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Post by valenciajim on Aug 12, 2015 7:02:02 GMT -8
The recent news has been talking about how the Chinese have devalued their currency in order to make the price of their goods more competitive in the global marketplace. Besides creating turmoil in the stock market, this action probably raises a lot of questions for our hobby.
So will this result in lower prices for model railroad products, or will prices just not rise as fast?
Will this mean higher quality motors in locomotives manufactured in China?
Are the manufacturing contracts denominated in US dollars or local currency?
Will the importers pass the savings along, or will they use the expected cost decrease to increase (restore) their profit margins?
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Post by mlehman on Aug 12, 2015 8:32:34 GMT -8
I think we'd be getting ahead of ourselves to anticipate anything different once you do the math. Yesterday's drop was 2% and today's was 1.6%. That's 3.6%. Assuming an example loco that retails for $100 here, the cost of manufacturing, transportation, etc is likely well under 50% of that. Even assuming the full $50 as cost to the importer (likely too high, but a nice round number), that would amount to $1.80 difference...
Don't make plans for all that extra cash just yet.
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Post by Spikre on Aug 12, 2015 10:07:59 GMT -8
 if moves of the Past are any Indication,this will be an Excuse/Cause for even more Price Increases on models. time will tell !! Spikre 
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Post by Great-Northern-Willmar Div on Aug 12, 2015 12:29:12 GMT -8
I wouldn't hold my breath as far as plateauing or perish the thought of the price dropping. Devaluing the currency should have the exact opposite effect by creating inflation. Since the Chinese worker is no longer accepting of a bowl of rice and a fish head(extreme sarcasm) for a days wages, the devaluation means their money buys less - aka inflation. So the workers demand more money, which in turn fuels more inflation.
I would anticipate this will put even more pressure on the Chinese factories to make a profit and lead to cost cutting measures. AKA that nasty inflation.
I believe I read where the contracts are in U.S. dollars. The Chinese want dollars.
Plus, aren't the factories for our toys in Hong Kong? Hong Kong does not use the Chinese Yuan, but the Hong Kong dollar which is pegged to the U.S. dollar.
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Post by mlehman on Aug 12, 2015 13:05:56 GMT -8
Jim,
I believe Kader's plants are on the Mainland. Used to be some stuff in HK, but not much anymore. Too expensive.
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Post by WP 257 on Aug 12, 2015 13:48:59 GMT -8
Imo any savings at all will be down the road, because items currently on their way through the pipeline are at already-determined pricing structure. The costs have to go down and stay down for some length of time in order for price structure to adjust.
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Post by riggelweg on Aug 12, 2015 18:25:01 GMT -8
To quote a famous economist, there ain't no such thing as a free lunch. I think as a general rule, currency devaluations help exporters at the expense of importers and currency holders (e.g., savers). It's just a wealth transfer.
Manufacturers are often both exporters (shipping manufactured goods overseas) and importers (importing raw materials for their products). For model railroad manufacturers in China, I suspect the costs of plastics will increase because oil prices in Yuan will rise. I don't see there being much of a benefit in price passed onto us.
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Post by riogrande on Aug 13, 2015 5:14:41 GMT -8
I don't expect to see prices on model train goods manufactured in China lower in price in the future. If anything, we might see costs increases delayed perhaps - prices may be maintained longer and the line held.
As Yoda said "always in motion is the future"! Difficult to see!
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Post by dti406 on Aug 13, 2015 6:37:52 GMT -8
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Post by riogrande on Aug 13, 2015 7:25:39 GMT -8
Probably an infitesimal fraction of stuff shipped out of China!
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Post by jaygee on Aug 13, 2015 15:09:47 GMT -8
WOW...All those BLI. Paragon 2 boards going up in a flash......!
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Post by valenciajim on Aug 14, 2015 16:41:21 GMT -8
I was being a bit sarcastic when I posted the original topic because I doubt that much will happen to the process of products other than perhaps a lower rate of inflation.
My understanding is that most of the stuff is manufactured in China rather than Hong Kong. Mike you are right about Khader. Although based in Hong Kong, the manufacturing activities are conducted in China. (See the annual report on their website.)
I recently read the book, Rise of the Robots, and one of the trends it spoke about was manufacturing requiring delicate assembly will be replaced by robotics and/or 3d printing. While the book did not refer to model railroading, it sure seems like this is where things are headed in the next ten to fifteen years. I highly recommend the book.
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Post by MONSTERRAILROAD on Aug 16, 2015 8:41:25 GMT -8
if moves of the Past are any Indication,this will be an Excuse/Cause for even more Price Increases on models. time will tell !! Spikre 100% correct! It is like every gas/oil issue, it gives causes for an increase in prices. |
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Post by theengineshed on Aug 16, 2015 9:36:42 GMT -8
Well oil is going down not up. Everyone is pumping at capacity trying to maintain market share, plus Iran will be entering the fray as well. Some forecasters are predicting the current $50 a barrel will drop to $20 before there is a shake out and reduction in supply.
