The ‘CKD,’ ‘CBU,’ and ‘SKD’ are terms you may be familiar with if you have been following the automotive business for some time. However, what do they mean? Put simply, these are the names of the three procedures involved in bringing new bikes into the country. However, how does that impact you as a customer? Here’s a closer look:
CBU (Complete Built-UPS)
Vehicles that are brought into the nation directly as complete units are referred to as CBUs. Typically, luxury vehicle producers like Ducati, MV Agusta, and Indian Motorcycles choose this path to export their motorcycles to the United States. These machines are subject to a higher tax rate—a whopping 50%, to be exact—because they are imported from another nation.
You may be wondering, then, why not just construct these motorcycles here? Wouldn’t the buyer benefit much from that? The problem is that there isn’t much of a market for high-end motorcycles in India, so it’s easier for manufacturers to bring them straight here rather than opening a new plant.
Why Do Business Select CBU?
Why utilize Fully Built-Up Units instead of alternative import methods when they are more expensive to transport and attract higher import taxes? This is so because the CBU units are often motorcycles, which don’t have enough demand in India for the corporation to establish a plant and a production facility there. Since it costs more to establish these manufacturing facilities, importing CBU is less expensive than CKD or SBU.
CKD (Completely Knocked Down)
As the name implies, vehicles that use this route to enter India arrive partially. At 15% of the CIF value, this import channel for vehicles has the lowest import duty. Regardless of the kind of vehicle—passenger, two-wheeler, or commercial—this import duty is imposed. It is also unaffected by the engine displacement or CIF value of the vehicle.
A vehicle is referred to as a CKD product if every part is purchased separately and assembled here from the ground up, which is a very economical method.
Why Do Companies Think About CKD?
The Indian government charges CKD units a lower tax rate, which enables them to make more from the automobile than they would from a CBU. A Memorandum of Understanding (MOU) between the government and the enterprise stipulates that the government will grant concessions for the purchase or lease of land in exchange for the company hiring locals. Everyone benefits from this.
SKD (Semi Knocked Down)
A method of importing or exporting items that is comparable to completely knocked down (CKD) is known as semi-knocked-down (SKD). On the other hand, SKD entails delivering kits or partially assembled pieces that need to be assembled again in the destination nation to complete the finished product.
The gearbox of a standard import SKD vehicle is either mounted on the engine or the chassis. Although manufacturers do not recommend using this technique to obtain their automobiles, Skoda India did so in the early 2000s when the manufacturer was a newcomer to the Indian market. For SKD passenger car kits, the import duty is 30% of the CIF value; for commercial vehicles and two-wheelers, it is 25% of the CIF value.
Why Do Companies Think About SKD?
As a compromise between CKD and CBU, SKD involves fewer testing and Quality Check procedures and requires slightly less work than CKD. Although this saves the corporation money, the fact that SKD is subject to higher taxes offsets this benefit.
Conclusion
When comparing CBU, CKD, and SKD, the primary distinction is the quantity of assembly completed in the nation of origin. Vehicles classified as CBU, CKD, and SKD are assembled wholly, partially, and totally, respectively. In addition, the cost of shipping and import taxes often makes CBU and CKD automobiles more expensive than SKD vehicles.
