The spurious auto parts hold a whopping 37.5 per cent share of the spare parts market in the country. These are some of the findings of a study conducted by the National Council of Applied Economic Research to estimate the market share of spurious auto component replacement market. The study states that the lack of presence of adequate number of original equipment (OE) components in the replacement market is one of the prominent reasons for the growth of the spurious components. Also higher profit margins in the duplicate trade have lured traders to the spurious trade.

The profit margin on spurious components range from 17 per cent to 26 per cent as against three to five per cent in respect of original equipment brands at retail outlets. With low quality inputs and technology, the spurious components are produced one third or one fourth of the cost of production of original equipment parts.

The replacement market is highly price sensitive. This has given fillip to the spurious trade of components. The duplicate component market prospers because of the easy availability of used parts or rejects from the assembly lines. These parts are reconditioned and sold in the market. The study which was undertaken at the behest of Automotive Component Manufacturers Association (ACMA) has recommended an action plan which includes: The setting up of an efficient and organised network of producers, distributors and retailers.

"The crux of the problem is that the vehicle and original equipment component manufacturers have failed to educate their consumers with manuals and publications on the need for the use of original equipment spares and benefits accruing from their use", it adds. According to the report, the excise duty on components should be reduced as it would have a direct impact on the cost of the components with their demand going up. At present, the excise duty is levied at the rate of 16 per cent ad valorem.

On certain assumptions, it is pointed out that the market share of original equipment components is likely to increase by about 9.17 per cent, if the excise duty is reduced by five per cent. Assuming that the benefit of reduction in excise goes exclusively to the original equipment manufacturers, the increase in the sale of components would be to the tune of Rs 1200 crore. This would provide an additional revenue of about Rs 180 crore to the central government and Rs 132 crore to the state governments.

There should be more transparency in the disposal of rejects in the factories of the original equipment manufacturers.

When large quantities are rejected by the in-house quality assurance department or by the vehicle manufacturers, it should be disposed off as rejects and scrap without making them unusable.

Similarly, the worn out parts of the vehicles run by fleet operators such as state transport undertakings are disposed off through auction. These parts enter the market as original components or after reconditioning.