The Tough Conversation. Knockoffs.

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It’s been two and a half years since I wrote a blog post titled “An Inconvenient Truth…About JDM – AKA The Death of Innovation”.  That blog post ended up being the most commented, emotional and debated blog post I’ve ever written. There is a lot of emotion from all sides on this topic. Clearly it would be easier and more convenient to simply ignore it and focus on positive lighthearted things that we all can agree on.

However when asked by our friends at night-import blog to chime in about the recent status of the industry I found myself free writing for about an hour on a variety of topics. One of those topics happened to be knockoffs.

Ultimately I think I may have given a far longer and more detailed answer than they were expecting. As a result it probably won’t be published in full by them so I wanted to share my section about knockoffs. This is just how I personally feel and a blog is nothing more than a venue for a discussion to be had. So lets have the discussion…

Here’s a segment from my email to them:

The knockoff discussion:
I can say with certainty that the amount of new parts being produced is significantly less than it was 6+ years ago simply and directly due to knockoffs. I think many people are already expecting that answer since they see it all around them and that answer is indeed true. I’ve heard this same topic come up in countless closed door meetings with Japanese tuning shops. Then again, that’s what I do for a living (representing innovators in Japan with new products) so I’m often in an environment where product development discussions are held.

Even in cases where the Japanese companies ignore all of the threats of knockoffs and produce something new, the knockoffs come out within a few months and instantly kill the chance for the company to recoup their investment into the R&D of the parts. Most people don’t realize that designing a front bumper (for example) costs often $30,000 for proper design, prototype and tooling in Japan (I have quotations). When a knockoff comes out within a few months and at that time only a handful of the authentic items have been sold – what do you think happens to the company who made the parts? They think twice about doing it again. And a lot of times they scale way back and come out with fewer and fewer new parts. If you were them and constantly struggled to make a profit, wouldn’t you do the same? The saddest part is that the better the design is the faster it gets knocked off. They truly can’t win regardless of how hard they try.

See this blog post and specifically the last paragraph within it for an example of just how predictable and sad this has become. That full kit was knocked off shortly after the release of it in the US.

http://www.bespokeventures.com/blog/2009/11/24/amuse-370z-rear-bumper-design-first-picture/

Continuing…

People want to compare costs of knockoff bumpers to the cost of an authentic bumper as if the authentic bumper is unfair, overpriced and should be less. Let me make this point as clear as possible. When it costs $30,000 to produce the first bumper by the authentic maker and yet it costs $1000 for the knockoff maker to buy an authentic bumper and knock it off…do you think it’s fair to compare the costs of each one side by side? That’s assuming the quality is the same which it never is. If magically the authentic companies could remove all of the R&D costs from their products and have the same business model as the knockoff companies where it costs almost nothing to make a new product – you can be sure the costs would be much less. People think it is price gouging but in reality most of these authentic companies can’t even get their money back half the time, never mind make a profit. And the knockoff company that is paying $150 to produce a bumper and is selling it for $450 with no R&D costs…they’re the ones gouging by charging a 300% markup and making instant profit on sale #1 because they have no expenses into it. Which one will you support? Which one is getting your money to buy ads in the magazines and get the big booths at SEMA? Which ones are growing their companies on their customer’s money? Which ones are left with a surplus of cash to be able to give away free product to hundreds of show cars and magazine cars to perpetuate the hype and legitimize the lie?

As a result of all of this, a standard is created that fake is acceptable and that whatever a car looks like on the surface is primarily what matters. The common excuse is that the parts cost too much and people think that running knockoffs simply saves them money and has no negative effect on the brand, however that’s far from true. For each person who fakes it and runs knockoffs it helps reward the companies who steal the design and produce those parts while at the same time it promotes the idea of knockoffs being ok and encourages others to do it by:
A. showing that it’s accepted on message boards, local car meets and in magazines
and
B. creating more profit incentive for the knockoff producers to knockoff more things and promote and sell more knockoff parts since it’s easy and cheap to do and pays them well.
It’s a domino effect. But if you ask those guys who run the knockoffs they conveniently overlook all of those facts and remind you that they saved a bunch of money and that they couldn’t have bought the parts otherwise.

Each year there are less and less exciting new parts to even bother knocking off. Meanwhile the most talented designers and engineers are struggling to pay their bills and I personally know of some that are out of a job and out of a career altogether.

This stuff is real, we all see it. The knockoff companies have been able to buy their voices in this debate by giving away free product and paying for advertisements anywhere and everywhere they can. The voice on the other side of the topic is left to you all who are reading this. Will you say something or will big money beat out passion and win this debate? This is an uphill battle, make no mistake about it.

Special thanks goes out to all of those who are down for the cause and speak up on difficult topics like these. You all know who you are, thank you for keeping it authentic and real in these hard times.

This man is one of them and deserves honorable mention: http://jdmego.wordpress.com

For the original topic two and a half years ago you can check out the link below:

http://www.bespokeventures.com/blog/2008/07/30/an-inconvenient-truthabout-jdm-aka-the-death-of-innovation/

Let’s have this discussion. What are your thoughts?

Update: We’ve put this blog post on facebook as well for discussion:
http://www.facebook.com/therealjdm#!/notes/bulletproof-automotive-gt-rr-bespoke-ventures/the-tough-conversation-knockoffs/10150191847623945

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