It didn't really occur to me until today, but over the past few months, we have seen the US dollar (USD) gain against the Euro (EUR). A year ago, the exchange rate between the two was around 1.30 USD for 1 EUR. Today, the rate is 0.86 EUR for 1 USD (buy) and almost par for sell.
European model train companies have long done business with Chinese factories and the costs have been billed in dollars and this means that the cost for items has gone up as the EUR has dropped compared to the dollar.

So, a model that cost the company 200 EUR (260 USD) to manufacture and was selling for 400 EUR now costs 260 EUR and the costs must be passed on to the customer.

Some German forums are mentioning that some manufacturers have cancelled models. It was reported that the follow-up models of the Liliput SBB RABe 511 would have double the cost of the original productions and have been postponed or cancelled. There have also been some rumours of companies like LSM possibly looking to cut back on fine details as a way of keeping the costs lower.

I think that this will be a major incentive for companies to bring production back to Europe if the costs are lower, but I am not certain whether the existing manufacturers in Europe have the capacity to absorb all of this potential production.

I have been looking through my collection and have concluded that the list of models that I am still waiting for to complete my collection of trains that I have seen or have ridden is getting smaller and that if I can avoid another trip to Europe, my collection should be pretty much complete with a last few additions.

Of course, the model RR industry will propose new models that will tempt me in the future, that is as certain as the sun rising in a few hours.

Regards

Mike C

Here in the US production has moved back for a number of reasons. Wages in China are rising, quality control and more of a demand for goods made in the US. Model prices here increased quite a bit a number of years ago due to that modeling items used to be tariff free but not no more. When the Euro came into existence prices also increased, remember how they were to remain the same? I have one box that has a sticker for 10.50 Euro and below it was a old sticker of 10.50 DM. At least the internet allows one to shop for prices but low prices always mean a good deal.

As usual the following is my simple opinion.

In the long run (as economists love to say) prices of any goods including toys, reflect the balance between demand and supply.

In my lifetime, the balance in regards to most things has changed only once, and that was in the 10-15 years after the 1945 war.
Any goods that were desirable, being in short supply, were expensive, and that included some but not all toys.
Certainly, model trains were relatively more expensive than they are today.

I occasionally buy old models on eBay internationally - run-of-the-mill 30 year old stuff costs way more than when originally marketed, because of long term inflation.
And I see brand new models in the hobby shops in Australia that cost the same, no more.

Across goods of all types, and housing, I see the same prices world-wide.
The exception may be the USA, where some goods and housing seems cheaper than anywhere else.

regards
Kimball

I meant to say a low price does not always mean satisfaction. Paying a premium price does not either for that matter. We, the consumer, have to rely on the manufacturer for the quality of goods sold to us. Manufacturers have to do certain compromises in order to keep items affordable and also to make a profit but hopefully in the end they sell us a quality product. Marklin, at least for me, seems to get right more times then not. I really do not care where a product is made but offshore production has been a problem for Marklin and others. As a plumber in the US I avoid buying tools made offshore (China) as they inferior to ones made in the US. The currency used to buy products has been and will always be a game until there is only one currency worldwide (which means never).
Since 2000 there is now tariff charged for items brought into the US however items mailed overseas do not seem to be charged. However if I bring the items back in my luggage I am charged unless I can prove it was a gift.
Model railroading can be quite affordable or quite expensive depending on what one wants or can do themselves. I keep mine analog as converting to digital is out of my range at this time but I may win the lottery this week.

However a typical business will run a US$ account and will hedge against currency fluctuations by keeping funds in that account instead of remitting them back to the base currency of the country of operation. This mitigates the exchange rate fluctuation problem to some degree.

The problem is that the USD went from just under a EURO to about 0.70 EUR between 2008 and 2014. In 2014, the Swiss Franc and the USD rebounded against the EURO (translate, the EURO dropped against those currencies), leading to a situation where the Swiss Franc is now about 1:1 and the USD is about 0.88 EUR, an increase of just under 20%. This means that Chinese manufacturers now have to be paid 20% more than they did in 2008. Some manufacturers may have had reserves in USD, likely from sales to distributors or dealers where the invoice was paid in USD, but since Europe, particularly Germany accounts for the lion's share of model train sales, most of those sales were probably in EUR and thus, the companies cannot escape this extra 20% cost for the models.
For a model that the manufacturer ordered from a Chinese supplier that cost them USD390 (EUR 300) and they were selling for EUR 500, that model now costs them EUR 360 and the sale price is probably now at least 600.
It was reported that further models of the Liliput Staedler KISS trainsets would have seen their retail price go from 600 EUR to over 1000 EUR as a result of the change in costs and it seems that this and other models have been postponed or cancelled by manufacturers. There seems to be a rush to find European manufacturers who can handle productions for these companies, but it will likely be difficult as other industries will be competing with model train companies for these production opportunities and companies that commission larger quantities and production runs might have a better ability to get the contracts while the smaller companies and smaller production industries will suffer.
If a company retains the equipment needed to increase it's production, it may have an advantage over other companies. If a company has lost it's internal ability to manufacture, it may be at the whim of the market and may not be able to find a cost effective production source and in that situation, it may find itself out of business because it can't keep it's prices competitive.

