher than their Chinese and even European equivalents in some cases, Financial Tribune reported.

Bakhshizade proposed a new scheme for effective market inspection. “By giving legal authority to the guild to shut down outlets selling fake auto parts, the presence of non-genuine parts can be curbed.”

Task forces have been created to inspect auto parts shops across the country.