A knock-down kit (also knockdown kit, knocked-down kit, or simply knockdown or KD) is a collection of parts required to assemble a product. The parts are typically manufactured in one country or region, and 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 kit of entirely unassembled parts of 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).
A semi-knocked-down kit (SKD) or incompletely disassembled kit (although it has never been assembled) is a kit of the partially assembled parts of a product. Both types of KDs, complete and incomplete, are collectively referred to within the auto industry as knocked-down export (KDX), and cars assembled in the country of origin and exported whole to the destination market are known as built-up export (BUX).
Technically, the terms "knock-down", "incompletely disassembled kit", and "kits of parts" are all misnomers because the knock-downs were never built up in the first place. The parts shipments 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 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 assembly plants are less expensive to establish and maintain because they do not need modern robotic equipment, and the workforce may be less costly than in the country of origin. 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]
In the automotive industry, the most basic form of a vehicle in the KD kit lacks the wheels, internal combustion engine, transmission, and battery.[ citation needed ] 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 extra tax preferences, the manufacturer needs to "localize" the car further, 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, effectively making KD assembly only a few steps away from full-scale production.
By the time 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 significant number of US- 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 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. Owing 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 its 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 Corporation (AMC).
In the 1950s and 1960s, Lotus Cars sold its Lotus Seven car in CKD form to avoid the UK purchase tax that applied to sales of fully assembled vehicles.
By 1959, and with the introduction of the Mini, British Motor Corporation (BMC) products 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 to assemble 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 significant foreign direct investment (FDI). The arrangement benefited the French automaker because its product range lacked large-sized cars, and it needed to offer an "executive" model for its European markets. [7] The situation changed by 1977. By this time, AMC sought outside support for a new car in the sub-compact market segment, which led to the first of many agreements with Renault.
Volvo's Halifax Assembly Plant, which opened in 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 (meaning "arrow" in Persian). Bought by Chrysler in 1967 and then part of the sale to the PSA Group by the Chrysler Corporation of its European operations in late 1978, the Rootes business basis in Iran became the primer for the very significant PSA Peugeot Citroën business in Iran involving engine and CKD deliveries, particularly from the 405, introduced in 1990 and facelifted as the Pars in 1999 and 206 introduced in 2001. [8] In 2004, Peugeot's partner Iran Khodro produced 281'000 Peugeot vehicles, securing a 36% market share.
In 1967 as well, Peugeot introduced CKD-based production of a light pick-up vehicle based on the Peugeot 403 in Peugeot's Berazategui factory (in Buenos Aires) under the name Peugeot 4TB. [9] In 1973, this model was replaced by the 404 pick-up and later (1990) by the 504 pick-up. The 404 and 504 were massively marketed worldwide through local CKD assembly shops: the 404 was assembled, besides France and Argentina, in Australia, Belgium, Canada (at the SOMA plant shared with Renault), Chile, Ireland, Kenya, Madagascar, Malaysia, New Zealand, Nigeria, Portugal, Perú, Rhodesia, South Africa, and Uruguay; [10] the 504, mainly in Argentina, Egypt, Nigeria, Kenya, South-Africa, Australia, and China by the Guangzhou Peugeot Automobile Company which developed a specific crew cab version.
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 (later known as Nissan), Hino, Renault, and Peugeot cars.
New Zealand had developed a car assembly industry [11] 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, and the ability to import Australian-built vehicles duty-free under the CER agreement, many car companies ended assembly in New Zealand. They switched to importing completely built-up vehicles from Japan, Australia, or Europe. More significantly, the easing of import restrictions led to many used imports, because they were less expensive than locally assembled used cars, and outsold the 'NZ New' vehicles. The last companies to construct 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.
Other 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. [12] 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 Ukraine at its Solomonovo plant, producing cars under its Škoda and Volkswagen Passenger Cars marques.
In Russia, KD assembling facilities are owned by Avtotor,[ citation needed ] which produced 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 had a plant that was expected to have an annual output of 150,000 units. [13]
Daimler AG has a CKD assembly plant in South Carolina that re-assembles Mercedes-Benz Sprinter vans for sale in the United States and Canada at Mercedes-Benz and Freightliner dealers, along with Dodge dealers before 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 under of the North American Free Trade Agreement (NAFTA).
