# Where is the Yuan devaluation?



## du-bousquetaire (Feb 14, 2011)

Hi there : One fellow in a thread on a Climax being sold by a dealer at ripoff prices, raised a good question to which no one has given any thought:
Sure prices for goods from China are rising and have been for the last year or two (even MTH) *But*, and there is a very big But fellows, the Yuan has devaluated a few months ago! The result should be that the prices for new products coming out of China from now on should be lower than in the past. Or at least remain at their prices of say two or three years ago. That's the whole point of devaluation for a country: It helps their exports. Meaning that if the prices of Chinese products don't become reasonnable again very rapidly, it means someone is putting that devaluation money in his pocket and not sending it on to the customers out there. So lets not hear complaints about the down market we have been experiencing since 2008, if intermediates don't repercuss their lower prices to the customers, it means that they are taking them for a ride. And the market won't pick up again. Nough said!


----------



## Kovacjr (Jan 2, 2008)

Issue is, it is not new stock. Its old stock. had been in his inventory fo rmore than a year as the listings were always higher and never sold. I guess he is thinking being its the last one new stock, he can try to snag someone that really wants it. BTW there was another one at auction on Ebay that just sold for just about 2000. Retail when new was like 1800? I think.

Yes China has increased as proven by prices by Accucraft of new productions, but still a fair deal in comparison.


----------



## John 842 (Oct 1, 2015)

du-bousquetaire said:


> Sure prices for goods from China are rising and have been for the last year or two (even MTH) *But*, and there is a very big But fellows, the Yuan has devaluated a few months ago! The result should be that the prices for new products coming out of China from now on should be lower than in the past. Or at least remain at their prices of say two or three years ago. That's the whole point of devaluation for a country: It helps their exports.


Yes but - ther's an even bigger '*but*' to be considered here - and that is the enormous and irreversible changes that are occuring in the social fabric of China, resulting in the business model of manufacturing products for western markets, becoming increasingly non-viable.

Part of the reason the currency was devalued was to counter the detrimental effects that the aspirations and wage demands of the exploding Chinese middle class was having on exports. Far from being able to maintain or reduce costs, model train manufacturers are having to continue to raise prices and in some cases dealers are having to resort to reducing their margins to maintain their sales volume. The devaluation alone was simply not enough. 




> Meaning that if the prices of Chinese products don't become reasonnable again very rapidly, it means someone is putting that devaluation money in his pocket and not sending it on to the customers out there. So lets not hear complaints about the down market we have been experiencing since 2008, if intermediates don't repercuss their lower prices to the customers, it means that they are taking them for a ride. And the market won't pick up again. Nough said!


In my view the markets are not likely to 'pick up again' because the 'Chinese social change genie' is well and truly out of the bottle.

In spite of manufacturers commitment to improve quality control, I see evidence that it is becoming more dependant on which country commissions models from China and how determined the 'middle men' are in ensuring that standards are maintained. In the case of one well known brand I've seen quality decline noticeably in the last couple of years in their UK and Australian markets, whilst dealer margins have contracted and they've had to raise prices and come up with more 'inovative' ways to shift unsatisfactory stock.

For me, the situation has got to the point where I cannot rely on previously reliable Chinese suppliers and I will only make future purchases, whether new or second hand, if I can see the actual model and in the case of locomotives, see them running first. 

Unless of course, they are actually *made* in the UK or Germany .... 

Don't blame the Chinese manufacturers or their dealers - most of the extra money we are paying is winding up in the Chinese workers pockets - and good luck to them - they've been exploited long enough.


----------



## Mike Toney (Feb 25, 2009)

I agree with John, and its all segments of the train hobby, not just large scale and live steam. If only the other brands could match the constant standard of fit & finish of Roundhouse engines, along with long term durablity and parts availablity. Will we be able to rehab a worn engine of any Chinese brand without having to have parts custom machined. With a Roundhouse, this isnt a big problem. Beautiful models at prices many more could afford for years, but alas those days are gone. With the auctions on ebay, some folks are wishing, some are just plain nuts and other are as smoking ditch weed.


