Thought this might answer some questions

This must be a reflection of the global economy. Who wants to build a product today that relies on disposable income? If these companies know what they're doing I guess we have much harder times ahead of us.

"This closure was caused in large part by the fact that model railroad price increases (averaging 10%-25%) have not kept pace with cost increases in China," This begs the question how far is the lag between the increase in labor cost in China and the increase in product prices? 40%-50%?  Add the quality issues..I would not want to be in this business facing these kind of issues, a sort of triple sabotage..I cannot imagine what a $1, 200 engine will cost a year from now..it just reinforces my thought that used equipment is the wave of the future..Will this increase auction values? Time will tell...

Darn! I just posted my NYC power for sale. I better think twice about this. I may not be able to go two rail. 

very illuminating... Thanks Ed.

Ed,

Maybe you missed this on the 3RS Forum:

https://ogrforum.ogaugerr.com/d...5514336624697/page/1

Just my thoughts. I bought most of my trains back when you could find Atlas cars for 8 bucks. Weaver and other stuff was cheap. I have a hard time now paying up to 60 dollars for a freight car and to buy the new locomotive at 4 and 5 hundred dollars is totally out of my price range.  The new stuff is nice but....

I spend quite a bit of time in China. We have a plant there for manufacturing car parts. I think its only going to get worse because you look around there and they have totally over built the country. there is a 40% vacancy rate on new construction.

If they keep building at the rate they are I think the county will be in big trouble soon.

They have already shown a slow down in growth in the country.

stvmike,

I think you hit the nail on the head. The economy of China seems to have placed itself on a collision course that befell the old Soviet Union that is mostly controlled as stagecraft with a odd pseudo-captialism  very little substance other than internal corruption, party favors and very little control over their own creation. As expectations rose in the country, the China "bubble" was bound to burst that was financed by soley by a brief period of cheap labor, and government infusions of "projects". I think that manufacturers bailing out of China will be inevitable as the government is in way over it's head.

I think that manufacturers bailing out of China will be inevitable as the government is in way over its head.

Then we're looking at another learning curve for model manufacturing.

I understand MTH has its own factory. How did MTH do that, the enterprise requiring significant capital, etc?

I remember when GEM (brass imports) bailed out of Japan and set up manufacturing in Korea. Their early products were not very good.

With proceeds from their Lawsuits!

That is excellent and so true. Well said.

Yves

One would think with 3000 unemployed and looking for a job wages would come down. Also with all the overbuilding  and vacancies one could set up a factory easily enough. But then I don't have the seed money nor speak Chinese.

The overbuilt sounds like the US now and home prices will fall. Could be real bad for many who depend on China for imports.  

Yeah - just what the overpaid Chinese worker needs.

Reading this very informative post regarding manufacturing in china!!!, one seller on ebay (selling Athearn trucks) have contacted Athearn about produktion of trucks.

Athearn replied they have more then enough in order for other scales and beside the

profit on the trucks was low, if thats the true do they not have a luxury problem????.

I think the O scalers have been loyal to Athearn in many years, and do not deserve

this.

best regards

ohj38

A while back my mother purchased one of those battery operated automatic can opener's on TV for $20 +7 dollars shipping. When she needed a new one she asked me if I could help her out and I went on the Internet and found a distributor from Hong Kong selling them for $5.99 plus an additional four dollars shipping. Nobody is going to convince me that an o-gauge boxcar at $60.00 is more complex to build than a can opener with a motor, gears and a hard case plastic shell. I think these model train companies are taking us for a ride, both literally and financially.

I'd rather have a precision injection molded box car than an automatic can opener any day.

No one makes you buy them, so stop now and build your own.

OTOH, I've never built an electric can opener, but then I've never needed one either.

