Ermiyas Abate¹ &Yared Negussie

Manufacturing Technology and Engineering Industry R& D Center, Addis Ababa, Ethiopia (Msc)

Lijalem Gebrehiwet ²

Ethiopian Space Science and Technology Institute, Addis Ababa, Ethiopia (Msc)

Abstract

Semi-Knock-Down (SKD) and Complete-Knock-Down (CKD) solutions have been widely accepted worldwide for export and import goods especially for automotive industry. The CKD kit ensures trade benefits and boosts technological capability for import substitutions. Duty at customs is high for products which are in the state of ready to use conditions where as the duty on SKD or CKD products imported from another country is lesser. Most domestic companies where the assembly cost is low and import cost is high prefer to buy product in SKD or CKD kits where as Complete-Built-Up (CBU) are not preferred technically and economically. This study focuses primarily on the basic concepts of assembly kit in Ethiopia, their benefits in tariff considerations, import substitution, technological transfer and other economic advantages. Secondly to analyzes basic problems on the understanding of these concepts to develop vehicle standard SKD and CKD in Ethiopia. In addition to this to highlight the automotive industry stage of development. The implementation of these concepts has great benefits in the size of job creation and import substitution rates which have impact on the economy. The investment for CKD in automotive industry requires greater finance when to compare machineries and equipment.

Keywords: Automotive, SKD, CKD, Tariff, Manufacturing, Assembly kit.

1. Introduction

          The automotive sector is vast in terms of commercial and technical factors which require different types of assembling and vehicle body manufacturing facilities to produce finished products (White, 1979). Ethiopia is transforming from total car importer to domestic assembler to some extent and its automotive stage of development is compared and contrasted in Figure 1 in which Kenya and Myanmar are a little ahead of Ethiopia (Ohno, 2019). Information of products, suppliers, international quality service links and technology is still lagging behind which still gives space for CBU second hand cars in Ethiopia. The main problems in SKD and CKD shipments are related to tariff issues in a particular country and it should promote manufacturers over importers (Ohno, 2019).

Figure:01 Automotive industry development

           According to Rob (2016), there are differences and inconsistencies in SKD and CKD definitions and standards worldwide as a result different countries may have different standards for these particular kits. The basic definition for these kits is provided by the Japan Automobile Manufacturing Association (JAMA) as shown in Figure 2 (Kim, 2013).

Figure:02 Definition of SKD,CKD and CBU by JAMA

           The vehicle production for assembling of manufactured and inspected parts is referred to as SKD where as in CKD kit there are car body related tasks including interior parts assembly, welding and painting works (Hofmann, Neukart & Bäck, 2017). According to Tomiyama (2014) & Sherry (2015), CKD is more sophisticated than a SKD. The main objective of this study is to standardize different products in SKD and CKD kits. Secondly assessing their tariff system and impact on the domestic trade and labour. Finally standardize the binding rules for national SKD and CKD concepts in automotive industry. At the end we should identify the stage of SKD & CKD development in Ethiopia from different manufacturers’ point of view.

• Literature Review

2.1  CBU, SKD and CKD Conditions

          The use of any form of kit has a direct impact on the total cost of the chain of supply. CBU, SKD and CKD logistics have great impact to the imported country. Motorcycles, trucks, buses, and tractors occasionally need to be imported in CKD, which accounts for greater market share as viewed by Libor and Alan (2008). Saberi (2018) described that CKD forms are exported to countries where automotive industry is at high development stage from developed countries which require high capital investment. Knocked down strategy for a company should be carefully evaluated in order to decide with any kind of deal and the formula used to calculate the overall logistics cost of CKD is shown below (Malavolti, 2019) ;                                                                                     

Cost of CKD = Cost of stock + Cost of warehouse + Cost of customer clearance + Cost of Shipping + Cost of customer clearance (Supplier) + Cost of stock (Supplier) + Cost of packing (supplier) + Cost of unpacking…………………………………………………(1)

