Knock-down kit

A knock-down kit 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. Variant names include knockdown kit, knocked-down kit, or simply knockdown, and the abbreviated KD or CKD.

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 in the automotive, bus, heavy truck and rail vehicle industries, as well as electronics, furniture and other products. Businesses sell knocked-down kits to their foreign affiliates or licensees for various reasons, including the avoidance of 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 transport projects with "buy national" rules).

An incompletely disassembled 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).

Technically, the terms "knock-down" or "kits of parts" are both misnomers, because the knock-downs 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 "knock-down" 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.

Knock-down 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. The plants 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]

Automotive

In the automotive industry, the most basic form of a vehicle in KD kit lacks the wheels, internal combustion engine, transmission, and battery. They 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 a 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., even down to the engine and transmission. At some point, the steel body could be pressed, welded, and painted locally, which effectively makes KD assembly only a couple of steps away from 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 regions of the United States or foreign countries where the cars would be sold.^[3]

During World War II, a great number of U.S. and Canadian-built vehicles - most notably light and heavy trucks like Willys MB/Ford GPW/GPA, GMC-353/CCKW and vehicles from the CMP family - were crated and shipped overseas in KD form, in various degrees of completeness, to Allied countries, in order to sustain their war effort. Assembly lines were preferably set up in local automotive factories where appropriate tooling and equipment could be easily found but, where needed, other types of buildings could be used, especially in on-the-field situations, and on occasion even open-air rebuilding camps were set up, managed by military personnel. Due to male mobilization, sometimes a female workforce was employed. CKD military vehicles could be stored for shipment in one-vehicle-per-crate form (or SUP, Single Unit Pack), or as several vehicles (usually two to three) divided in two or more crates. Vehicles shipped to certain countries could be lacking some items, such as cabs, beds or tires, that were built and provided locally.^[4][5]

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).

In the 1950s and 60s Lotus Cars sold its Lotus Seven car in CKD form to evade the UK Purchase tax that applied to sales of fully assembled vehicles.

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.^[6] Beginning in 1962, and continuing until 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 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.^[7] The situation had changed by 1977. It was now AMC that sought outside support for a new car in the U.S. sub-compact market segment, which led to the first of many agreements with Renault.

Volvo's Halifax Assembly Plant, which opened 1963, completed vehicles in CKD form from Sweden for North American consumers. Halifax Assembly closed in December 1998.

In 1967, Rootes Group UK began exporting CKD Hillman Hunters to Iran where they were sold as the Paykan.

AMC Javelin by Karmann 1968 brochure cover

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 done 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 ^[8] 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.^[9] 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 well-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 have an annual output of 150,000 units.^[10]

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 Mercedes-Benz and Freightliner dealers, along with Dodge dealers prior to Fiat Group's takeover of Chrysler Group LLC — essentially to circumvent the 25% tariff on imported light trucks known as the "Chicken Tax". The Sprinter was eventually replaced in the Dodge/Ram lineup with the similar Ram ProMaster, a rebadged Fiat Ducato. Unlike the CKD Dodge Sprinter, the ProMaster is fully imported to the U.S. from a Chrysler plant in Mexico, which is part of the North American Free Trade Agreement and not subject to the Chicken Tax.

In 2009, Mahindra & Mahindra Limited announced that it would export pickup trucks powered by diesel engines from India to the US in knockdown kit (CKD) form, again to circumvent the chicken tax.^[11] Mahindra planned to export CKDs to the US as complete vehicles that will be assembled in the US from kits of parts shipped in crates.^[11] However, Mahindra's US CKD and export plans never materialized and were subject to several lawsuits.

