CKD, CBU and SKD Cars: Decoding auto manufacturing
Because of steep import duties, car manufacturers doesn’t necessarily import the whole car in its entirety. The duty is levied on the sum total of vehicle value, insurance value and freight cost, effectively known as the vehicle’s CIF value; this significantly rises the pricing of the vehicle. Therefore, to keep the pricing and quality control in check the manufacturers legally have three methods to import any vehicle in India- Completely Knocked Down (CKD), Semi-Knocked Down (SKD) and Completely Built-Up Unit (CBU).
Completely Knocked Down (CKD) Vehicle:
Vehicles entering India via this method arrives in a disassembled state. This particular import route incurs the lowest import duty, fixed at 15% of CIF value. Remarkably, this duty remains consistent across various vehicle categories, be it passenger vehicles, two-wheelers, or commercial vehicles. Moreover, the duty is unaffected by the CIF value or engine capacity of the vehicle. Notably, car manufacturing giant Suzuki, opted for this method for their newly launched mini SUV- Jimny, leveraging the reduced import duty to maintain competitive pricing for their vehicles.
Completely Built-Up Unit (CBU) vehicle:
With this method, the vehicle is imported fully assembled and functional. Most luxury vehicles imported into our country use this route. Importing a vehicle like CBU is the safest and easiest way to get your dream vehicle in India. The CBU charges import duties of 30–125% depending on the vehicle type. Let’s take a closer look at which type of vehicle is subject to which import duty: Among the CBUs, the lowest import duty is 30% and applies only to commercial vehicles, regardless of their declared value or engine capacity. However, two-wheelers are subject to a 50% duty rate regardless of their CIF value and engine size. It should also be noted that imported two-wheelers must have a displacement of at least 500 cc for motorcycles and scooters with a displacement between 250 and 500 cc. Due to low demand and high assembly cost, almost all two-wheeler manufacturers in India source larger displacement motorcycles in CBU form from India.
Semi-Knocked Down (SKD) vehicle:
The Semi-Knocked Down or SKD method is actually a subset of the Totally Knocked Down or CKD method. On typical imported SKD vehicles, the transmission is mounted on the chassis or engine. While manufacturers do not prefer this route to purchase their vehicles, Skoda India used it in the early 2000s when the manufacturer was a new entrant in the Indian market. The import duty on SKD car kits is 30% and on commercial vehicles and two-wheelers it is 25% of the CIF value.
India doesn’t get SKD cars anymore as CKD is a better choice by every margin. One of the commonly known cars that used SKD was Maruti Suzuki S-Presso.
Understanding the differences between CKD, CBU and SBU vehicles is critical for consumers to make informed decisions based on their budget, preferences and desired level of quality. Each manufacturing process has its advantages and cost implications play an important role in purchasing decisions.