           The finished bodywork is assembled in the country of destination and they are exported where complete disassembled of parts not required (Libor & Alan, 2008). According to the definition of Toni (2022), kit is not totally knocked down and SKD often refers to subassemblies that can be quickly and readily put together partially in another nation. CBU vehicles are those that arrive in a country ready to use with completely build. In the research paper of Yongwook (1987) and Tulder & Ruigrok (1998) each model change requires production line changes, re-tooling, and constant technological change. Some companies in Malaysia issued supplier development and localization program as well as locally produced parts initiated by the company with listed parts in different category (Abdullah, Lall, & Tatsuo, 2008). In conclusion, the common definitions of the three terms can be illustrated as shown below (Chemendy, 2018).

                  Figure:03 Automobile model kits

2.2  Automotive Manufacturing Processes

           Automotive integrated manufacturing facilities consist of different shops or departments each with a special function with input resource delivered from outside suppliers. The body shop, paint shop, assembly shop and material logistics department are the five key departments that make up the general organisation of the assembly plant (Oumer, Atnaw, Cheng, and Singh, 2016). According to the paper by Sherry (2015) Mortimer (1987), KD parts are delivered to the production site by the car manufacturer or independent contract suppliers.

2.2.1      Chassis Fabrication

      Generally there are different types of chassis according to the fitting of engine namely, Conventional chassis, Non-Conventional chassis, Full forward, Semi forward, Bus chassis, Engine in front and Engine at the center. Conventional type is also known as a non-load-carrying frame where as the non-conventional chassis is known as frameless chassis or unibody chassis (Abernathy, 2012), (Brünger, Engler, & Hirsch, 2006) and (Selvamanikandan &Venkatesan, 2019).

Figure:04 Conventional and Non-conventional chassis

According to Bhise, (2012) and Hryciów, Wiśniewski, Rybak & Tarnożek, (2021), the bus chassis provides an increased floor space in the vehicle. Harr, (2018) described the automobile frame moves to component assembly areas where complete front, rear suspensions, different components and accessories are sequentially installed. Chassis is mostly imported from OEM in different forms. Every assembly task on chassis has provided assembly workers with the safest and most efficient tools available (Anazawa, 2021 and Aswicahyono & Kartika, 2010). 

2.2.2      Stamping Process

          Metal stamping is a sophisticated industrial process that uses a variety of metal shaping techniques to transform flat metal sheets into precise forms which is also known as pressing. The term “Body in White” (BIW) describes the parts of the car that have been welded together using various types of connecting methods. The parts included in the BIW are the cover, body, floor, and encon (Mortimer, 1987), (Selvamanikandan &Venkatesan, 2019), (Cooper, Rossie, & Gutowski, 2016), (Fu, Guang-Hong, Yang, Ma, Chen, & Zhu, 2022) and (Awatiger, 2020).

Figure: 05 BIW stamped parts (Yu-Kai Fu and et al, 2022)

           The required shape is obtained by shaping the metal using different stamping techniques and model BIW stamped parts is shown in Figure 5  (Mortimer, 1987), (Cooper, Rossie, & Gutowski, 2016), (Fu, Guang-Hong, Yang, Ma, Chen, & Zhu, 2022) and (Asnafi, Shams, Aspenberg, & Öberg, 2019). Stamping is a common choice in the automotive sector due to its high productivity, affordable, capacity to provide exceptional strength, and cost-effectiveness at high production volumes (Cao, Kinsey, Yao, Viswanathan, & Song, 2001). Technically stamping is considered to be a net shaping process (Mortimer, 1987) and (Brünger, Engler, & Hirsch, 2006). The body of a vehicle is made up of several hundreds of stamped components which are joined together by spot welding and accurate production of the car body (BIW) is essential (Thiruvengadam, 2010) and (Chaturvedi & Kumar, 2019).

