“The reality is that model railroad price increases (averaging 10%-25%) have not kept pace with cost increases in China, and it is often difficult for the Chinese suppliers to stay in business while meeting the demanded price point from their major North American clients.”
Definitely going to have an adverse effect on this hobby.
Got it linked…well, all I can say is that if it comes to pass that price increases are in the offing that some of us may do the scratchbuilding thing even more so.
It will be a sad day for many if they can’t do their “thing” with trains and layouts. But the hobby will not die.
Without starting a flame war, it must be said that when you raise the standards of a foreign country that was beneath the standards here, the people in that country are bound to get envious of the products they are manufacturing for first rate countries, and will naturally want wages to coincide with their desires to purchase said things.
We have long talked of making India our next companion manufacturing country. But India doesn’t have the infrastructure yet to do such things, and it hasn’t happened yet. When and IF we get India set up to make {cheap} goods for us, they, too, will naturally want raised standards of living.
It is somewhat like the old argument that Union based employees here in USA can Unionize themselves out of a job if they demand too much that the market simply won’t bear to pay for.
There may be a lull in the hobby, but I don’t think it will disappear totally. People willjsut have to pick and choose what they opt to purchase with the dollars they have.
Now watch me be wrong.
And yes, this thread will get pulled/locked quickly.
“Made in Japan” used to be the mark of cheap merchandise. Tell that to Ford and Chevy now.
As one country prices itself out of a market, the existing second tier will rise up to fill the demand, but at some cost of time and initially quality as the infrastructure ramps up and workers gain experience. I wonder if the rising prices will bring back a return to kits? It costs less to hire a person with the qualifications to put parts in a box (if that hasn’t been automated) than it does to hire a person that is skilled enough to assemble a model. It also takes less time to stuff boxes than to assemble a model so you need fewer people.
Japanese manufacturers became t0o costly so production moved to Korea which became t0o costly so production moved to China which is becoming too costly so production may be moving to India which in 15 years will be too costly to production will move to… Brazil? South Africa? We have been down this road before.
Or perhaps we will see a move back to less detailed and generic models at less cost? I gotta say I have not been able to swallow the cost of any of the newer models no matter how gorgeously detailed they are, but I am also old enough to remember 25 cents for a gallon of gas or a cup of coffee.
There is at least one company in my area doing the non-traditional thing, in that they are providing call center and help desk services from the US, and competing head to head with the off-shore call centers in India. Another company (auto parts supplier) has boasted they can now beat any offshore manufacturers costs. So it’s not too much of a stretch to say that someday the model manufacturing may return to the US as costs rise overseas. But the models will be more expensive, no doubt.
The article only mentioned that Rapido didn’t expect to be affected by this. It would be interesting to find out which manufacturers are going to have their production shut down and will have to find someone else to do the work for them.
Just because a manufacturer shuts down does not mean that it is one of the ones the big boys on the block were using. They have enough sense not to hold to an artificial price point, or so I hope.
Right after China enacted new labor laws (which brought them up to the level American labor had reached seventy-five years earlier) it was noted that some Chinese enterprises were subcontracting to Vietnam.
If that’s the case, maybe our suppliers should go straight to Vietnam and cut out the middle men…
It has happened before and it will happen again. I don´t think I will have to shed a tear.
In 1973, the German industry faced a similar situation, following the Bretton Woods Agreement, which led to the floating of the exchange rate to the US Dollar. The Deutschmark went up by as much as a third and the industry was faced by a steep decline of demand from the world market. In China, manufacturers see themselves confronted by the demand for higher wages and a slowly, in fact, too slowly, strengthening of the RMB vs. the Dollar. The name of the game is to increase productivity to keep prices low - if you can´t do that - sorry, but there are manufacturers around who can.
The hobby won´t change just because a major manufacturer closes down - others will rise, but so will the prices. We can cope with that by a smart buying strategy.
Brazil and South Africa already have too costly labor rates; and India has very difficult governmnet procedures for setting up new businesses. I would guess Viet Nam. A lot of textile manufacturing has moved there after China became too costly. I know there are a lot of emotional baggage associated with Viet Nam in the USA, but they are a hard working people, much like the Philipinos I worked with when I was working overseas.
I have heard that the failed company is CML - Not sure who they manufacturer for in the model railroad field. Manufacturing has shifted from country to country over the years(look at the ‘brass’ production). The big issues for US model train companies are:
Molds/Production Tooling - can they recover them?
If they do move to another country(say Vietnam or India), how long will it take to ‘ramp up’ the skills to produce our models? The Chinese still have quality issues with glue blobs/finger prints on models.
I can see that there may be a many tentacled approach to the issue. Vietnam maybe one country that would be ideal in this case…but let’s look closer to home as well. I am seeing many companies in the electronics field reconsidering the offshore scenario as it has become too costly to maintain a constant vigil over their QA. Or the issue around raw material( commodity) costs keep going up…raw material supplies are apparently getting stretched kind of thin in some parts of the world as well.
As well, the idea that superdetailed locomotives are necessary may have to take a backseat for awhile until such time that training new workers and such are ramped up…
I guess it is going to be a challenging time for all concerned…
I can see companies shutting down if they cannot arrange to have production lines running their products, let alone ecenomically. We are hearing more and more about the false economy of having China make our goods for us. The importers will either need to find a new 3rd world country to make products, bring the manufacturing back to the U.S. or go under.
I like the idea of things being built in the US. Lets go back to the blue box kits, if you want up scale Accurail and Branchline. I like building the kits. Since most of it is tooling and molding with the items on plastic runners it should be easy to achieve quality production at reasonable cost. Think of the fuel savings by not hauling the stuff all over some other country, crossing an ocean, paying duties on imported goods, and then still hauling it all over the US.
The way to be competitive is to get productivity high enough so as to off set the cost of wages. Automation should do that.
A tractor trailer runs at around 90 ton-miles per gallon. A container ship hits around 750 ton-miles per gallon.
So its actually more fuel efficient for a small truck to drag a container across Hong Kong or Shanghai, get loaded into a transpacific container ship, put on a train in California, get sorted in Baltimore, and put in a truck to MB Klein than it is for a truck to drive it from Texas to Maryland.