It’s fun to apply world news to real situations. If the exchange rate stays favorable for long, when do we see the price cuts? If they’re big will you buy more? If the importer is stuck with stock at the old rate will you yell at them for not cutting prices?
Personally, I don’t expect the cut to last.
Short answers. No. No. No.
Personally I don’t expect to see any changes in prices downward.
Fun to think about. First, I’m an engineer, not a finance guy (and economists are famous for divergent predictions).
In the short term, I’d think this would be almost invisible to us. And equally important is what the dollar does simultaneously (weaken or strengthen). Plus, Chinese labor rates might continue to rise (in yuan terms) at least as much as they have been, so price increases might increase a tad slower than otherwise. But what fraction of the US price is the wholesale price as it exits China, which moderates any internal manufacturing cost effect. Add shipping (that cost is an international “market” price), plus primary US distributor (e.g., Walthers, Athearn) costs (inventory, handling, building) & profit plus in many cases a final seller (e.g., MBKlein) cost to ship to them, plus their internal costs and profit and you have the “discounted” (unless sold at MSRP) cost to you. Then adding your shipping and in some cases sales tax, these items further diluting any luan change effect.
I do think (also a key part of the issue raised) the long term effect (trend) might (or might not) be significant. As an example, we’ve travelled some since retirement and the $ / Euro conversion has changed alot. Whether a cycle or trend is significant here. On our first trip (around 2000) the conversion was $0.90 per Euro. But it went up to $1.60 or so, then $1.30, recently $1.10 and predicted (short term due to Europe struggling more than US) to reach $1.00. You could check out your theory here by finding a Maarklin loco and its MSRP that they have made over the period, and plotting that against the $/Euro rate. Would be interesting. Since Maarklin presumeably would set its wholesale price in Euros, one would expect that to trend up mainly due to internal inflation, so the importer’s cost in US dollars would vary with the $/Euro exchange rate plus G
A bigger question is what may happen to the Chinese economy. As of a couple weeks ago, its stock market was way down. The loss of one big factory that assembled Athearn RTR and Atlas several years ago caused shortages we still haven’t recovered from and probably contributed to the loss of some shops over here. Anything similar would hurt the hobby more.
If I were in the business, I’d be looking for a Plan B.
I think Paul’s assessment that there’s too many other factors for this to matter much for pricing here is a good one.
The actual cost of labor is a small percentage of the final cost of the products we buy. It’s part of a larger package of costs in getting the product out of China and landed in the US. Some, like labor, would be affected by this but most would not be.
I wouldn’t worry about any more factories closing because of this so long as the trade stays profitable. The closings a few years back were part of a retrenchment due to overcapacity in the industry. While overcapacity can seem temporarily good for consumers when it leads to lower prices, it’s also unsustainable. Now that it’s been dealt with, I doubt there will be more major closings.
Yes. If the factory goes under, it won’t matter what they might have charged. So given the chaos the hobby has gone through over the last few years with product unavailability this may not be good. And last time around some folks just went out of business.
I think we’ll be lucky if prices don’t go up as fast and we still have products. I suggest that you buy ahead on any critical components like track.
Paul
Despite all the media hoopla, they only devalued the yuan by 1.9%. If fully passed along, a $100 loco would now cost $98.10. But I’m not holding my breath for any price decreases.
Now for the bonus round: How much of the decrease in fuel prices has been reflected in shipping costs?
Plus this the $100 locomotive only cost $50. to make in China, the rest is tranport,markup,shipping,etc. Net cost reduction $0.99, rounded down to zero.
Dave
No. What ever prices the model railroad companies have announces, they will stay the same. Y’all pretty much know how it goes just from watching reality play out.
An adjacent observation- at the flea markets I regularly attend every few months, the price of used BB (and similar) rolling stick, either built or still in kit boxed form, has regularly increased, despite continuous supplies offered by table vendors. I have also noticed asking price increases of similar items on EBay. The reason for such increases- surely not related to monetary policies or currency fluctuations!
Cedarwoodron
The price of gold and silver is going up. why not plastic as well? [:S]
Short term anyway, gold has been sinking on the whole for a while now. Who knows where it will be in a week, month, year… I don’t have a crystal ball.
Well since plastic comes from oil, I would hope the price of plastic would plummet as well. Eighteen months from now we model railroaders will be in “price cut” heaven. Model Railroader Magazine subscription prices will drop as well from the huge decrease in transportation cost. [:-^]
I’m holding my breath.[(-D]
“I’m holding my breath.”
Yeah, I pretty much figured you were funnin’
Bob Bochenek
Ha! Remember all those “experts” predicting gold would go to $2000 an ounce? Remember all those commercials offering to buy your old gold?
Well maybe some things on the China side might drop in price a bit for awhile. But here…with our abundance of US companies farming their manufacturing out to China and having dollar signs in their eyes. I figure, if anything, it would be an excuse for the US model manufacturers to raise prices because of some garbage like… “We are raising our prices because of Yuan instability.”
I’m not cynical…am I!?[2c]
Mark H
Price always go up, never down. Name one auto MSRP that has ever gone down in price despite whereever the economy was?
The China crash has OPEC thinking $30 a barrel for oil. The Saudis are drowning in debt and need the money. Smart companies who sell overseas buy a monetary futures contract to cover exchange rate fluctuations. They are fairly cheap and covers them for the difference when needed otherwise it Is a throw away item…
It is down for the third day now. If this continues long enough the price of our, well, toys will not be the issue. It would have to go on a lot longer, grow bigger, for that to come true. What was that line about successfully predicting 14 of the last 3 contractions?
What happens when the cost of all the hand labor required by the large number of small detail parts becomes to large? Will models become simpler and production become more “in house”? Will 3D printing fill the gap? (but make painting a real pain) Will we all grow too old and “kids today” just won’t care?
I plan to wait 20+ years and see…
Looks like the “experts” weren’t too far off … In 2011, gold very nearly did reach 2000 an ounce [;)] Take a look here - it got pretty close, nearly $1900 dollars from the graph:
http://www.infomine.com/investment/metal-prices/gold/5-year/
Don’t mean to burst your bubble but it’s the labor that generates all the expense in our models made in china is, not the plastic! [:-^]