2.2.3      Body Fabrication

          The process of fabricating bodies is extremely mechanized and most popular tools are used to create unibody chassis assemblies. The largest body component to which a multitude of panels and braces will subsequently be either welded or bolted together as it moves down the assembly line (Almeida, Diasa, Goncalvesa, Peschlb, & Hoffmeisterc, 2011). According to Sherry (2015), manually operated welding equipment is also used in less automated manufacturing facilities.  The front and rear door pillars, roof, body and side panels are assembled in the same fashion with a high number of weld operations with a degree of great accuracy (Mortimer, 1987) and (Brünger, Engler, & Hirsch, 2006). Fully assembled parts are subsequently installed using pneumatically assisted tools (Almeida, Diasa, Goncalvesa, Peschlb, & Hoffmeisterc, 2011).

Figure:06 Car body fabrication

2.2.4      Vehicle Painting and Curing Ovens

           Vehicles move into the paint shop after final body assembly. According to research paper of Pendar, Rodrigues, Carlos Pascoa, & Lima, (2022), the paint shop provides corrosion protection and attractive appearance to the BIW vehicle body. Primer coating operations in an automobile assembly plant are usually implemented in three stages (M. Mahajan, Varade, P. Mahajan & Patil, 2019).

Figure: 07 Layers in primer coating

            The exterior body parts are thoroughly cleaned and inspected as it moves through a brilliantly illuminated white chamber to see any flaws (Pendar, Rodrigues, Carlos Pascoa, & Lima, 2022). The main purpose of painting is to prevent the BIW from corrosion and to provide desired shapes in style, texture and color. Different countries have their own vehicle painting standards and processes (Lovell, Higgs, & Deshmukh, 2006). Paints usage should be free of environmental hazard and most eco-friendly painting process should be used (Meschievitz T., Rahangdale Y., & Pearson R., 1995)

           Curing ovens are directly or indirectly heated by various types of fuels and they are applied after the primer coat, base coat and the clear coats. Ovens are divided into multiple zones with the radiated heat dries the outer layer of the paint (Sherry, 2015) and (Akafuah, Poozesh, Salaimeh, Patrick, Lawle, & Saito, 2016).

Figure:08 Flowchart of car painting process

2.2.5      Vehicle Interior Assembly and Car Mating

           The painted body travels through the process where parts like instrumentation, wiring systems, dash panels, interior lights, seats, door and trim panels, headliners, radios, speakers, all glass (except the automobile windshield), steering column, wheel, body weather strips, brake and gas pedals, carpeting, bumpers and fascias are assembled. The automated lines facilitates a continuous process with a moderate speed which enables human operators to perform interior and door assembly tasks with the required level of safety (Mortimer, 1987) and (Brünger, Engler, & Hirsch, 2006). During mating the chassis assembly and body shell conveyor meet at final stage of production in which the shell is lifted from its conveyor fixtures and placed onto the frame to be bolted by assembly workers. The automobile travels down the assembly line to receive final trim components after auto mating of body shell and chassis White (1979) and (Brünger, Engler, & Hirsch, 2006). The majority of modern automobiles has a unibody construction in the middle of the vehicle and supports various components in a half-frame configuration (Mortimer, 1987) and (Brünger, Engler, & Hirsch, 2006).

3.    Material and Methods

3.1  Kit Production Network

           The kit concepts mainly differ in terms of the degree of disassembly, partition, number of kits and the value addition. The automotive global production network clearly put the production strategy that determines the type of assembly sections established at the local production facility as well as in the sales country as shown in Figure 9 (Börold, Teucke, Rust, & Freitag, 2020) and (Schwede C., Song Y., Sieben B., Hellingrath B. & Wagenitz A., 2009). 