----------



## Taperpin (Jan 6, 2008)

John,
Just so I can avoid getting stung, would you like to expand on your personal knowledge of the Australian market and the declining quality therein and an example or two of dealers margins etc and how they are changing..


----------



## dougiel (Jun 3, 2008)

Taperpin,

do not know about Australia but here in the UK all the discounts for one Chinese made product have disappeared from sellers sites. I was told the manufacturer was not putting up their RRP so I can only assume they have removed any discounts for the sellers. In the narrow gauge product their prices are now very much in line with British Made product. I know which I would buy.

In G1 we now have a well respected dealer offering steam and track tested products from the same manufacturer. I wish him well and have ordered a loco from him. I am hoping he can keep his head above water but in the light of day I think I ( and he ) may be dreaming.

DougieL


----------



## Kovacjr (Jan 2, 2008)

John. Prices were changed due to a worldwide uniform pricing level. Now we all have the same margins where the UK had a larger one and discounted it down to what we have in the US. But in reality they could and have undercut the US dealer. Now its a level field. No retail costs were changed either.


----------



## John 842 (Oct 1, 2015)

Kovacjr said:


> John. Prices were changed due to a worldwide uniform pricing level. Now we all have the same margins where the UK had a larger one and discounted it down to what we have in the US. But in reality they could and have undercut the US dealer. Now its a level field. * No retail costs were changed either*.


Presumably you meant to say '*recommended* retail cost' - the *actual* retail cost from a well known UK dealer has typicaly gone up by 14% for locomotives and 12% for rolling stock in the last month.


----------



## vsmith (Jan 2, 2008)

It's been mentioned in the past, that the internal changes in China mean the days of cheap model trains are gone forever. IIRC some smaller sized manufactures in the small scales have brought their production back to the US because the cost differential was minimal. I think in a couple more years we will see even more manufactures doing the same.

Chinese workers want their $2, they're not going to work for 2¢ anymore.That means higher prices are here to stay.


----------



## BigRedOne (Dec 13, 2012)

Regarding the expectation that an improvement in exchange rate should be rapidly reflected in the retail cost for an imported product, there are a couple of counter-factors:

- Desire to minimize retail price volatility. Remember, if the seller lowers prices for favorable exchange rate moves, then the seller has to increase them for unfavorable moves. This type of activity will irk some customers, and sellers may elect to estimate the exchange rate for the life of a product and stabilize the selling price.

- Foreign currency sales may be hedged, so the seller makes neither unforeseen profit or loss due to the currency movement.

The dollar has risen against the Euro too, yet we don't see German model train manufactures lowering prices either. (Which should be even more elastic, since US customers can buy directly from a European seller with a comfort level unlikely in China.)

Even on expensive products like automobiles, we don't tend to see much sign of exchange rates impacting retail prices.


----------



## Wizard69 (Feb 4, 2016)

Actually many price sensitive industries have left China due to high costs years ago. Some to India, some to Vietnam and other countries. So it isn't surprising that the cost of China made rolling stock has increased. 

As for passing on the supposed gains from the better exchange rates that would be foolish considering the state of many suppliers to the model railroad industry.


----------



## Ironton (Jan 2, 2008)

I do not have the current exchange rates available, so I will use values converted to US dollars here.

Let's say that you have a locomotive selling for $1000. Now the Chinese manufacturing costs have gone up by 12%. This means the loco will now sell for $1120 with no change in the yuan.

So China decides to devalue the yuan by 10%. So now the loco will sell for $1080. Or your prospective buyer will be paying $80 more for the loco.

One of the reasons that we are not seeing a decrease is the interaction between increase in cost and devaluation.

Another reason is it is hard for the costs to decrease. Take copper. It had been selling for $1+ per unit. When it hit $4 per unit the companies refused to eat the cost and raised prices on everything involving copper. For the last year copper has been between $2 and $2.40 per unit. Have the prices come down or are you still paying for $4+ per unit copper? The latter I think.


