Sunday, October 1, 2023

Difference between KD & CKD parts

Difference between KD & CKD parts

Many automotive manufacturers indigenously design and develop the vehicle in the country they intend to sell them. Countries such as USA, UK, France, Italy, Germany, Japan, and India have talented workforce and development facilities. Many international brands set up their R & D centers to develop new vehicles in these countries. The vehicles such produced are generally labeled as the “Indigenously developed”.

However, the countries that do not have the R&D, workforce or the manufacturing facilities fully import the vehicles. Such vehicles are often termed the “Fully Imported” vehicles.

Here you can understand this with an example, Honda Motor company in India has manufacturing facilities for cars like-Honda Amaze, Honda Civic, Honda Jezz, Honda City. So Honda company can make these cars in India with local suppliers which also have manufacturing facilities for parts of these cars. But Honda can not make Accord Car in India, because, first no manufacturing line for Accord Car in Honda Cars India Limited (HCIL). So this car to be import as it is & will be sell in India.

Honda CR-V was CKD upto 2013, but now it is localized with parts of local suppliers. This Honda CR-V is manufactured in India. 

So KD & CKD could be a vehicle and vehicle parts. Now lets understand what is meaning of KD, CKD, SKD & CBU in Automotive industries.

What are KD parts?

First we have to understand what is KD. KD part stand for Knock-Down, it is mostly called KD-Kit (Knock-down Kit). 

A knock-down kit (KD) is a collection of parts required to assemble a product. The parts are typically manufactured in one country or region, then exported to another country or region for final assembly. 

Here we can understand with an example of Honda Civic. This car is manufactured at Noida Location also at Alwar Location. Child parts required to make complete car are also manufactured by local supplier, some parts are not manufactured by Indian Suppliers, so Honda Car India Limited import those parts from that country which is already making those parts and supplying continuously in Honda Motor company. That part or kit of parts will become KD parts. 

Sometime supplier also import child parts, if they do not have manufacturing facilities. So we have to make buffer of those part, so called buffer stock or KD stock. These KD parts are assemble with car and final product is manufactured which is sold in India. 

A common form of knock-down is a complete knock-down (CKD)

What are CKD parts?

So CKD stand for complete Knock-down. The manufacturer completely strips down or disassembles a vehicle at the origin and reassembles
it in another country. However, the manufacturers cannot sell them immediately as a CKD unit. So, more manufacturing or assembly is required once the vehicle reaches its destination country as CKD unit.

So completely strip down mean, vehicle parts will be developed with local suppliers under new model development. Vehicle will be indigenously developed with existing R&D, workforce and manufacturing facilities. Now these developed Child parts will not be assembled to make complete vehicle, these parts will be export to other country, in that country vehicle will be assembled.    

The CKD is the process which the manufacturers adapt to save taxes in the destination country. The manufacturers import the vehicles as “Knocked-down” parts or kits in the destination country. 

Many countries levy more than 100% tax for any imported product such as the vehicles. So, the cost of the vehicle doubles in such countries. However, for “Completely Knocked-Down” units, the tax rate is much lower. So, the CKD is one of the most preferred routes for the manufacturers
across the world.

Example, Honda developed a Bike in India, Also sell it in India. And Honda want to develop same bike in Italy, but cost of making this Bike in Italy is high as compare to India. So Honda will export the vehicle in Italy, then there will be export taxes, which will also make it costly. But if Honda export only child part in Italy with low export tax, by this cost will save and only assembly will be done in Italy with country local workforce. 

So Honda will call Indian Child parts as CKD parts for Indian vendors, same they consider. That bike in Italy will be called CKD bike.

So CKD parts are kit of entirely unassembled parts of a product. A value higher than or equal to 40% of the equivalent CBU.

What is CBU in Automotive industries?

CBU “(Completely Built Unit) working” finished vehicles. 

It is a type of manufacturing process adopted in the automotive manufacturing field. In this process, a manufacturer imports a vehicle to a different country as a completely built unit. So, no more manufacturing or assembly is required once the vehicle reaches its destination country so that it can be sold immediately.

Honda Accord, Nissan GTA has not manufacturing facilities in India, So they can exported in India. High-end cars like Mclaren, several Ferraris,
even the Maybach is a CBU unit. 


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