Figure: 09 Strategies in global automotive production network

            In SKD process description, the exporter collects and packs the parts in the SKD warehouse but the importer repacks the products in the local OEM factory. This process can be referred as SKD-packing-and-SKD-unpacking process (Börold, Teucke, Rust, & Freitag, 2020) and (Schwede C., Song Y., Sieben B., Hellingrath B. & Wagenitz A., 2009). Similarly under the CKD mode, the exporter has the control of technology, the factory organizational structure and information flow. The operation point of view all CKD parts are subject to the CKD-packing before export in the exporter warehouse. The CKD kits are subject to the CKD unpacking before the assembly in the importer plant (Börold, Teucke, Rust, & Freitag, 2020) and (Schwede C., Song Y., Sieben B., Hellingrath B. & Wagenitz A., 2009).

3.2  CBU/SKD and CKD Tariff Conditions

            Ethiopia is known for its high automotive tax rates which require various policies and amendments for car assembly from the CBU to SKD and then to CKD stage. Nigeria raised CBU tariffs to 70% for passenger cars and 35% for commercial vehicles while SKD tariff is 10%. CBU is taxed at higher than CKD which gives sufficient incentive for domestic assemblers. There is no distinction between passenger cars and commercial vehicles in Kenya’s tax structure as shown in the Figure 10 (Ohno, 2020) and (K.Ohno, I. Ohno, & Nagashima, 2018).

Figure: 10 Kenya’s automotive tax structure until 2019 (Ohno, 2020)

           According to Ohno, (2020) and K. Ohno et al (2018), positive rates are applied for designated 17 automotive components but Kenya did not have an SKD definition as of 2019. The smaller tax gap is not economical to cover production cost and Japanese producers need at least 20-30% advantage in favor of SKD/CKD over CBU (Ohno, 2019), (Nogimori, 2020) and JETRO (2018). The duty rate for different automotive products and tariff code is tabulated from Ethiopian custom commission in accordance with different references from the Ethiopia Custom Guide, (2017), Ethiopian Customs proclamation, (No. 859/2014), Ethiopian Customs Tariff Book, (HS 2017) and Ethiopian HS Code Import Data. The tariff system for parts and accessories is seen clearly from Ethiopia’s automotive tariff structure as shown in the Table 1.

Table 1

HS code chapter 87 tariff description

Type of product	HS codeTariff code	Tariff description	Duty rate
Complete vehicle	8703  3219	Other vehicles, with compression ignition internal combustion piston engine(diesel or semi diesel)…..Of a cylinder capacity exceeding 1500cm3 but not exceeding 2500cm3   …..Others	35%
Intermediateproducts	8706 0091	Chassis fitted with engines, for motor vehicles of headings 8701 to 8705      …..Others….For vehicle of heading 8703	10%
Parts andaccessories	8708  4020	Gearbox and parts thereof…..for industry assembly of (end-use condition)Vehicle of heading 8703	5%

3.3  Definitions and ambiguity

           The main ambiguity for vehicle SKD/CKD kits arose due to the fact that all components are available in different chapters of the harmonized system and HS code. Most of the parts are found in Chapters 40, 68, 70, 73, 83, 84, 85, 90, 91 and 94.  Concerns on Chapter 87 is that motor chassis fitted with cabs fall in headings 8702 to 8704 but not in heading 8706 about chassis fitted with engines for motor vehicles of headings 8701 to 8705.  As stated on Ethiopian Customs Tariff Book (HS 2017) and Ethiopian HS Code Import Data, it is important to consider the exclusions as well as the texts of headings 87.06 and 87.07 including note 3 in Chapter 87 when considering general HS code interpretation to sets of unassembled parts. 

Table 2 

Concerns on HS code chapter 87 subtitles

8706	Chassis with engine for tractors, motor vehicles for pass/good & special purpose
870600	Chassis fitted with engines, for the motor vehicles of headings 8701 to 8705. For the vehicles of subheading 870120 or heading 8702 or 8704
8707	Bodies (including cabs), for specific motor vehicles
870710	Bodies (including cabs)For the vehicles of heading 8703
870790	Other Bodies, for the Other Motor Vehicles

            Each component in SKD and CKD kits are not specified clearly in order to insert additional clarifications in the subtitles. In the CKD case studies of Aswicahyono & Kartika (2010), some joint venture company are responsible to produce engine for commercial trucks and others to be imported from overseas companies as well as locally produced engine parts as shown in the Figure 11.

