As we know, cars are produced all over the world. The well-known car-manufacturers assemble cars in different countries. Sometimes the necessary parts for the cars are shipped overseas from suppliers to the plants, sometimes suppliers are settled near the plant in the foreign country, and sometimes something completely different happens.
CKD is the keyword. CKD stands for Completely Knocked Down. The term has its origin in the automotive industry and refers to a form of production of vehicles. The car manufacturer exports a not-assembled vehicle in the form of individual parts that is assembled into a finished vehicle in the respective country of import and sold there. In addition to individual parts also partially prefabricated vehicles are exported as Semi-Knocked Down (SKD) or Medium-Knocked-Down (MKD).
Main reason for the CKD exports are mostly high import duties for complete end products, whereas partially dismantled or completely knocked down products have often considerably lower duties. Another reason is the start of local production, especially in emerging countries.
So how does this procedure work? Just like your LEGO! At the car manufacturer, the body and corresponding individual parts are removed from the normal manufacturing sequence and packed. These parts will be sent to the destination country . Once there, the parts get assembled and completed with parts to meet the requirements of the country (local content).
The main advantage of CKD is the avoidance of high import duties on finished products (CBUs “Completely Built Units”). Non-European countries impose some duties between 30-300% of the value to protect the industry and therefore the jobs in their own country. In the disassembling of the product according to CDK-principle duties of only 25% of the goods value will be charged.
A major disadvantage in the choice of CDK strategy, the problem of shipping can be seen. The parts must be packaged individually or in groups and be sent. Defective, damaged or lost goods may delay the manufacturing process in the country. It must also be noted that the packaging material is expected to be in the calculation of the production.