Hi, does anyone know the production cost of an HO engine?
“Engine” is vague, so if you know of prod cost of any specific engine, please tell me.
I was just curious…
Thanks!
Charles
Trainman440,
I’d say it depends on what kind of locomotive is being made.
Somewhere between $70-180. That’s if they produce something like 500 of them per run.
Yeah, that’s a vague question. That likes asking how much the production cost of a vehicle is. Compact? Full-size? Pickup? SUV? Budget line? Or luxury brand? Pretty much everything in our hobby is an import when it comes to locos, so that simplifies things in that respect vs autos.
That question is like my “How many cars and locomotives do they get out of a ton of material?” That will drive the cost down per car/locomotive as well.
We will never know.
I believe the major cost that needs to be absorbed is the design and construction of the dies. That, plus all the fixed and variable overhead costs would be added to the actual construction costs (material/labor), and of course a profit factor would go on top.
I’m reminded of how in the late '40s Lionel went in with the Santa Fe and New York Central for the cost of the dies to produce their runs of F3 units - in of course ATSF and NYC livery.
Gidday Charles, Jason Shron of Rapido Trains has been, IMO, pretty open as far as manufacturers go regarding production costs and while he’s discussing passenger cars here, I would expect the same parameters would hold for an engine.
http://rapidotrains.com/content/rapidonews39.html
Unless one was to go into the business or at least become a shareholder, any discussion on the actual production costs will remain either pure speculation or, at the best, an educated guess.
The dies are the major cost.
This would be in the high tens of thousands of dollars for a model locomotive or car.
The cost per moulding from these dies would be in cents.
However, the painting and assembly has to be done by hand, and this would account for most of the cost of the model after making allowance for the cost of the dies.
For a locomotive, the chassis and motor would be the main additional expense. The actual drive axles and gears would not vary much between models of diesel locomotives and might be shared between different manufacturers using a given factory.
M636C
The general rule in electronics is that the cost of the parts is about 10% of the total cost of a finished product.
But, before you get excited, that is a pile of parts. They have to be assembled into something useful, and therein lies the costs.
Typically the final cost of a manufactured product is the sum of the cost of materials times a “number” which results in the final, packaged and on the shipping dock cost of the item.
The distributer does the same to cover his costs and freight charges, as does the dealer.
So the choice of plastic pellets, paints, and metals used has a definite and noticeable effect on the final cost. The obvious one is if it has a DCC decoder or not.
Jason Shron has stated the cost of a motor and gear train is such that deleting them has very little impact on his final cost. Which makes producing an unpowered locomotive a waste of time because the final retail price will not be significantly different between the two versions, and most would just opt for a powered one and pay the small premuium for it.
I would assume that MSRP is set at 100% mark up. Twice the cost of production.
Tooling costs for a new HO engine are not in the high tens of thousands as reported above. That is low. You also cannot compare the model train industry to other industries like electronics because they don’t have to pay for prototype research and drawings and 3D modeling and checking of all that work.
Hundreds of thousands is more accurate, depending upon the level of accuracy of the model and the road specific versions to be produced.
I was told by one HO manufacturer that just re-doing the handrails on an HO diesel, to update them to be more “finescale”, and to stay on the model better than previous editions, was $16,000 a couple years ago. That’s just a new set of handrails, period. Also, said manufacturer had actually identified slightly different versions of handrails that could not all be offered on the same HO model (that no one else had ever found or commented upon). One would have to change the body shell to do so, so it could not be done. There are actually more prototype variations than the commonly accepted “phasing” that many of us go by.
If completely made and assembled in the U.S. with all-American labor, in accordance with our environmental laws and hazardous waste disposal (waste from some train manufacturing operations is defined as hazardous in the U.S.) a new from the ground up Genesis-level diesel would have an MSRP of about $1000, as agreed to by one manufacturer. That is why it is not done here. That is why it is done “over there”.
Also, with current wholesale-distributor price structure in the U.S., the final markup of a locomotive may easily be more than 100%. Cost to produce the model might be closer to 33% to 40% of the MSRP, depending upon manufacturer. The manufacturer has to get a little profit before the distributor gets any at all. Some distributors acquire the items at 45% of the MSRP, so have 55%
If that is the case, then I assume it is because there is too little demand. If a “Genesis-level diesel” were made in larger quantities, the cost to the consumer would logically come down to a more affordable level.
I also question how important it is to most model railroaders to have the level of detail that you describe on something as insignificant as handrails. I wouldn’t even notice the difference.
I am not trying to make a case for Made in the USA, nor am I knocking the rivet counters among us, but for goodness sakes, why do manufacturers of such low demand products strive for such a high level of perfection when it comes to detail?
Rich
No, economies of scale argument doesn’t work with trains. Production quantities are far too low. Labor costs what it costs in the U.S. and we have the most regressive regulations in which to do business of any country. Selling and making an extra thousand of a two thousand unit run is not going to lower the cost much at all. If they make those extra thousand units that have no pre-orders, they may never sell them, either.
A very small but very vocal minority of people demand near perfection in detailing, or else the manufacturers can receive poor online reviews.
If you read some other forums (I won’t single them out here), some of the people are very picky on prototype detail, to the nth degree, and simply demand all that detail, nowadays, or they won’t buy and will be loud about it.
I don’t have a dog in the fight, as I’m into brass steam power now. I’m attempting to explain how we are where we are, that’s it. Don’t take me as caring one way or the other.