Figure: 11 Engine CKD part for firm 2

           The actual collection of “parts” does not have to be sufficient to assemble complete vehicles according to the clarification and the “parts” can be assembled into an incomplete article that has the essential character of a complete or finished article as declared in Ethiopian Customs Tariff Book, (HS 2017) and Ethiopian HS Code Import Data.

3.4  Custom Duty and Product for Imported goods

           The supply strategies and the growth of sales of the product or product life cycle from CBU to different KD products can be related with the market’s maturity as a result the economic concept leads to a chronological order of the strategies (Schwede, Song, Sieben, Hellingrath and Wagenitz, 2009). The different import tax systems and facts in Ethiopia are shown in Table 3;

Table 3

Import tax in Ethiopia (Custom proclamation No. 307/2002, 570/2008, 610/2008 and directive no 18/2009), (Income tax proclamation No 286/2002 & Proclamation No. 285/2002), (Customs proclamation No. 622/2009) and (Customs tariff amendment No.1, 1996 edition)

 

S/N	Facts of taxes in Ethiopia	Remark
F1	The tax sequential orders are customs duty, excise tax, VAT, surtax and withholding tax. Taxes on imported goods are collected by Ethiopian Revenues and Customs Authority (ERCA).	ERCA collects customs duty based on the rules stipulated in the customs proclamation No. 622/2009.
F2	ERCA collects customs duty on a great variety of goods which can be classified into two categories. Depending on the primary purpose of the imported goods. Items for public, personal or non productive uses.	Category 1It includes raw materials, semi finished goods, producers goods and import items for public use.Category 2It includes items such as consumer or finished goods imported for personal use.
F3	Customs duty has 6 bands or groups of rates which are applied to imported goods. These bands of rates are 0%, 5%, 10% 20%, 30% and 35%.	The maximum is 35 percent of the CIF (Cost + Insurance + Freight) value of an imported item.
F4	According to the Customs Tariff, the maximum customs duty rate used to be 60 % of the CIF value of an imported item.	CIF(Cost + Insurance + Freight) value of an imported item
F5	Excise tax it is one of the most well known forms of tax in Ethiopia. It is a tax levied on selected goods such as luxury goods and basic goods. The minimum excise tax rate is 10% & maximum is 100%.	Excise Tax is also applied to goods which are considered hazardous to health and that may cause social problems.
F6	Excise tax has 10 bands or groups of rates at which excise can be charged. These band rates are 10%, 20%, 30%, 33%, 40%, 50%, 60%, 75%, 80% and 100%.	These rates are used to calculate the payable excise tax.
F7	In Ethiopia, VAT is levied at a flat percentage rate. To the exclusion of goods detailed in article 8 of the proclamation No. 285/2002 and goods exempted from VAT by the directive issued by the Ministry of Finance and Economic Development.	VAT is levied on every imported item. Importers are liable to pay 15 percent of the sum of cost, insurance, freight, customs duty and excise tax.
F8	Automotive techs are not included in the type of goods or services exempted from payment or VAT except the supply or import of fuel gas. It is stated at “Circular Ref. No. Am3/16/28/227.	The law that allows exemption of goods and services from payment of VAT for the supply or import of fuel gas.
F9	Surtax is the fourth of the five taxes imposed on import items. Surtax was introduced in the Ethiopian tax system on April 9, 2007. The council of Ministers issued a regulation to levy 10 percent surtax on imported goods.	Ten percent of the sum of cost, insurance, freight, customs duty, excise tax, and VAT is the base of computation for surtax on all goods imported into the country.
F10	There are items and services which are exempted from payment of surtax. Fertilizer, Petroleum, lubricants and motor vehicles.	Motor vehicles for freight and passenger and other special purpose motor vehicles.
F11	Withholding tax is not a tax in the traditional sense. Goods imported by the following individuals and firms are exempted from the 3 percent withholding tax imposed on commercial import items.	The amount collected on imported goods shall be three percent of the sum of cost, insurance and freight (CIF value). Auto tech is not included in this privilege.