In 2009, Mahindra & Mahindra Limited announced that it would export pickup trucks powered by diesel engines from India to the United States in knockdown kit (CKD) form, again to circumvent the chicken tax. [14] Mahindra planned to export CKDs to the United States as complete vehicles that will be assembled in the United States from kits of parts shipped in crates. [14] However, Mahindra's United States CKD and export plans never materialized and were subject to several lawsuits.
In 2013, Tesla started operating an assembly plant in Tilburg, the Netherlands. [15] It is used for the assembly of their Model S sedan and Model X SUV for the European Union, but not all of Europe since only cars imported to the EU benefit from circumventing the 10% import duty [16] (e.g. cars to Norway are shipped directly from the United States). For the most part, the car is still manufactured in the Tesla Factory in Fremont, California. During the final assembly in the Netherlands, various parts are added to the car, most notably the rear subframe with the drive train as well as the battery pack. [17]
Motor Coach Industries opened its Pembina, North Dakota, assembly plant in 1963, as part of an expansion into the US 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 US Customs and meets the "Buy America Act" provisions (49 USC 5323(j) and 49 CFR Part 661) for public agencies purchasing new equipment with federal funds. [18]
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.
The practice of selling "knocked down" railcars, called by that name, pre-dates the 20th century, as evidenced by an advertisement by JG Brill Company in the Street Railway Journal from 1898. [19]
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:
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 the EU or the United States and locally sourced components for interiors. Airbus 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.[ citation needed ] 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.
From 1908 to 1940, the Sears, Roebuck & Co. mail-order catalog offered over 400 styles of homes. [22] Buyers were provided with all of the materials and the instructions needed to build a house. Everything that arrived by train or in the mail was designed to fit together, therefore buyers could build the houses themselves or hire contractors. [23] Sears sourced building materials at a high volume, thus keeping prices low and competitive with the local builders. [22]
Knock-down furniture dates back to at least the mid-19th century, with the 1859 Thonet No. 14 chair bentwood chair being easily disassembled for transportation. [24] In the late 1940s, Australian designer Frederick Charles Ward founded a mail-order business for knock-down furniture in response to a lack of affordable furniture. [25]
Swedish furniture company IKEA began selling flat-pack furniture in 1956. [26]
The Kaiser-Frazer Corporation was the result of a partnership between industrialist Henry J. Kaiser and automobile executive Joseph W. Frazer. In 1947, the company acquired the automotive assets of Graham-Paige, of which Frazer had become president near the end of World War II. Kaiser-Frazer was one of a few US automakers to achieve success after World War II, if only for a few years. Joseph W. Frazer left the company in 1949, replaced as president by Henry's son Edgar F. Kaiser.
The Rambler Classic is an intermediate-sized automobile built and marketed by American Motors Corporation (AMC) from the 1961 through 1966 model years. The Classic replaced the Rambler Six and Rambler Rebel V8 names, which were retired at the end of the 1960 model year.
The automotive industry in India is the fourth-largest by production in the world as per 2022 statistics. As of 2023, India is the 3rd largest automobile market in the world in terms of sales. In 2022, India became the fourth largest country in the world by the valuation of its automotive industry.
Australian Motor Industries (AMI) was an automobile assembly firm that was significant in the early history of the automotive industry in Australia.
Mahindra & Mahindra Limited (M&M) is an Indian multinational automotive manufacturing corporation headquartered in Mumbai. It was established in 1945 as Mahindra & Mohammed and later renamed Mahindra & Mahindra. Part of the Mahindra Group, M&M is one of the largest vehicle manufacturers by production in India. Its unit, Mahindra Tractors, is the largest manufacturer of tractors in the world by volume. It was ranked 17th on a list of top companies in India by Fortune India 500 in 2018. Its major competitors in the Indian market include Maruti Suzuki India and Tata Motors.
UMW Toyota Motor Sdn. Bhd. (UMWT) is the appointed Toyota distributor, assembler and exporter of Toyota vehicles in Malaysia. The company was founded in October 1982 as Sejati Motor, prior to being renamed UMW Toyota Motor in October 1987.
A substantial car industry was created in Australia in the 20th century through the opening of Australian plants by international manufacturers. The first major carmaker was Ford Australia and the first Australian-designed mass production car was manufactured by Holden in 1948. Australian manufacture of cars rose to a maximum of almost half a million in the 1970s and still exceeded 400,000 in 2004. Australia was best known for the design and production of 'large' sized passenger vehicles. By 2009 total production had fallen to around 175,000 and the Australian market was dominated by cars imported from Asia and Europe.
