Knock-down kit

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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 completely 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 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 "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]

Automotive[edit]

In the automotive industry, the most basic form of a vehicle in KD kit lacks the wheels, internal combustion engine, transmission, and battery[citation needed] - 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]

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 completedness - 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 in case of need 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 women 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 2 to 3) divided in 2 or more crates. Vehicles shipped to certain countries could be lacking some items like cabs, beds or tyres, 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 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 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 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.

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 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 [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 known KD assembling facilities are owned by Avtotor,[citation needed] 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.[10]

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 Mercedes-Benz and Freightliner dealers, along with Dodge dealers prior to Fiat Group's takeover of Chrysler Group LLC — essentially to circumvent the 25% US tariff on imported light trucks that is also known as the Chicken Tax. The Sprinter was eventually replaced in the Dodge/Ram Trucks lineup with the similar Ram ProMaster, a rebadged Fiat Ducato. Unlike the CKD Dodge Sprinter, the ProMaster is fully imported to the US 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 will 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.

Rail[edit]

Aircraft[edit]

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.

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 plans on opening a similar A320 final assembly line in the United States in 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 or will 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[edit]

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.

References[edit]

  1. ^ a b c Miller, Russell R. (2000). Doing business in newly privatized markets: global opportunities and challenges. Greenwood Publishing Group. p. 281. ISBN 978-1-56720-260-1. Retrieved 2010-06-08. 
  2. ^ Lind, Tommy. Partnerships - a solution. Tommy Lind's History of Renault 1898-1975. Retrieved 2010-06-08. 
  3. ^ Ford, Henry; Crowther, Samuel (1922). My Life and Work. Garden City Publishing. pp. 81, 167. Retrieved 2010-06-08. 
  4. ^ "CMP Assembly Overseas". Wheels & Tracks Issue 37. 
  5. ^ 148th MVA Ordnance - WWII - Dad in France on Assembly Line. 
  6. ^ Lind, Tommy. International agreements.... Tommy Lind's History of Renault 1898-1975. Retrieved 2010-06-08. 
  7. ^ Le Cimetiere Des Autos Oubloees: Renault Rambler (1962-67) (in French). The graveyard of forgotten cars. 2007-04-04. Retrieved 2010-06-08. 
  8. ^ Webster, Mark (2002). Assembly: New Zealand car production 1921-98. New Zealand: Reed Books. pp. 1–223. ISBN 0-7900-0846-7. 
  9. ^ "ZAZ increased car output by 7% in Q1 2006" Bank AVAL[dead link], retrieved on: 3 September 2007.
  10. ^ "The Volkswagen Plant in Kaluga" (Press release). Volkswagen-Media-Services.com. 28 February 2009. Retrieved 2009-08-22. [dead link]
  11. ^ a b Kong, Benson (June 2009). "Mahindra Planning Kit Assembly of Diesel Pickups To Avoid Chicken Tax". Motor Trend. Retrieved 23 November 2012. 
  12. ^ Brill, Debra (2001). History of the J.G. Brill Company. Indiana University Press. pp. 56–57. ISBN 978-0-253-33949-2.