From customs proclamation No. 622/2009 and Customs tariff amendment No.1, (1996 edition), the formula for calculating customs duty and other taxes in Ethiopia are shown below;

 Where 

DPV = Duty Paying Value; CUDU = Customs Duty Rate; EXTA = Excise Tax Rate; SURTAX = Surtax; WHT = Withholding tax 

• Results and Discussion

4.1  Basic Standards Identified for SKD and CKD 

      Basic standards are required in the tax related issue and should be clearly put with clarifications as a result the Ethiopian standards (recommended) for SKD and CKD automotive products or categories is tabulated in Table 4,5,6 and 7 below. The SKD/CKD parts and production methodology differs from company-to-company, permission of OEM, manufacturers’ company standard which is compatible with specific types of vehicles. SKD/CKD standards are summarized for vehicle types categorized as LMV, MMV and HMV for different models are described in the tables below.

Table 4

Vehicle parts for standard SKD/CKD category (Engine)

Vehicle type	LMV, MMV and HMV
KD type or form		SKD
Engine	From OEM for SKD parts
LMV, MMV and HMV Except for Bajaj and motor cycles	Full engine kit fixed on car chassis		Fittings and mechanical hardware
	Assembly manuals		Electrical harness
	User instructions		Fuel system pipe connection
	Basic drawings		Cooling system assembly
`KD type or form		CKD
Engine	From OEM to CKD parts
It is for LMV, MMV and HMV Except for Bajaj and motor cyclesNote: Low Motor Vehicle = LMV= Car, Jeep, Minivan, etc    Medium MV = MMV= Tempo, bus, mini truck, etc  High MV = HMV=   Truck, trailer, container, tractor, multi-axle bus	Separate engine kit in box		Disc assembly clutch
	Engine is not fixed on chassis or airframe		Cover assembly clutch
	Assembly manuals		Fly wheel
	User instructions		Bracket mounting
	Basic drawings		Cushion rubber
	Engine testing instructions		Stopper
	Defect troubleshooting manuals		Alternator
	Ground support equipments		Starter motor
	Radiator		Manifold exhaust rear/front
	Oil pump		Fan
	Water pump		Inlet manifold
	Air filter & Oil filter		Cover assembly & Cover rocker assembly
	Battery		Fitting and mechanical hardware
	EGR valve and Catalyzer		Harness and Engine mounts

Table 5

Vehicle parts for standard SKD category (Car body)

Vehicle type	LMV, MMV and HMV
KD type or form			SKD
Car body	From OEM for SKD parts
It is for LMV, MMV and HMV Except for Bajaj and motor cyclesNote: Low Motor Vehicle = LMV= Car, Jeep, Minivan, etc     Medium MV = MMV= Tempo, bus, mini truck, etc   High MV = HMV=   Truck, trailer, container, tractor, multi-axle bus	Main body (Body shell) + chassis unpainted§  All basic parts are supplied unassembled (LMV) (MMV and HMV)§  Car chassis without body parts but engine, gearbox, wheel/ tire, steering, drive train, suspension/dumper, seats, batteries, exhaust system, control parts supplied unassembled (MMV and HMV)§  All electrical wiring installed with lightsCar body parts painted for LMV
	LMV	MMV		HMV
	Fender and fender liner	Chassis without body		Chassis without body
	Roof panels	Doors & door ways		Hinges
	Doors	Skirt panel front/rear		Truck cabin
	Sill	Main side panels bay1, 2, 3.		Catches and latches
	Hood or bonnet	Access cap		Door checks
	Number plate lid	Skirt panels (all)		Door panel locks
	Window glass & mirrors	Spare wheel access flap and other panels		Handles
	Wiper	Pillar capping (All)		Dump hoist assembly
	Wheels	Roof panel bay1, 2, 3….		Bumper and hitch (rear)
	Brake shoe	Valance panels		Other small assemblies
	Trunk lid	Side panels (all type)		Parts to be manufacturedLocally for truck bodySide walls Columns (rails)Bulkheads (portal frame)Truck floor assemblySide sheet panelsRear panel (door)Beam doorSide ladderMetering chainDouble acting tailgateTank
	Front and center pillar	Emergency door parts
	Front  and side roof rail	Flaps
	Side member	Entrance steps
	Small body parts	Door aperture
	Engine hood	Longitudinal and lateral, rails, & frames
	Floor parts	Wheel arches
	Windshield glass	Roof parts (roof sticks)
	Outside  handle (locks)	Arch members
	Door weather strip	Cross bearer
	Front and rear bumper	Mirrors
	Head & tail lights, lamps	Window glasses
	Mud flaps	Windshield glass

