This discussion about X-Treme and their profits brought to mind some ideas I've observed over years looking at the EV industry ....
http://visforvoltage.org/blog/arcticfox/5579
There have been several EV makers go under because they were undercut by cheaper competitors (often sourcing products from China). The same pattern has happened in a larger scale in other markets .. so much that I have this question:-
Is 'low cost' always the best choice of product ???
If 'low cost' means the maker had to cut corners and produce a product that falls apart the moment you touch it, was it a good idea to seek the lowest cost? But it seems many people look for the lowest cost products as their primary motivation and hence places like Walmart flourish as a result.
In the personal EV market ... Some examples are the early ZAP, Vego, Currie, Badsey, Charger Bicycles ...
In ZAP's early days they popularized the small standup scooter. Their Zappy was in national catalogs etc. Okay it wasn't itself the best built thing but the Chinese brought out a bunch of clone scooters at half the price and ZAP did a poor job of competing (insisting for a long time to keep all production in Sebastapol).
Vego.. they sold the Vego 300 and 600 (I have a Vego 600 in my garage) and went out of business a few years ago. The scooter was really well built (but for a flaw in the frame) but they, too, were undercut by cheap chinese imports.
Currie used to be an independent maker but got swallowed by Schwinn and the technology is now sold under several brands.
Badsey used to make a line of really high end scooters .. they died for some reason that I don't know. They were in a different market niche than the others I'm mentioning so perhaps the reason they died wasn't the cheap chinese scooters, maybe.
There were several e-bicycle makers the one I know best is Charger Bike (because I have one in my garage). It sold for $1500 or so and maybe someone's eyes would pop out at that price but it's a really well built bicycle and if you take a decent bike and add a decent conversion kit (such as BionX) the price would end up close to the $1500 the Charger bike sold for. However there have been many cheap import e-bicycles come to market for less than that $1500 price tag, and Charger went out of business.
I'm not saying chinese==crap because there are probably good quality products made in China.
On the other hand there has been a flood of cheap poor quality low end scooters (often from China) which then caused some good quality scooter companies to die.
Business is business ?? And maybe those companies that died weren't prepared to compete ?? Maybe so.. ? That is the theory behind capitalism but I think the quest for low price at all costs leads inevitably to cheap crap products that serve nobody.
I certainly don't disagree with anything you said, but the trick is how do you compete with a higher quality product against crap. As an Apple product user, it seems that they have figured out how to do this, but few others have. From what I have seem, if you want to sell a quality product, you have to be satisfied with fewer sales. Period. Apple continues to be a small supplier (of computers at least), and their recent growth in sales appears to be driven more by consumers finally becoming dissatisfied with the alternative, rather than anything Apple is doing.
Sort of the "If you build it (right), they will come" philosophy.
Tom
Apple is an interesting choice for comparison - personally I don't equate Apple with quality. I equate Apple with great marketing and cool industrial design. They operate a closed system to ensure stability - but that stagnates innovation and also hampers adoption (they're learning though - take the iPhone App Store as an example). Heaven forbid someone should try and make a peripheral for an iPod or an iMac without jumping through Apple's hoops though (I know, I tried it once).
But back to scooters - and to win32forth's great summary "how do you compete with a higher quality product against crap"? It's all about value add - if your higher quality doesn't equate to perceived increased value by your customer then why on earth would they spend more money for your product?
From my perspective, first you need to really have a product that is competitively priced and if there's cost increase over the "entry level" bikes then you better have a rock solid reason as to the benefit of that increased cost. You better also make sure that the market cares enough about that value to pay increased cost. For example - it's NOT enough to rely on people's national pride (made in America). You have to point out the advantages to the customer of that (not to the national economy). From my perspective building my bike in America makes sense because the biggest improvement I see necessary in bikes like the XM and the EFD is attention to detail and the time to fix that is during the design process. So, yes, I'll be putting "made in America" front and center - but along with an explanation of what that gives the customer.
So, I'd add a second line to Tom's closing remarks:
"If you build it right, they will come. But you better let them know what right is and why right costs more"
John H. Founder of Current Motor Company - opinions on this site belong to me; not to my employer
Remember: " 'lectric for local. diesel for distance" - JTH, Amp Bros || "No Gas.
"there are probably good quality products made in China",I also can agree at it though I am foriegn trader of a chinese manufacturer specilized in electric motorcycle. It is not news that ome prodcuts from China are of bad quality,but chinese always improve there quality for the world.And chinese products are so cheap just because of the low labour cost,you know.Please trust the products made in China,we will be better and better.