Can't see prices for our models rising in the short term, if anything we may see some price reductions. I suspect some of the cancellations we've seen may be because manufacturers want to renegotiate contracts...
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Post by valenciajim on Aug 17, 2015 8:20:05 GMT -8
Well oil is going down not up. You don't live in the People's Democratic Republic of California, where we refine a unique blend of gasoline that is unavailable elsewhere. We have not built a new refinery in CA since the 1970's. So when there is a refinery issue, the price jumps. There are two refineries out of commission right now, so retail gas prices have jumped in spite of the decline in the cost of crude oil. I paid $4.19 a gallon in San Diego last week and was amazed at how cheap gas was at the corner Shell station a few blocks from my house--$3.74 a gallon. |
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Post by riogrande on Aug 17, 2015 9:27:05 GMT -8
Jim, they have a similar name for our neighboring state. There are many times I get homesick for California, where I spent ages 6-24 and have many fond memories. Then thinks like your unique blend of gasoline costs so much higher than the rest of the country, not to mention the long standing drought where the water tables are sinking very fast and won't be replenished within multiple lifetimes. *sigh* I passed by stations locally where I live and saw cash prices for gas at $2.3x. It helps to offset the higher cost of trains at least (getting back on topic).
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Post by Deleted on Aug 17, 2015 18:04:50 GMT -8
Jim, they have a similar name for our neighboring state. There are many times I get homesick for California, where I spent ages 6-24 and have many fond memories. Then thinks like your unique blend of gasoline costs so much higher than the rest of the country, not to mention the long standing drought where the water tables are sinking very fast and won't be replenished within multiple lifetimes. *sigh* I passed by stations locally where I live and saw cash prices for gas at $2.3x. It helps to offset the higher cost of trains at least (getting back on topic). There is no real drought. There is plenty of water, it's just not where it's currently needed due to policy decisions. About half of all the fresh water in the distribution system is dumped into the San Joaquin/Sac Delta in order to aid some species of fish move up & down stream. The value of this is debatable, at best. About 40 to 45 percent of the fresh water goes to agriculture. This leaves about 5 to 10 percent for all urban (residential, drinking, commercial, industrial, landscape, parks, etc.) use. The lack of a market for water and old laws that entitle ag users to pay a fraction of what urban users pay is the problem. But it's only a problem for the users, it's being used by the State and local agencies as a hammer to increase urban density and manipulate land values. A drive down the I-5 thru the Sac / SJ Valley reveals 60 miles of lush green rice paddies starting just west of Sacramento. Most of the SJ valley is covered with almonds, alfalfa / hay, grapes, and COTTON. You'll see sprinklers going all day. Cotton that gets shipped to Indonesia or China and comes back as $3 t-shirts. Because water is artificially cheap for the farmers. But they could not re-sell their water to urban users even if they wanted to. This is forbidden. How can there be a drought when 10s of thousands of acres of export rice is growing nearby? The population of California has more than doubled sine the Calif water Project was completed to bring water south. No major projects have been built since. There will be rain again, and people will complain about the floods. People have short memories:  "Climate is what you expect, weather is what you get". |
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Post by riogrande on Aug 18, 2015 4:10:43 GMT -8
One thing about having lived there during those years of my life, I was mercifully and blissfully ignorant of most of the politics. The were the "daze", but sometimes all the discussion of the politics etc. just gets wearisome - I don't shut off the news entirely but at times for sanities sake, its good to take a break from it. Hence, why I have a train hobby ;-)
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Post by valenciajim on Aug 18, 2015 15:09:15 GMT -8
Omaharoad--you nailed it on the CA water situation. My son did a research project on this subject for his undergrad thesis at UCSB. I will be driving through the region on Saturday on my way to Portland, so it will be interesting to see first hand what the situation is. I actually think the population has triple since the CA Water Project was conceived. It takes a gallon of water to produce an almond in the Central Valley. Most of the almonds are exported to China.
By the way, I saw the Valencia Water Company "Enforcement Vehicle" driving up my street yesterday making sure that nobody was watering their yard. It was an orange pickup truck with huge signs saying "WATER ENFORCEMENT VEHICLE." There is a $500 fine if you get caught watering on the wrong day. It gets added to your water bill. If you don't pay it, your water gets shutoff. There is not much left to water as what used to be my front lawn is parched earth. The HOA has already told me that they expect me to put in a new lawn this winter if we get rain.
RioGrande--when you lived in CA, the politics were not what they are today. But remember this--CA is a trendsetter, so you might see some of this in your neighborhood down the road. On that cheery though. I am going upstairs to work on my railroad.
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Post by riogrande on Aug 19, 2015 1:28:12 GMT -8
RioGrande--when you lived in CA, the politics were not what they are today. But remember this--CA is a trendsetter, so you might see some of this in your neighborhood down the road. On that cheery though. I am going upstairs to work on my railroad. It was a trend setter when I lived there as well. My parents, who were much more aware of the politics than I was, weren't very happy with that part of California life and haven't looked back after moving away. As a side note, the current governor there was governor when I lived there too.  Jim |
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Post by valenciajim on Aug 19, 2015 7:42:59 GMT -8
Some things in CA don't change, except the first time around the governor was considered to be a liberal...now he is considered a conservative in relation to the legislature.
