What’s the difference between CKD and imported cars?
What is CKD？
CKD is the acronym for “Complete Knocked Down” — anything from a single screw to a piece of moulded car body that comes without any assembly process.Such parts imported into the country can reduce tariffs, the current national tariff standard parts import tax rate is 10%, and the import tax rate of the whole vehicle is 25%, the import of the whole vehicle will also increase the tax rate by the size of the displacement, and there are consumption tax and value-added sharp, etc.. General small and medium displacement of imported cars, the actual purchase price of consumers is more than twice the CIF price, large displacement models even reached more than 300%. By using CKD to produce cars for sale, reduced tariffs become a cost reduction for domestic automakers. And there are a lot of low technical threshold parts can also be produced in China, which can avoid tariffs, the domestic labor costs are lower than abroad, by this way the final sales price of the assembled vehicles can be much lower than the whole vehicle imports.
Our domestic heavy industry production level is low in the early years. In order to promote the development of car industry, our country adopt the method of exchanging market with technology imported brand vehicles, from the initial 100% import parts and even large parts, and by foreign hand-holding our assembly production, part to reduce the proportion of import parts, now we have already had the ability to produce an excellent capacity car independently.
Future development of CKD
In addition to CKD, there are SKD and even DKD production. SKD is the assembly of semi-spare parts, such as engine assembly, gearbox assembly, complete body, etc., which can be assembled into a complete car without very demanding industrial operation after being imported back. Such a form is generally the product of mature cooperation. In order to reduce costs and tax rates, or transport costs, and to facilitate production, different workshops are arranged in different places, SKD production mode will be adopted. Many of our domestically made cars now adopt SKD mode, such as body-in-white in China, technology-intensive engines in foreign countries, or labor/pollution-intensive tires, glass, leather goods, chips and so on in the surrounding less developed countries. DKD is the further development of SKD, which is a way taken by enterprises in order to allocate production reasonably.
Since the automobile industry in our country is already very developed, why is there still CKD form now?The limelight of imported cars have not fully been covered by pure independent production car. Our auto industry develops very late, even catching up now we can just catch up with the level of foreign companies. Meanwhile we are also lacking of some innovative concepts and experience in building cars if we want to be the best. Although some foreign technology advanced, but under the momentum of the energy crisis, Maybe we just developed to catch up, it is not suitable for new energy vehicles, and There are also niche models that sell very little, all of these are not worth our energy and money. Then using CKD form of production, or simply pure import, reduce unnecessary development costs, which is beneficial to us.
With the development of China’s economy, our labor, land rent, logistics and energy costs are also rising rapidly, and our cost advantage in the past is gradually declining. At this time, the cost advantage of some countries such as Africa and Southeast Asia is reflected. We also outsource some production processes to foreign enterprises, and such repurchased parts are also called CKD. So CKD does not mean that our technology is inferior to others, but it is a form of industrial productivity distribution.