Buses

• Motor Coach Industries opened its Pembina, North Dakota assembly plant in 1963, as part of an expansion into the U.S. market. Unfinished KD (knocked down) coach bodies are shipped from Winnipeg, Manitoba by flatbed trailer and completed, outfitted and delivered at Pembina. This practice simplifies U.S. Customs and meet the "Buy America Act" provisions (49 USC 5323(j) and 49 CFR Part 661) for public agencies purchasing new equipment with federal funds.^[12]

• North American Bus Industries opened operations in Anniston, Alabama in 1993, with incomplete buses shipped from Budapest (Hungary) to Anniston for final assembly. NABI expanded production operations in Anniston to allow full production with its first fully domestically produced bus unit in 2008.

Rail

• The practice of selling "knocked down" railcars, called by that name, pre-dates the 20th century, as evidenced by an advertisement by J. G. Brill and Company in the Street Railway Journal from 1898.^[13]

• Many rail equipment builders have used kits or incomplete vehicles, often to meet local assembly and production requirements or quotas, or to satisfy tariffs. Some examples include:
  • During the late 1930s, 1940s and early 1950s, the St. Louis Car Company shipped PCC streetcar body shells and trucks north for assembly by Canadian Car & Foundry. The Toronto Transit Commission (TTC) PCC fleet was purchased and delivered in this method.^[14]
  • Bombardier ships incomplete cars from its plant at La Pocatière, Quebec, to Plattsburgh, New York, and (until 2002) Barre, Vermont, facilities for final assembly. These are to meet "Buy America Act" provisions for U.S. public transit agencies and tariff rules. Since 2009 the Plattsburgh assembly plant has full stainless steel welding and fabrication capability, allowing for cars to be fully assembled and completed on site.
  • Kawasaki Heavy Industries (KHI) has an assembly plant in Yonkers, New York, that completes final assembly of cars using bodies shipped from Kobe, Japan. KHI also has a car body plant in Lincoln, Nebraska, full cars are built there and can be shipped to Yonkers for completion.
  • Alstom's Hornell, New York, assembly plant produces final completed cars using stainless body assemblies shipped from the Lapa plant in Sao Paulo, Brazil. The same production method was used by Morrison Knudsen when it built new passenger cars at the Hornell shops in the 1990s.
  • From their first U.S. order from the South Shore Line in 1982 until the opening of a full body manufacturing and assembly line in Rochelle, Illinois thirty years later,^[15] Nippon Sharyo sent commuter train bodies from Japan to U.S. finishers, including an American unit of Sumitomo.
  • Hyundai Rotem opened an assembly facility in South Philadelphia, located in an industrial park off Columbus Boulevard. Car shells are assembled, outfitted and completed for delivery at this site, which is served by Conrail on the Philadelphia Belt Line, allowing delivery of new cars by rail.
  • The London Underground 1995 and 1996 Stock fleets have aluminium bodies built by Alstom in Barcelona with assembly completed at the Metro-Cammell works in Washwood Heath, Birmingham.

Aircraft

Unserviceable military aircraft are also sold as "knock-downs" after they have ended their service life, packaging them with serviceable aircraft. This allows them to be used for cannibalization of spare parts.

The European aircraft manufacturer Airbus uses knock-down kits to assemble A320 family aircraft outside Europe. The Airbus A320 final assembly line in Tianjin, China assembles fuselage, wing, and tail sections made in Europe with avionics and engines made in Europe or the United States and locally sourced components for interiors. Airbus has opened a similar A320 final assembly line in the United States in September 2015, located in Mobile, Alabama; again using European-made fuselages, wings, and tail sections. However, the Mobile final assembly line will use more locally sourced components than the Tianjin line; engines, interior components, and avionics will be sourced mainly from American suppliers. Both the Airbus Tianjin and Mobile plants receive their fuselages, wings, and tail sections from Europe via ocean freight using specially designed ships, as the plants are located in port cities.

Housing

Advertisement for knocked down kits for houses, in Popular Mechanics, May 1908.

A 1908 advertisement in Popular Mechanics attests that knock-down kits for houses were on the market by the early 20th century, if not before.

See also

• Rules of origin

References