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Post by riogrande on Aug 19, 2015 9:45:23 GMT -8
Some things in CA don't change, except the first time around the governor was considered to be a liberal...now he is considered a conservative in relation to the legislature. No surprise at all. The world we live in today is really different than 35-40 years ago, but Jerry Brown probably hasn't changed that much except for being that much older. |
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Post by The Ferro Kid on Aug 19, 2015 9:50:04 GMT -8
Some things in CA don't change, except the first time around the governor was considered to be a liberal...now he is considered a conservative in relation to the legislature. No surprise at all. The world we live in today is really different than 35-40 years ago, but Jerry Brown probably hasn't changed that much except for being that much older. Jerry Brown -- the third Smothers Brother! |
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Post by riogrande on Aug 19, 2015 10:29:07 GMT -8
I confess, I never watched that show but maybe I was a little young when it was airing?
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Post by kentuckysouthernrwy on Aug 19, 2015 17:18:46 GMT -8
Maybe a more literal meaning to the land of fruits and nuts....
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Post by The Ferro Kid on Aug 19, 2015 18:57:00 GMT -8
I confess, I never watched that show but maybe I was a little young when it was airing? Well, I don't know if Jerry Brown ("Governor Moonbeam" -- i.e., young, idealistic, non-conformist) was ever even on The Smothers Brothers Show, but at the time he just seemed to be the same type of counter-culture character as they. |
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Post by mlehman on Aug 19, 2015 22:09:28 GMT -8
The Smothers Brothers Show could be edgy, but it was a time that inspired such things. However, a show on CBS is not exactly counter-culture. They were still basically selling soap, just like much of the rest of TV. Rather ironically, the show was cancelled when it was in the top ten, so someone was watching.
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Post by valenciajim on Aug 20, 2015 9:14:34 GMT -8
The Smothers Brothers show was cancelled because of the ongoing disputes between the CBS censors and the Smothers Brothers. The show was a head of its time. Today, the networks would do anything for ratings.
Governor Moonbeam was never on the show. He was elected attorney general of California in 1970. just as the Smothers Brothers show was going off the air. He was elected governor n 1976 and re-elected in 1980. Ironically he took the same path the second time--was elected attorney general and then governor.
This time around his big vision is for the high speed train connecting northern and southern California.
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Post by Deleted on Aug 20, 2015 10:03:33 GMT -8
The Smothers Brothers show was cancelled because of the ongoing disputes between the CBS censors and the Smothers Brothers. The show was a head of its time. Today, the networks would do anything for ratings. Governor Moonbeam was never on the show. He was elected attorney general of California in 1970. just as the Smothers Brothers show was going off the air. He was elected governor n 1976 and re-elected in 1980. Ironically he took the same path the second time--was elected attorney general and then governor. This time around his big vision is for the high speed train connecting northern and southern California. The Browndoggle. |
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Post by calzephyr on Aug 20, 2015 12:11:23 GMT -8
Well oil is going down not up. You don't live in the People's Democratic Republic of California, where we refine a unique blend of gasoline that is unavailable elsewhere. We have not built a new refinery in CA since the 1970's. So when there is a refinery issue, the price jumps. There are two refineries out of commission right now, so retail gas prices have jumped in spite of the decline in the cost of crude oil. I paid $4.19 a gallon in San Diego last week and was amazed at how cheap gas was at the corner Shell station a few blocks from my house--$3.74 a gallon. Jim As you know, Uncle Jerry is trying to find a way to finance more road repairs and is considering major new taxes on our already expensive gasoline. We are now paying the added charge of the carbon tax that was added last January. The refineries have to pay this hidden tax and Uncle Jerry wants to add an additional 25 to 50 cents on top of that to discourage driving and use that money for roads?  ? I doubt the new tax would be used for roads since they need money for retirements and whatever. The so called carbon tax is going to be paid to other countries? They are also considering a mileage tax for miles driven much like Oregon has proposed. Remember, most electric cars are coal burners east of California. Ours use Oil and natural gas to charge up. I am waiting for the mandatory breathing tax that should hit the politicians even harder than us since they expel a lot of hot air!!! The latest problem in China will probably increase our prices since many of the factories might not be able to cost effectively stay in production. Less production normally means higher prices and long waiting times. The company that went bankrupt there years ago was starting to produce the Athearn MT4 at that time along with many other projects and they went out of business for unknown problems. This latest devaluation might just raise prices and slow production in the long run if any of the China factories cannot make a sufficient return on our models. Walthers latest cancellations might not be entirely justified due to less reservations than desired, but it could be a business caution sign to possible problems with future production cost and capability. We will see how this works out for our purchases in the next few months. Larry Larry |
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