What is an Indigenously Developed vs Fully Imported vehicle?
Did you come across the terminology CBU, CKD, and SKD? You bet. Many automotive manufacturers indigenously design and develop the vehicle in the country they intend to sell them. In such cases, they use the terminology “Indigenously Designed and Developed” vehicles. This process is useful where there are proper “Research & Development” Centres and technically sound/trained manpower is available. 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.
What is a CBU vehicle?
The term CBU stands for “Completely Built Unit”. 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. However, such vehicles may need to undergo the “Pre-Delivery Inspection” or the PDI at the dealerships/distributors before handing over to the end customers.
Many manufacturers opt for the CBU route which does not have the manufacturing facilities or yet to open them in the countries of operation. Initially, they prefer the CBU route until a proper manufacturing set-up is available. The CBU route avoids the quality control issues in the new country and can maintain high levels of the standard while manufacturing the vehicles. Thus, the customers can get a good quality product from the manufacturers.
What is a CKD vehicle?
The term CKD stands for “Completely Knocked-Down”. It is another type of manufacturing process adopted in the automotive manufacturing field. In this process, 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. However, such vehicles may need to also undergo the assembly, inspection before they leave the manufacturing plant. They also need to undergo the “Pre-Delivery Inspection” or the PDI at the dealerships/distributors before handing over to the end customers.
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. This is because the manufacturers operate an assembly line in such countries, creating local jobs. So, the CKD is one of the most preferred routes for the manufacturers across the world.
What is an SKD vehicle?
The term SKD stands for “Semi Knocked-Down”. It is another type of manufacturing process which the automotive manufacturers adapt. In this process, the manufacturer partially strips down a vehicle at the origin and reassembles it in another country. However, the manufacturers cannot sell them immediately as an SKD unit. So, it needs some more manufacturing or assembly once the vehicle reaches its destination country as SKD unit. However, such vehicles may also need to undergo the assembly, inspection, quality control, and testing before they leave the manufacturing plant. They also need to undergo the “Pre-Delivery Inspection” or the PDI at the dealerships/distributors before handing over to the end customers.
The SKD process also helps the manufacturers save taxes in the destination country. Many countries levy more than 100% tax for fully imported products such as the vehicles. So, the cost of these vehicle increases in such countries. However, for “Semi Knocked-Down” units, the tax rate is different. So, the SKD is also a popular choice for the manufacturers across the world.
What is a BUX vehicle?
The term BUX stands for “Built-up for Export”. The manufacturers collectively refer both types of KDs, the CKDs and SKDs, either complete or incomplete, as KDX (for knocked-down export). They also term the cars assembled in the country of origin and exported wholly to the destination market as “Built-up for Export” or BUX.
The manufacturing plants which assemble the “Knock-down kits” are less expensive to establish and maintain. This is because they do not need modern robotic equipment and very skilled workforce that is usually much inexpensive in comparison to the home country. Such plants may also be effective for low-volume production. The CKD concept allows the manufacturers in the developing markets to gain expertise in a particular manufacturing process. Alternatively, the company that exports the CKD kit gets new markets which are not available to them otherwise.
Many manufacturers make use of these manufacturing processes to overcome the shortcomings of a particular country. Indian manufacturer Mahindra began its operation in 1947 with assembling the CKD Jeeps. Mahindra expanded its operations to include domestic manufacturing of Jeep vehicles with a high level of local content under license from Kaiser Jeep Corporation and later American Motors (AMC). To avoid the UK purchase tax that applied to sales of fully assembled vehicles, Lotus Cars sold its Lotus Seven car in CKD form in the 1950s and 1960s. By 1959, the products of British Motor Corporation such as the Mini were still either imported or assembled from CKD kits in several international markets.
Volvo's Halifax Assembly Plant which opened 1963 assembled the vehicles in CKD form from Sweden for North American consumers. Daimler AG operates a CKD assembly plant in South Carolina that re-assembles Mercedes-Benz Sprinter vans for sale in the United States and Canada. They did so with Mercedes-Benz and Freightliner dealers, along with Dodge dealers to circumvent the 25% tariff on imported light trucks known as the "Chicken Tax".
Read more: What is Badge Engineering?>>