----------



## du-bousquetaire (Feb 14, 2011)

I still think that some visibility of this devaluation should have appeared. But it hasn't and that isn't helping the market. Some of the answers to this forum seem to really take the plight of our dealers more to hart than that of the hobbyist, isn''t it stange... Or has this become a dealers forum? Sure the Chinese middle class is asking for more and I do agree that it is fair for them to do so, but I don't get the impression that they get what they want by just klicking their fingers. And I doubt that they have gotten much of a raise yet. And so far I have found their quality is not as bad as some say. I have on the other hand seen one very famous company making live steam from another country turn out some incredibly filthy boilers for an engine famous for it's exhorbitant price.... So reputations are often not what people think. I really don't know where this 10% devaluation did its disapearing act in the gauge one market. No sight of it anywhere. Strange to me.


----------



## MIkeintallahassee (Jan 18, 2016)

It probably did not go to the dealers. I have been in LS for fifteen + years. Nobody gets rich. Most dealers make a little money, but not a lot, considering time and investment. Don't forget the pleasures of currency fluctuations, shipping charges, and being thousands of miles away from and in a different language from your suppliers.And some go broke

Everybody wants a deal, because we're all friends, right?

I've gotten some deals, but mostly in the seconded hand market and by buying new release (untested) models. On the other handed, I've consistently gotten value.

And no, I am not a dealer -- who would want the heartburn!?!

Still, it's cheaper than golf or fooling around on the wife.

Regards, Mike


----------



## Kovacjr (Jan 2, 2008)

MIkeintallahassee said:


> It probably did not go to the dealers. I have been in LS for fifteen + years. Nobody gets rich. Most dealers make a little money, but not a lot, considering time and investment. Don't forget the pleasures of currency fluctuations, shipping charges, and being thousands of miles away from and in a different language from your suppliers.And some go broke
> 
> Everybody wants a deal, because we're all friends, right?
> 
> ...


 
 Mike,

I am a dealer and completely agree with you.


----------



## du-bousquetaire (Feb 14, 2011)

Grant you, being a dealer in the present times is not easy. I can vouch for that because I worked for a leading Paris dealer for four years, doing his N gauge production (of all things, great occupation for a gauge one man!) But I get the feeling that some dealers bring it on to themselves, by not using such occurences as a devaluation to bring their prices down, which in turn would help the market pick up. Any professional activity brings heartburns, not only dealers. 
I have fled the French market because dealers took us Frenchies for a ride since forty years of modeling in gauge one. You know how: "Why stock a Marklin box car that takes up the shelf space of arouind 36 plastic HO box cars that will all be sold in a couple of months (because it's a hit in the maket) when the Marklin one will stay on that shelf for years"? And you know why it will stay on that shelf for years? Because it is sold at too big a margin. So people who would be interested, buy it where its cheaper. The result is that gauge one never picked up in France. It would be sad if that happened to the US maket now.
When I go to Switzerlanfd they have plenty of gauge one and in Germany too and their market is flourishing.
But I do recognise that it is a tricky business. But pre order sales, especially ones where you are told a price "if you reserve early", then they announce you a price hike a couple of weeks after (or before) a devaluation, is no way top do business and it happened recently in a few occasions. the Aster 2-4-1P went through I beleive three price hikes like that, wow! Ouch! 
Then there is this practice of making smaller and smaller series when Aster came out with the Schools class they made over 2000 of them the PLM pacific there were over 600. the 2-4-1 P around 70...
And I don't beleive that US dealers are loosing money on shipping the prices are wild here. Nearly all my American stuff comes from the US; I often pay more for shipping than the price of the book or the car! And with the new rules with French Customs it's even worse. They should be charging 20% but they have a special charge to present your goods in customs another ten bucks or so and so on... It's getting to a point where I just will stop buying.
Sure there is the plight of the dealer but what about the plight of the customer? Or is gauge one going to become the collectors scale in the USA like it has in France...


