Complete knock down
From Wikipedia, the free encyclopedia
Complete knock down (CKD), is a complete kit needed to assemble a vehicle. It is a common practice among automakers, as well as bus and rail vehicle manufacturers, to sell knocked down kits to their foreign affiliates in order to avoid high import taxes and/or receive tax preferences for providing local employment.
An incomplete kit is known as SKD or Semi Knocked Down. Both types of KDs are collectively referred to within the auto industry as KDX or Knocked-down export, while cars assembled in the country of origin and exported whole to the destination market are known as BUX, or Built-Up Export.
KD kit assembling plants are cheaper to maintain because there is hardly any modern robotic equipment and the working force is usually much less expensive in comparison to the home country, so they are perfect for low-volume production. The CKD concept allows firms in developing markets to gain expertise in a particular industry. At the same time, the CKD kit exporting company gains new markets that would otherwise be closed.
In most basic form, a car in KD kit lacks only the engine, battery and transmission, which are either supplied as parts for assembly (a "complete" kit) or obtained from 3rd parties (a "semi-complete" kit); wheels and all of the interiors are already installed on the head factory. To gain some extra tax preferences, the manufacturer needs to further localize the car, i.e. increase the share of parts produced by local manufacturers, such as tires, wheels, seats, headlights, windscreens and glass, batteries, interior plastics, etc. down to the engine and transmission. At some point, even the steel body could be pressed, welded, and painted locally; this effectively makes KD assembly only a couple of steps behind the full-scale production.
Developing nations may pursue trade and economic policies that call for import substitution or local content regulations. Companies with CKD operations help the country substitute the finished products it imports with locally assembled substitutes.
[edit] Examples
Mahindra & Mahindra Limited in India began its business in 1947 by assembling CKD Jeeps. Mahindra expanded their operations to include domestic manufacture of Jeep vehicles with a high level of local content under license from Kaiser Jeep Corporation and later American Motors (AMC). By 2005, Mahindra had become the largest producer of SUVs in India.
Beginning in 1962, and continuing through 1967, AMC also sold CKD kits of its passenger cars to Renault. They were assembled in Renault's factory in Belgium and sold through its dealers in Algeria, Austria, Belgium, France, the Netherlands, and Luxembourg. The deal allowed AMC to sell its cars in new markets without a having to make a major Foreign Direct Investment (FDI). The arrangement was good for the French automaker because its product range was lacking large cars and it needed to offer an "executive" model. The situation changed by 1977. It was now AMC that sought outside support for a new car in the sub-compact segment, which lead to the first of many agreements with Renault.
In 1968, the independent German auto firm, Karmann began assembly of CKD kits of AMC's newly introduced Javelin for distribution in Europe. American Motors also provided right hand drive versions of their automobiles to markets such as Australia and South Africa. The components were shipped in containers to Australia from AMC's plants in Kenosha, Wisconsin, or Brampton, Ontario. Assembly was by Australian Motor Industries (AMI) in Port Melbourne, Victoria. Local content requirements were met by using Australian suppliers for the interiors (seats, carpeting, etc.) as well as for lights, heaters, and other components.
New Zealand developed a car assembly industry as a means of import substitution and providing local employment, despite the small size of the local market. Following economic reforms in the 1980s, including the lowering of import tariffs, the ability to import Australian-built vehicles duty-free under the CER agreement, many car companies ended assembly in New Zealand and switched to importing completely built up vehicles from Japan, Australia, or Europe. More significantly, the easing of import restrictions led to a large number of Japanese used imports, which were far cheaper than locally-assembled used cars, and continue to outnumber so-called 'NZ New' vehicles. The last companies to assemble CKD kits in New Zealand were Toyota, Nissan, Mitsubishi and Honda, which closed their plants in 1998, when the government announced plans to abolish import tariffs on cars.
More recent examples include the Ukraine, which has almost prohibitive import taxes on finished cars. AutoZAZ assembles CKD kits of some Lada, Opel, Mercedes-Benz and Daewoo cars. It went as far as adopting a version of Daewoo Lanos for full-scale production and equipping it with a domestic engine. In a similar approach, an (undisclosed?) Swedish company buys used busses, disassembles them and then exports to Ukraine as spare parts; then they are reassembled into full busses at the local plant.
In Russia, the most known KD assembling facilities are owned by Avtotor company; it produces Hummer H2, BMW 3-series and BMW 5-series in Kaliningrad, and Renault Logan is built in Moscow on the facilities that once belonged to AZLK.
In South Carolina, DaimlerChrysler has a CKD assembly plant that manufactures Mercedes-Benz Sprinter vans for sale in the US and Canada at Dodge and Freightliner dealers.