John
Quantity does matter when it comes to amortizing the cost of r&d and making the dies. If as was suggested above that cost is $100,000+ thats $100+ for 1000 locomotives, but $50+ for 2000, and $25+ for 4000.
I like what Scale Trains is doing with their new diesel with 2 levels of detail and 2 levels of pricing. But I am sure that only works with popular models that will sell in the 1000’s.
Paul
Actually, it is all about economy of scale!
Tooling and design cost are the by far most expensive items on the calculation sheet of a locomotive. These cost easily run into the 6 digit figures on the lower end for a Diesel and the upper end for a steam engine. Figures of $200k are quite normal. A production run of only 1,000 locos would bring the amortization up to $200. Add to that the material value and purchased parts like motor etc. you are at $230 for a loco - without labor cost, which are an estimated $40 in China and about 2.5 times that amount in the US. Total cost before any mark-up would in that case be between $270, if made in China, or $330 if made in the US. With a mark-up of 100%, this would bring the sales price up to $540 and $660 - nobody is going to pay that for a “mass”-produced loco. Production batches must be significantly higher to allow for market pricing. I don´t think a manufacturer would produce a locomotive that sells less than 2,000 or even 5,000 pieces.
Now to the myth of production in the US would bring the price up into astronomical regions. Yes, it would be more expensive to produce a loco in the US, but it´s not the labor cost driving that. Overhead costs are much higher in the western world, as EPA and Hazmat rules do cost a significant amount of money - money a Chinese manufacturer can (still) save due to the more relaxed attitude towards environmental and safety issues.
Would you agree that labor costs and environmental & safety cost in Germany are higher than in the US? Official statistics will confirm this. If that´s correct, how come a small German business called Bemo is producing their highly detailed Swiss narrow gauge locos in Germany and are able to sell them at prices between $300 (DCC ready) and $400 (DCC & sound), including 19% VAT. The answer is economy of scales - their production batches run are much higher than just 2k pieces.
Okay, then if it costs that much to make the tooling/molds, then why would certian companies do limited production runs, like BLI’s C&O L-1?
Charles
Sir Madog–
I don’t know costs of manufacturing in Europe but have had this very conversation face to face with an American HO manufacturer. My figures are based on trying to build something here.
Sorry, HO trains are not about economies of scale–not in the U.S. for most (ie non-Bachmann or non-Trainman level) locomotives.
The sales quantities, in America (not in Europe where trains arguably have more of a following, and model trains arguably have better sales according to certain American brass importers, not me) are just not there to the point where economies of scale can lower the price point.
Anything not pre-ordered and not sold within about 2 weeks of arrival in the U.S. is considered to be dead inventory that does not sell. So building an extra 1000 locomotives on a 2000 unit run to reduce the price point per locomotive slightly will result in nearly 1000 locomotives of unsold inventory.
When manufacturers build a few extra to cover future ie non-pre-ordered sales, it literally is a few units extra, as in maybe a dozen or two per roadname. That’s it. Those few take awhile to sell (unless you luck out and get a really hot item). If it’s a slow seller, the extra units never sell and get stripped for spare parts.
Today, a new locomotive (never offered in HO plastic previously) will only sell a couple thousand units, maybe less. After a couple runs, some manufacturers are down to selling foobie paint schemes that never existed to generate a few more sales. Some locomotives released just only a couple years ago are already to the point where they have made all that will be reasonably made and sold. The tooling is being shelved and will not be re-used again for many years, if ever. I am not at liberty to discuss which diesels, so please don’t ask me.
John
I have noticed recently with the SD39 at MBK, the MRSP is listed at $134.98 and the MAP price is $114.73. Just a few short weeks ago, other RTR Athearn engines priced at MRSP $134.98 were priced at $99.98. Who is pocketing that extra $14.75 that the “street” price suddenly took a jump too? Some items are still showing a non-MAP price. What’s it all aboot (as the northern Englanders would put it).
I’m not trying to be argumentative. You are asking good questions.
This is exactly what I was referring to when I stated on another topic there are train store employees, working for manufacturers here in America, who have stated that the small but vocal minority, the “1%” or so of modelers are ruining the hobby for the rest of us by demanding unsustainable or unaffordable levels of rtr detailing.
I don’t hate the 1%, in fact I prefer highly detailed, correct as possible steam models myself. However, Rich is correct in stating that the other 90% doesn’t care that much and could live with less than Genesis details.
This is why we have Atlas and Walthers Trainman series offerings…
RioGrande–
Two answers. You choose which one you think is best:
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Manufacturer/importers decided to “hold the line” on cost by reducing the discount percentage so that they can hold the MSRP down to some level. This was publicly stated by at least one manufacturer. Maybe they did or did not accept less profit for themselves. I do not know.
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Certain manufacturer/importers may have decided to “get greedy” and shaft the few brick and mortar train stores that remain by reducing the profit margin to a level that will not be sustainable and will drive the little guys out of business so that only the big sellers remain.
Already it is true, as Howard Zane has said on here that there is wholesale, really wholesale, and really really wholesale pricing for those who wish to buy and sell large quantities. To a certain extent the game may be rigged to drive away the small dealers, sooner or later.
The dealer looks at it as “I have to make xx percent just to pay the utility bills”. The importer looks at it as: If it’s a big ticket item the end dealer can accept a smaller percentage of profit.
Who is “right”?
John