Doesn't work that way over there.  The government sets the wage rates.  If you start a new factory/business or hire workers for your existing factory you have to pay the workers the same rate they were paid before.  That's why the just go out of business.  They lay off workers to keep their costs down till they get to the point where they can't get anything done and then just go out of business.   I think this years 22-24% government mandated wage increase may have caused a tipping point for many many of those businesses.  I think you are going to see lots of things in all scales just cancelled this year because the importers don't think they can sell what is planned for production this year with the requisite price increases.  It will be interesting to see Lionel's catalog prices at April York.  I think everyone should be prepared for some heart pounding sticker shock.  I understand several of the manufacturing companies are looking to move their manufacturing facilities to the Phillipines this year to cut costs.  So expect ramp up delays in that eventuality.

Richard

Of course a boxcar would have more appeal to a train collector than a can opener.

My point is that Lionel is producing $60 box cars and the industry says even after a 10% to 25% price increases, they still can't make a profit.

 So how does a company make a profit producing and selling a six dollar can opener?

We have it great today with the quality of products available at the costs we pay. You can buy a beautiful Atlas car, fully built and detailed (well beyond what a person could do on their own in a reasonable time) for only $60.00. In fact, if you look a little, you can find that same car several Dollars cheaper. Let's go back 40 years to 1972... What was the equivalent of $60.00 back then? About $11.00! Would you even consider paying $11.00 for an Atlas car from back in that time period?  Look what you get today.

The value of money has not remained static, although the tendency is for our memories to do so. I contend that it has never been better with the choices, and costs associated with those choices, than we have today. I applaud manufacturers for their willingness to invest and risk their money to bring us products. They have no guarantees that people will buy enough to recoup their costs. (Though they can be guaranteed that many people will complain that they are charging too much.)

One of the ways to cure this is to go into the business, and offer a six dollar box car with trucks similar to the now hard to get Athearn.  What you lose on each car will be more than offset by the volume of business. A box car in every kitchen!

Maybe it could be a battery powered operating can opener box car - letter it for PRR and watch the sales!

In our factory the worker are under contract. they average about 300 US dollars a month. Yes the government tells you how many you have to hire for the plant size but they don't control the wage cost in our shop. If its a bad worker your better off to have him quit then fire him. They see the western life style and want it bad. The cost of labor is always on the rise. it will not be long before everyone is moving out of China for a lower cost country. I have already had people in our industry tell me they have Chinese company's setting up shops in India. We have an Aluminum foundry.

I don't think I could live on 300 a month. It's either your rich over there or your poor.

Just my opinion.

You want new  Atlas-MTH-Lionel $60 freight cars for $11.00 today?  

Simply make them like can openers,  250,000 units per brand (road) name.

Plus, have the same income demographic customer base.

Plus, make sure it is something that is absolutely needed several times a day. 

Plus, make sure the clients will not post complaints world wide if the printing is a tad crooked or "wrong" in shade.

Plus, have big box retailers order them by skid loads for each location.

Plus, etc, etc..........

Can openers & choo-choos are like apples n' oranges, a fruity comparison.

See you all at the Cherry Valley Swap Meet this Saturday.

Bring you appetite and DC or DCC models to stretch their legs on the large model RR.

Endless running n' free eats!!

Sounds like one better grab what one can and be happy ever after. Resale prices up. 

This was a good thread.  We now have input from Sunset and Rapido, and I have found it utterly fascinating.  I do worry that in time, this could mean essentially and end to 'O' gauge.  As popularity of O seems to be waning, and model trains in general aren't what they used to be, pricing and supply may force companies to focus exclusively on the larger markets/smaller gauges.  

Regardless, this has been informative, and I thank Ed for posting this up

Doubt that O Gauge will end.  Maybe all these neat imports will, but you can see that interest is quite high on eBay for older O Scale.  Most of us are just staring in amazement when a fifty dollar doorstop goes for $400.  I do not believe O Scale has ever been more popular than right now.

There will always be tons of O Scale available but it will be the classics, All Nation, Walthers, Athern, Max Grey, KTM, Weaver, IM kits and etc. I suspect that there is still a 2-3 decade supply of unbuilt O Scale kits out waiting for completion, God knows I have 2 lifetimes worth myself.. What won't be available is anything that hasn't already been produced, especially modern diesels.  Kit building and ascratchbuilding skills may be a requirement for the hobby again. Major achilles heal.. where is the track and switches coming from?