----------



## BigRedOne (Dec 13, 2012)

Gauge One already seems to be withering in the US. When I got into model trains in 2003, my dealers at the time were giving up carrying any Gauge One, making it special order only. (I am speaking here of Marklin; I bought Marklin HO, but the same dealers had a few pieces of Gauge One.) Most stuff is 1:29 plastic here.

I think a thriving hobby calls for exposure to new people, and the retail environment is important. I worked for a local hobby shop in the evenings 25 years ago, and most train sales were sets to people buying them for a child, and expansion pieces for the sets.

The other thing needed is a place to operate and the social aspect of being in a hobby. Few people have the space for large scale trains, especially fine scale that calls for larger radius curves. What would the future of the hobby be if there was a steam track or garden railway in places like Central Park or the Washington Mall? A public place people could gather and operate their models in population-dense, tourist-rich areas.


----------



## kormsen (Oct 27, 2009)

i think, we can be happy, if largescale does not cease to exist at all in the economic sector.

there are so many factors against it.

first space.
be it space on the shelves for the dealer, or space for the hobbyist. - how many have a 500 - plus squarefeet, indoors or out, at their free disposal?
(with the exception of one californean gentleman. he needs just four squarefeet for an entire layout... ;-) )

second disposable money.
am i the only one, who is noticing, that since about 2008 the "look, what i bought!" threads are getting less and lesser?
ours is an upper middleclass hobby. upper middleclass being eroded by modern economics and politics, there is less and lesser money free to be spent on toys.

third no ample offer of (new) toys.
well, if we are less and lesser hobbyists, with less and lesser disposable money - for whom should companies (with directors in their right mind) produce new toys?
just look around your own empire... how much did you buy new lately?
(in my case, most of the track bought cheap, when a shop went out of business; over half of my locos are second hand; most of my rolling stock is newqida, or no-name-brand cheap stuff)
and... this is an old man's hobby.
meaning, that every time one of us has reached "game over", like vultures, we pick the widows clean.

not to mention, that our offspring has no connection whatsoever to (real) railroads, because they disappear more and more from sight.

so, my personal estimation is, that largescale will hide again in its niche somewhere below a stone, where it was from the beginning of the 1900s till the peak of our civilisation in the 1970s.

get used to it. do it yourself, or do without.


----------



## du-bousquetaire (Feb 14, 2011)

Kormsen: I agree with you 100% Which is why I am turning more and more to doing it myself and scratchbuilding. But when you scratchbuild most of your stuff, it's good to get a little help from the manufacturers now and then, after all we only get one live to live... But indeed the way the prices for gauge one are going and the way our middle class is being destroyed by our modern world, we won't be able to afford them soon. Thats why I am worried about the futur. And I think the in between men should think about this, because they will go too if they keep raising the prices the way they do. Only a precious few will be able to follow. That is the reason I raised this question.


----------



## StackTalk (May 16, 2014)

Simon . . .

I'm going to request some help from you in another thread, one I have not started yet.  

I am working on my Chapelon Nord and I need some advice. 

* * * * *

On this subject . . .

This thread relates to another thread that we had on the subject of "How many of us are there?" 

Sales volume . . . or lack thereof . . . must certainly be playing a very significant role here.

There can be no doubt that most if not all of "our" manufacturers would rather be producing 3000 items at a time instead or 100 to 200. No doubt unit costs and unit selling prices would be a bit lower if volume were up. But even if all products were reduced by 15% across the board, would there be a substantial difference in volume moved? I doubt that it would make much difference at all.

On the subject of currency fluctuation . . .

I don't really expect manufacturers or stockists to adjust pricing very often vis-a-vis currency valuations - either down . . . or even up.

