A knock-down kit (also styled knockdown kit, knocked-down kit, or simply knockdown, and sometimes abbreviated KD) is a kit containing the parts needed to assemble a product. The parts are typically manufactured in one country or region, then exported to another country or region for final assembly.
A common form of knock-down is a complete knock-down (CKD), which is a complete kit needed to assemble a product. It is also a method of supplying parts to a market, particularly in shipping to foreign nations, and serves as a way of counting or pricing.[1] CKD is a common practice within the automotive industry, the bus and heavy truck industry, and the rail vehicle industry, as well as electronics, furniture, and in other products. Businesses sell knocked down kits to their foreign affiliates or licensees for various reasons, including to avoid import taxes, to receive tax preferences for providing local manufacturing jobs, or even to be considered as a bidder at all (for example, in public transit projects with "buy national" rules).
An incomplete kit is known as SKD for semi-knocked-down. Both types of KDs, complete and incomplete, are collectively referred to within the auto industry as KDX (for knocked-down export), and cars assembled in the country of origin and exported whole to the destination market are known as BUX (for built-up export).
The terms "knockdown" or "kits of parts" are both misnomers, because the knockdowns were never built up in the first place, and the shipments of parts are often not in the form of kits,[1] but rather bulk-packed by type of part into shipping containers. The degree of "knockdown" depends on the desires and technical abilities of the receiving organization or on government import regulations.[1] 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.
Knockdown kit assembling plants are less expensive to establish and maintain, because they do not need modern robotic equipment, and the workforce is usually much less expensive in comparison to the home country. They may also be effective 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.[2]
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In the automotive industry, the most basic form of a vehicle in KD kit lacks the wheels, internal combustion engine, transmission, and battery - which are either supplied as parts for assembly (a "complete" kit), or obtained from third parties (an "incomplete" kit); all of the interiors are already installed at the originating factory. The term SKD for semi-knocked-down refers to a kit with complete, welded car body, usually coated or already painted. To gain some extra tax preferences, the manufacturer needs to further localise 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.
By the time that Henry Ford co-wrote his 1922 memoir My Life and Work, the Ford Motor Company was already shipping car parts from its Michigan plants for final assembly in the U.S. regions or foreign countries where the cars would be sold.[3]
Mahindra & Mahindra Limited in India began its business in 1947 with 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 1959, and with the introduction of the Mini, the products of BMC were still either imported or assembled from CKD kits in several international markets.
In 1961, Renault began negotiations for a first partnership agreement with AMC for assembly of Rambler automobiles in Europe.[4] 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 Haren, 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 in its European markets.[5] The situation changed by 1977. It was now AMC that sought outside support for a new car in the U.S. sub-compact market segment, which lead to the first of many agreements with Renault.
In 1968, the independent German automotive 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, New Zealand, and South Africa. The components were shipped in containers to Australia from AMC's plants in Kenosha, Wisconsin, or Brampton, Ontario. Assembly of Rambler and AMC vehicles in Australia was performed 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. Various Rambler models were assembled in New Zealand from the early 1960s until 1971 by Campbell Motors in Thames (later Toyota New Zealand), which had also built Toyota, Datsun, Hino, Renault, and Peugeot cars.
New Zealand had developed a car assembly industry [6] 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 Ukraine, which has almost prohibitive import taxes on finished cars. AutoZAZ assembles CKD kits of some Lada, Opel, Mercedes-Benz, and Daewoo cars.[7] It went as far as adopting a version of Daewoo Lanos for full-scale production and equipping it with a domestic engine. The German automotive giant - Volkswagen Group also produces SKDs in the Ukraine at its Solomonovo plant, producing cars under its Škoda and Volkswagen Passenger Cars marques.
In Russia, the most known KD assembling facilities are owned by Avtotor, which produces Hummer H2, BMW 3-series and BMW 5-series in Kaliningrad, and Renault Logan in Moscow using facilities that once belonged to AZLK. In Kaluga, Volkswagen Group is currently constructing a new plant, which when completed, is expected to produce an annual output of 150,000 units.[8]
In the USA, Daimler AG has a CKD assembly plant in South Carolina that re-assembles Mercedes-Benz Sprinter vans for sale in the US and Canada at Dodge and Freightliner dealers — essentially to circumvent the Chicken tax.
In 2009, Mahindra & Mahindra Limited has announced it will import pickup trucks from India in knockdown kit (CKD) form, again to circumvent the Chicken tax.[9] CKDs are complete vehicles that will be assembled in the U.S. from kits of parts shipped in crates.[9]
Unserviceable military aircraft are also sold as "knockdowns" after they have ended their service life, packaging them with serviceable aircraft. This allows them to be used for cannibalization of spare parts.