Flatpack car production – the CKD business model

I’m a big fan of vintage/classic/unusual cars – a dream of scenarios and pleasures simply not possible in over-restricted, over-taxed Denmark. One of my compensation mechanisms involves following the visual delights and gorgeous vistas provided by the BringaTrailer website.

Blast from the past

In a September 2017 BringaTrailer auction, this little gem popped up. My Mum used to drive a Morris Minor like this, fwith the loor so rusted – as per normal British engineering standards of the 1960s – you could see the road through the holes.

The BringaTrailer post described more about the special CKD versions of these iconic cars – “Completely Knocked Down (CKD) Minors were sold as kits and delivered via crates of components to overseas assembly plants (19,587 individual parts) using jigs and equipment from Cowley. CKDs went to Australia, New Zealand, India, Africa, Holland, Denmark, and the Republic of Ireland. The kits utilized various color combinations, locally-made electrical components, seats, glass, tires, etc., all to lower import costs and provide local employment.”

Great summary and an intriguing idea, and it reminded me of stuff I somehow vaguely knew from wartime history about shipping vehicles all over the world. And it piqued my curiosity about the business model – and where it’s all at in an era of flatpacked logistics efficiency and meticulously integrated global manufacturing setups. Nowadays a car is usually perceived as a complete glued/welded/bonded package delivered fully finished – more electronics than mechanicals, more manufacturing process and supplier-module integration than component sub-assemblies, with everything taking place in vast complex, highly automated plants reliant on just-in-time supply chains.

Demolishing efficiencies, circumventing duties

These scenarios don’t leave much room for variation and local kludges. It would seem that the whole original CKD idea would shoot holes in this carefully choreographed manufacturing efficiency, adding costs for packaging, logistics and less-optimised assembly as well as kiboshing all the carefully accumulated cost advantages of economies of scale.

In the modern era, the main aim and advantage of CKD setups apparently lie in avoiding high import duties on finished products (CBUs “Completely Built Units”). Many countries impose import duties to protect domestic industry and try to keep jobs in their own country. There are also often efforts to support and encourage local production capabilities, especially in emerging countries.

Interestingly, one of the most advanced and different-thinking automotive companies in the world – Tesla – operates a semi-CKD setup in Europe, with an assembly plant in Tilburg in the Netherlands to circumvent a 10% EU import duty (but probably also because Tesla doesn’t have the clout or volume for a global manufacturing setup!).

In the other direction, Daimler AG and other European manufacturers run CKD assembly plants in the US to avoid a 25% tariff on imported light trucks known as the “Chicken Tax”. Meanwhile, India is particularly big on CKD thinking via its 2014 Make in India nation-building initiative, which has had high-profile successes in the aviation industry.

In fact, CKD thinking has become the cornerstone of a global manufacturing setup for Airbus, which for political/tariff and globalisation reasons now also has assembly plants for A320-series aircraft in Tianjin, China and Mobile, Alabama in the US, both using knock-down kits of fuselages, wings, and tail sections shipped from Europe.

Involvement and inclusion

Many aspects of 1950s/60s-style CKD thinking seem to be a relic of World War Two logistics requirements and the long tail of French and British empire structures.

But there may be some perspectives that can be attractive for modern business thinking. Involving local communities in the assembly and commissioning of key products, structures and capabilities (i.e. not just consumer goods and disposables) can change perspectives about inclusion, responsibility and the importance of things like new infrastructure and new technology capabilities. Localising to match specific cultural preferences, using standards-compliant local suppliers and providing local employment all seem to have potential as ways to build inclusion and acceptance, if they can win acceptance in a global business model.