The Chicken Tax is a 25 percent tariff on light trucks imposed in 1964 by the United States under President Lyndon B. Johnson in response to tariffs placed by France and West Germany on importation of U.S. chicken. The period from 1961 to 1964 of tensions and negotiations surrounding the issue was known as the "Chicken War", taking place at the height of Cold War politics.
Pragoti Industries Limited (PIL) is a Bangladeshi car assembling and car parts manufacturing company headquartered in Chittagong with a manufacturing plant in Barabkunda. Founded in 1966, it is the country's largest car assembling plant and it has assembled and marketed more than 50,000 vehicles such as cars, SUVs, buses, trucks, pickups, ambulances, tractors of multiple models by importing CKD kits from overseas.
This article provides an overview of the automotive industry in countries around the world.
Sevel Argentina S.A. was an Argentine automobile company established in 1981 that produced and marketed Fiat, Peugeot, Alfa Romeo, Chevrolet, and Citroën vehicles for the local market until it was dissolved in 1999. The company was created by merging Fiat's and Peugeot's Argentine operations.
The automotive industry in New Zealand supplies a market which has always had one of the world's highest car ownership ratios. The distributors of new cars are essentially the former owners of the assembly businesses. At the dealership level they have maintained their old retail chains in spite of the establishment of the many new independent businesses built since the 1980s by specialists in used imports from Japan. Toyota entered into direct competition with those used-import businesses refurbishing old Toyotas from Japan and selling them through their own dealers as a special line. The nation's car fleet is accordingly somewhat older than in most developed countries.
Serbia's automotive industry is one of the most important industrial sectors and makes about 15% of industrial output of the country and 18% of all exports.
The automotive industry in Ireland has had a varied history. The punitive tax on imported cars encouraged a wide range of companies to assemble their cars locally including Fiat, Ford and Renault. From Ireland's entry to the European Union in 1973, the need for locally produced cars to avoid import taxes reduced and since the 1980s, production ended and all cars are now imported.
Tan Chong Motor Holdings Berhad (MYX: 4405), also known as the TCMH Group or simply Tan Chong Motor (TCM) is a Malaysia-based multinational corporation that is active in automobile assembly, manufacturing, distribution and sales, but is best known as the franchise holder of Nissan vehicles in Malaysia. The company was founded in 1957 by two Malaysian entrepreneurs, Tan Yuet Foh and Tan Kim Hor, with ambitions of importing and selling Datsun cars from Japan. Tan Chong Motor Holdings Berhad was incorporated on 14 October 1972, and in 1974, the company was listed on the Kuala Lumpur Stock Exchange.
Bulgaria's production strongly depended on auto imports from the Soviet block earlier and currently depends on other European and Asian countries. Presently, Bulgaria introduced its own domestic supercar company, SIN Cars and armed automobiles SAMARM.
The automotive industry in Malaysia consists of 27 vehicle producers and over 640 component manufacturers. The Malaysian automotive industry is the third largest in Southeast Asia, and the 23rd largest in the world, with an annual production output of over 500,000 vehicles. The automotive industry contributes 4% or RM 40 billion to Malaysia's GDP, and employs a workforce of over 700,000 throughout a nationwide ecosystem.
As of 2019, the automotive industry in Thailand is the largest in Southeast Asia and the 10th largest in the world. The Thai industry has an annual output of more than two million vehicles, more than countries such as Belgium, Canada, the United Kingdom, Italy, Czech Republic and Turkey.
Roughly 720,000 cars per year are being sold in Nigeria every year. Only ca. 140.000 of them have been built domestically.
The automotive industry in Vietnam is a fast-growing sector mainly reliant on domestic sales. All currently produced models are designed abroad by foreign brands, and many rely on knock-down kit production. Due to high import taxes on automobiles, the Vietnamese government protects domestic manufacturing. Although Vietnam is a member of the ASEAN Free Trade Area, automobile imports fall under an exception. Since January 1, 2018, the 30% import tax has been discontinued as part of ASEAN agreements. Currently, the Vietnamese motor industry is not deemed competitive enough to make exports feasible. As of April 2018, 85% of car sales in Vietnam were produced domestically from knock-down kits.