One wishes to have inventory turn-over, but one struggles not to lose money, so when the Yen or the Yuan become more attractive in US Dollars, if the inventory is already in another country and has been paid for, no one will drop the price. However; when the currency valuation goes the other way, in all probability the price will not be raised either as the person holding the inventory will favor moving it out at a good price especially if it has been sitting around tying up money and taking space.

I have experience with TEAC Japan and TEAC America as well as with JRC (Japan Radio Corporation) and Furuno Electric in Nishinimaya as well as Furuno USA . . . and I can say that over a period of decades, these companies have sought to maintain price stability. They rarely raise their prices when the Yen gets more expensive to the dollar and they rarely lower them the other way 'round.

Compared with Gauge 1 trains, these Japanese companies are infinitely stronger and move a huge amount of volume.

I doubt that Foxconn in Taiwan or the electronic manufacturing plants in Shenzhen are adjusting their prices regularly . . . nor does the price of Apple products vary much with currency over the short-term.

My hope is that these companies that manufacture for the Gauge 1 hobby will simply be able to remain viable.

Cheers,

Joe


----------



## Kovacjr (Jan 2, 2008)

So lets look at an example. 

Accucraft produced the K28 going back almost 10 years ago. 

Price then was 4200USD for batch 1, batch 2 had a increase a year or two later up 4500USD. 

Many years later they built a K36 and K37 a substantially larger locomotive and its retail was 6000USD. So that's a 1500. difference in both increase and of size cost. What each one works to I'm not sure but if Aster built the K37 Hans said it would be 10k many years ago. 

I think part of the trouble today is that while our expenses all are increasing our pay is not at the same rate. Insurance for healthcare is more expensive for us now under the wonderful affordable healthcare. Our copay also went from 25 to 40! Plus the rates went up. And my wife works for Meridian and is insured through the hospital. Nevermind that out of state we are almost on our own being out of network with a much higher deductible.

Prices have risen in the hobby, though not sharp. Over the last few years its somewhat leveled off. The DSP191 /DSp51 is basically a C16 and they sold for 2400 retail where the C16 was 1800? more than 15 years before. **** my first Ruby/Ida was 250.00 off Ebay where that one sold for 400 15 years later. Its not all equal in increases.


----------



## du-bousquetaire (Feb 14, 2011)

Yes Joe I can give you all the advice you might need about the Chapelon with great pleasure.
I think that you definitly have a point there about maintaining the price for goods ordered before the devaluation and price stability. It's really because when I started to model US prototype in gauge one around 2009 right through 2011 you could find Dailights for sale at around 3500 dollars now Accucraft announces the N&W J at 5700 dollars for an engine not much more complex than the daylight. That is a big price increase. 
But as you say we all hope the manufacturers find it viable to stay in the business. Although I do beleive that keeping the price right can help volumes of sales. Which is really all that I am trying to say with this thread. I have no axe to grind against anybody.
Do let me know where you are asking your questions on the Chapelons so I can give you an answer. I will look for it.


----------



## John 842 (Oct 1, 2015)

du-bousquetaire said:


> .............Sure the Chinese middle class is asking for more and I do agree that it is fair for them to do so, but I don't get the impression that they get what they want by just klicking their fingers. *And I doubt that they have gotten much of a raise yet*..........



I think that they have been getting good raises for some time now, if this quote from 2013 is any indication ....

"Despite signs of a slowdown in the Chinese economy, General Motors posted record first-half sales in China, where GM sales now have surpassed the total number of vehicles the company sells in its home market of the United States"

Source .... http://www.cnbc.com/id/100870316

I know the Chinese market is four times larger than the US, but it's the *speed* at which the disposable income of the population is growing that is so remarkable.


----------



## BigRedOne (Dec 13, 2012)

Yes, I'd also read recently that living standards in China's coastal cities were near parity with US living standards.

That said, my employer has a factory in China and buys a variety of industrial goods there. The prices we pay for these goods is not increasing. If workers are making more, then that appears to be offset by productivity improvement (and whatever the Chinese government does to sustain its exports.)


----------