Table 6

Car body CKD manufaturing requirements

CKD tasks

Main body (Body shell) + chassis unpainted§  Unassembled chassis or main body§  Car chassis without body parts but engine, gearbox, wheel/ tire, steering, drive train, suspension/dumper, seats, batteries, exhaust system, control parts supplied unassembled (MMV and HMV)§  All electrical wiring uninstalled §  Car body parts fully not assemble, unpainted and not glazed Some component customized locally

Related to chassis

Without leaf springØ  Without differential/axel partsØ  Without suspension jointsØ  Without axle longitudinal link supportsØ  Without inner cross members and bracketsUnassembled brake and suspension components

Table 7

Vehicle parts for standard CKD category (Car body)

Vehicle type	LMV, MMV and HMV
KD type or form			CKD
Car body	From OEM for CKD parts
It is for LMV, MMV and HMV Except for Bajaj and motor cyclesNote: Low Motor Vehicle = LMV= Car, Jeep, Minivan, etc    Medium MV = MMV= Tempo, bus, mini truck, etc  High MV = HMV=   Truck, trailer, container, tractor, multi-axle bus	LMV	MMV		HMV
	All car body SKD components unassembled	All car body SKD components unassembled		All car body SKD components unassembled
	Body sides, roof and floor supplied loose	Body sides, roof and floor supplied loose		All car body SKD manufacturing tasks
	Fully disassembled body frame (chassis)	Disassembled (loose) chassis		Body sides, roof and floor supplied loose
	Disassembled body parts(Read- made)	All materials supplied loose for final welding and assembling		All materials supplied loose for final welding and assembling
	Disassembled doors, handle and locks	Disassembled doors, handle and locks		Disassembled (loose) chassis
	Full logistics with assembly line is required	Full logistics with assembly line is required		Disassembled doors, handle and locks
		Full logistics with assembly line is required		Full logistics with assembly line is required
	Required equipments for CKD Welding guns, Jigs, Templates,Metrology Equipment (3-D measuring machines), etc.Conveyors, paint tanks, paint both,Drying oven, etc. Wheel alignment tester, Turning radius tester and Shower testing Head light tester, Side slip tester, Speedometer tester, Brake dynamometer and

 

4.2  Stages of Development for Domestic Assembling Companies in Ethiopia

     The development stage of different domestic vehicle companies for light vehicle, bus, truck and trailer assembling as well as manufacturing are assessed as per to 2019 data and the current five years data will be required to further filter the respective assessment but the stage is mostly at CKD. Table 8 for light vehicle, Table 9 for buses, Table 10 for trucks and Table 11 for trailer fabrication companies are tabulated below to assess their developmental stage in SKD/CKD strategies.