Regards

Mike C

Goofy,

The problem exists for all model train fans because the producers demand to be paid in a currency that has gained a lot of value over a short period. For me it is double, because the Canadian dollar has dropped from 1:1 with the US dollar to 0.81 USD, meaning that prices from US dealers and suppliers are now 20% higher. When you add to this the fact that the USD is now also 20% higher against the Euro, that companies that have to pay the producers for their models in US dollars now have to pay about 20% more in cost, which is passed on in the dealer cost and in turn to the customer in the retail price.
Technically, US customers should not see an increase because their currency has gone up, but because the companies are based in Europe and have increased their dealer costs, the price for US dealers has gone up too. US customers do benefit in that they don't have to pay additional exchange at purchase, whereas Canadians have to pay the additional 20%. Maerklin, Roco, Fleischmann all have Canadian distribution through the US network, so we get double dinged.
Canadians ordering from Europe have to pay the increased Euro retail price, but benefit from the fact that the CAD$-EUR rate has remained pretty stable at around 0.65 EUR to 1 CAD$ and from the VAT export rebate, making European orders cheaper than US orders right now.

The problem is so severe that for some models, the production costs have increased to the point where companies are cancelling projects, either due to concerns that the item(s) won't sell at the price point that they will now have to offer them for or simply because they judge that the project can no longer be profitable for the company.

This does not only affect me, but affects every modeller differently, even you. The cost of models from China or anywhere outside the EU where the transaction was done in USD$ will or has increased by at least 20%. The European companies are not taking this amount out of their profit, but passing it on in the cost. Companies are flocking to find manufacturers in the EU so that they can avoid or minimize this increase in cost, but there are only so many companies in Europe that can perform this work and model train companies have to compete with companies that make electronics, electric goods and other plastic goods for the production slots that may come open. If you think that a 5000 unit run for a model train is going to win over a 500,000 unit run for a razor or hair dryer, you are kidding yourself. This is going to hit our hobby hard, mark my words.

Regards

Mike C

Hi Mike,
Thankyou, very interesting reading.

It means that Marklin are sitting in a box seat, as we say.
With well established European manufacturing facilities, and experienced human resources.
However, with currency fluctuations at the mercy of speculation, the advantage may be temporary.

One wonders if their recent offerings from China (Bavarian S2/6 and the Nohab diesels) were the result of either:
1. an offer too good to be true from a Chinese manufacturer, or
2. an over-commitment of their own capacity, that did not allow these models to be made locally.

regards
Kimball

Pick up a paper and pencil with the ink.
Write 1...10...100...1000 euro.
There you see how to add numbers on the products.
Without the ink,you cannot write symbols.

He's obviously off his medication! Weird.

Hi Anders,

Of course, I agree with you, but in this country ( UK. ), there are many 1,000's of people who survive very well without working...

Ian.

Goofy,

you've convinced me now!

Fully agree Peter, here in my town (Den Haag / The Hague) 80% of the children have single parents (mothers) who depend on benefits and food stamps and have no money for toys, let alone Marklin. And this poverty in the Dutch cities is getting worse day by day.

In this photo taken by Mehmet at the Rossdorfer Modellbahn Markt you can see what's 'wrong' with our hobby...only 50+ man are intrested in (or can afford) model trains.

Hi all,

There is a future...

Ian.




....

Unfortunately Marco your probably right.

The 3 boys all well into their 30's now have virtually no interest in the trains although I am hopeful the youngest may take more of a interest as he gets older. Hell the daughter shows more interest.

Some of the grandkids show a lot of interest but like their parents they too most likely will lose interest once they hit the teens. I'd like to think that out of the 14 so far at least a couple will take up the torch before I pass....... with luck another 20 years to convince them.

As others have said there is just too much "crap" available for kids now days, when most of us were kids you were dam lucky to have a train set or slot cars. But there wasn't a hell of a lot of options either except for model kits. Sad but most of us would not be any different if we had been born after the 80's.

Hi Ray,

I think that's a pretty good prediction of the future of MRR. Märklin as well as some DC manufacturers will survive, but they'll have to cater to a different market. What surprises me in today's MRR scene is that the offer ist still huge despite shrinking sales, so there's still some hope. Maybe kids will eventually get tired of electronic games ... Some companies will go bust, but that's not new. Bing, which used to be the largest toy company in the world, went out of business in 1932, and a number of post-war manufacturers failed in the 1960s or 1970s.

I'll try to get my daughter as well as any future kids we will have interested in Märklin. I can always try ... So far, she has enjoyed watching model trains in action and has even managed to make a digital locomotive run using the mobile station; that's not so bad for a three-year-old.

Best regards,
Mark

True Mike. Then when these kids have families of their own they may return to our great hobby? Peter

I don't think that will last. A lot of men have done it, and when they get tired of it from a few days to a few weeks later, they cover it up with concrete.

Model trains is the way to go, they never get covered with concrete.