A secret sentence that doubles the value of your product

You are working very hard to increase the value of your product, while keeping its price competitive. Did you know that you can multiply the value of your product with one simple sheet of paper? I’ll tell you how.

In 2003, Europe passed a landmark law that changed the way cars, and especially parts would be sold in Europe. It took a while for everybody to realize how drastic this law was. The European automotive market changed from one of the most regulated into one the most liberal markets in the world. The U.S.A. that usually pride themselves for their “free market” doctrine, the U.S.A that usually want the rest of the world to follow their example, now looks like a state-controlled monopoly compared to Europe. The law goes by the name of “Block Exemption Regulation,” or “BER” for short.

Basically, in Europe, anybody can sell any car now. Automakers also cannot force their branded stores to buy and use the “Original Parts” of the automaker.

Even the term “Original Part” has been redefined. As a parts maker, you know that most “Original Parts” are not made by the auto maker, but by one of its suppliers. Before the BER, if Bosch made a water pump and sold it to Volkswagen, Volkswagen could sell that part as “Original Part.” Bosch could not. The BER changed this. If Bosch makes a part that is being used to build a new car, Bosch can market that part as an “Original Part” – in Europe. If you make a part that is used in OEM production, then you can market that part as an “Original Part” – in Europe. Sounds unbelievable?

The European law reads like this: “Original spare parts” means spare parts which are of the same quality as the components used for the assembly of a motor vehicle and which are manufactured according to the specifications and production standards provided by the vehicle manufacturer for the production of components or spare parts for the motor vehicle in question. This includes spare parts which are manufactured on the same production line as these components. It is presumed, unless the contrary is proven, that parts constitute original spare parts if the part manufacturer certifies that the parts match the quality of the components used for the assembly of the vehicle in question and have been manufactured according to the specifications and production standards of the vehicle manufacturer.”

Two little details hidden in here: Firstly, the “specifications and production standards provided by the vehicle manufacturer” are usually proprietary, and when challenged, you as the manufacturer of an OEM part cannot disclose the specifications, and cannot prove that what you sell is an “Original Part.” Secondly, you as the manufacturer of an OEM part may run the risk of angering the auto manufacturer, and you could lose the OEM business if you make use of the European law. Once you have lost the OEM business, feel free to continue the manufacture of the part on the same production line. You can sell them as “Original Parts” in Europe.

When the “Original Part” issue was blown wide open by the BER, other manufacturers protested. They made equal or better parts, but were discriminated against. So Brussels added another category of parts to the law. Parts those are just as good, possibly even better than Original Parts are called “spare parts of matching quality” or “matching quality parts” for short. According to the European law, “spare parts of matching quality” means exclusively spare parts made by any undertaking which can certify at any moment that the parts in question match the quality of the components which are or were used for the assembly of the motor vehicles in question.”

In European legalese, “made by any undertaking which can certify” means that the manufacturer, and only the manufacturer needs to write a short letter, in which he declares that the part is a matching quality part according to BER 1400/2002. That’s it.

Even a branded 4S store has a choice of using either “Original Parts” (from the auto maker or from the parts manufacturer) or “matching quality parts.”

With the “matching quality parts” declaration, your product ranks right up there with Original Parts, at least in Europe. No other proof is necessary. If challenged, it is enough to show quality testing data. A brake pad for instance that is made according to ECE R90 automatically qualifies. One of the main criteria for ECE R90 certification is that your part matches the OEM part within a 15 percent range.

European buyers who are familiar with the law will ask you for the “matching quality” declaration. If you refuse to give it, they will shake their heads, and assume that you make a really bad product. If your product falls under ECE regulations, they will assume that you will not comply with the regulations. Or they will simply assume that you don’t know what you are doing.

Many European buyers are not familiar yet with the law. Offer them the “matching quality” declaration. At the cost of a simple one page letter, your product will become much more valuable. The buyers will be very impressed by your knowledge of the intricate European regulations. And they will be more successful in selling your product.

About the author: Bertel Schmitt, Gasgoo's columnist, is CEO of Hong Kong based parts sourcing company Sinamotive. Before founding Sinamotive, with the assistance of U.S. venture capital, Mr. Schmitt was a marketing consultant to Volkswagen AG.