Table 8

S/N	INDUSTRY	Stage of development
		SKD	CKD
1	Abay technical and trading sc.
2	Belayab motors plc
3	Bishofitu automotive industry
4	JIN BEI motors plc
5	Marathon motors engineering plc
6	Mesfin industrial engineering plc
7	Tamrin international trading plc
8	Yangfan motors plc

Light vehicle assembling companies

Table 9

Bus assembling companies

S/N	INDUSTRY	Stage of development
		SKD	CKD
1	Ada bus assembling and steel engineering
2	Bishofitu automotive industry

Table 10

 

Truck assembling companies

S/N	INDUSTRY	Stage of development
		SKD	CKD
1	Bishofitu automotive industry
2	Frankun ET automotive engineering plc
3	NA metal industry and engineering
4	AMCE(Automotive manufacturing of Ethiopia)
5	Mesfin industrial engineering

Table 11

Trailer fabrication and assembling companies

S/N	INDUSTRY DESCRIPTION	Stage of development
		SKD	CKD
1	Abenco general construction industry and  trading  plc
2	Alami industrial engineering
3	AMCE (Automotive manufacturing company of Ethiopia (sc.)
4	Ami metal engineering
5	Asnake engineering
6	Belaynehe Kindie metal Engineering complex
7	Bridge metal & wood shop business plc
8	Dagim Kennedy general trading plc
9	Fasil Mesfin Derso manufacturing
10	Frankun ET automotive engineering plc
11	Habtom G/Egziebher Woldehawaryat
12	HH engineering plc
13	KG Engineering
14	Kifle Mekonene importer trade in iron & steel manufacturing
15	Maru metals industry plc
16	Mesfin industrial engineering plc
17	NA metal industry and engineering
18	Nehemmiah engineering plc
19	NKG Engineering
20	Ocfa metal manufacturing plc
21	Rahel Dagnachew Gelaye
22	Tsehay industries sc.

      From the above table, we can conclude that Ethiopia’s automotive development stage is mostly on SKD/CKD strategy and the import substitution or technological specialization is only on some body parts of vehicle types. Generally Ethiopia is in the second automotive manufacturing stage which is similar to the JICA report on automotive industrial development stage for Africa as shown below (FRN 2015 Report).

Figure: 12 Automotive manufacturing stages

5.    Conclusion

           In this study it is revealed that the value chain of interconnected global market system shows the importance of automotive manufacturing development with higher foreign investors’ and OEM role in this sector. The study identified clearly the following significance for assembling and manufacturing of auto vehicles in Ethiopia;

• Perform relevant research studies on SKD/CKD concepts practically which is functional in different countries and CKD related tariff system encouraged by other nations.

 Collection of annual market data in SKD/CKD for all vehicle types in auto manufacturing areas in Ethiopia and the impact of tax rates. Review highlights for custom classifications and their gap in fulfilling the CKD tariff systems

• Clearly identify items to be manufactured domestically for all types of vehicles in order to promote the import substitutions. Auto domestic parts production capability study should be undertaken to restrict import of these parts and promote the manufacturers.
• Revise the established standard for SKD/CKD kits for automotive industry in all types of vehicle models annually. All the prepared documents should be revised side-by-side with the assemblers for its effectiveness or gaps in production. 
• Import and excise duties for completed built-up and complete knocked-down vehicles should be promising in order to prohibit imports of used commercial vehicles, their parts, components gradually. Promising incentives should be provided for critical and high value-added parts and components.
• The custom and tariff issues should encourage strategic partnership between globally branded manufacturers (OEM) with domestic investors which enhance the competitiveness and effective technological transfer.
• Complete implementation of vehicle-type and component approval as well as vehicle end-of-life policy should be introduced by the Ministry of Transport for all types of vehicle imported to Ethiopia.
• The Ministry of Science, Technology and Innovation should introduce and enforce mandatory standards for vehicles, their parts and components operational nationally.
• Relevant federal offices related to natural resources and environment should establish a clear roadmap for fuel, lubricants and paints standards used in vehicle operation, maintenance as well as manufacturing.    

Acknowledgements

     We convey our gratitude to all of our colleagues for their support and encouragement to publish the article.

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