Cntact me if you need any information about our comany and our products.
Robert
Email:ever.chenyi [at] gmail.com
I think it's the consumers fault.
It wasn't that long ago that Japanese products were of poor quality and low prices. Since then Japan has come of age and makes some of the best quality products in the world. China is the new Japan (IMO) of consumer product production. Appearantly we have short memories and so we fall into the same low price trap in droves. The down side is we spend more for less in the long run and American manufacturing suffers losses each time we fall for it. China is so large and so diverse in what they are producing that many items can not be found anywhere without the made in China lable. SLA batteries are a good example. The best ones I've ever boought are still US made. Head and shoulders better. They cost up to 50% more but in the long run are a better value by far than any Off shore battery that I have previewed. I see a lot of batteries so this is not a few examples I'm talking about. It's sad that these quality products may go away as so many others have because American consumers appear to bo so easily pulled to lowest price and accept inferior quality. Spending more in the long run and killing our manufacturing base in the process.
It forces companies to offshore production or close the doors. I believe capatilism should be more regulated and some degree of tariffs should be in force to even prices between domestic and foriegn sources. We obviously can't trust consumers to be smart, or economically patriotic in the short run. It's always too late for so many domestic companies once we re learn the lessons of the past again.
Remember the period of BUY AMERICAN following the glut of Japanese products and the realization of the consequences for US business. Walmart, the buy from China king today, was founded on this buy American wave years ago. How soon we forget and repeat the past!
Aerowhatt
I totally agree with Aerowhatt! In short, we've got to become smarter than the typical walmart employees that gather the carriages in their parking lots!
taheibbor
It seems very simplistic to blame it all on low labor costs from abroad. The notion that on 1998 CHINA made about 40000 electric bicycles and on 2005 about 10 million of them speak for itself .Building an AMERICAN EV that would impact the consumer, the country . the people , should go the way of the MODEL T (FORD) rather than the TESLA. Have we forgotten the concept to make things available to the regular working man? To hung the intended profit on the initial price is just aiming for instant gratification .This farmer few years back confided me : " It cost me 2 1/2 cents to make a can of corn ... I know that because I do the whole process ...I grow the crops , I got a cannery ..." .He said :" That includes even the piece of paper the can is gummed with - same thing goes for a beer ....Now if most years I just break even , Where the money goes? Since you pay $ 0.89 cents or whatever sticker price is at the grocery store. SALES & MARKETING .... ".Still there was pride in owning his own land and business .PROUD COUNTRY PEOPLE ! YEAH there are differences but take a bite at electronics or computer CHIPS . In three years the product gets three times cheaper and twice better. However it won't work unless a certain quantity is made and sold but it is clearly defined for us the real value of a penny or a dollar?
Actually, I'd say it's simplistic to blame it on any one culprit.
You're right - it's not just the labor costs. Just like it's not just the consumer's fault, nor sales and marketing (either too much (your view) or too little (somewhat my view with regard to educating the consumer)). It's a complex interaction between all of them. However, you then go on to offer a simplistic world view because I think your farmer example is next to useless in this context.
You say you want the Model T not the Tesla? Then what are YOU doing to make that happen? It's easy to complain. It's not so easy to do something about it. Even if you don't do anything - let's talk hypothetically.
You (or anyone else who wants to play) have the hypothetical task of making the electric Model T. How are you going to do it?
PS: A large part of Ford's success was because he got the labor costs down (along with the production costs) - he's often considered the father of the modern assembly line. Kind of ironic, huh?
John H. Founder of Current Motor Company - opinions on this site belong to me; not to my employer
Remember: " 'lectric for local. diesel for distance" - JTH, Amp Bros || "No Gas.
The farmer's example is to show that most of us cannot really figure the real value (production cost) of a soda pop , a pencil , real state ,etc since it is always controlled by the capital -the banks the MONEY . The example paired with the fluctuation of everything : the weather , the oil prices and world's economies . My understanding was that Ford's vision was to make an affordable vehicle. There were other manufacturers building the ROLLS and the BUGATTIes .It is easy to be proud building the best. What about building the most affordable?...Yeah , hypothetically there must be a way to convince or force all that power and money to scale down making the quick buck and put some of it to benefit the regular man. More than educate ourselves ,a higher conscious level is needed .Before Ford's success there was his heart or insight at work.
I don't think most people realize that in this mass production environment labor is less than ten percent of the cost of most things. That begs the question why the race to Asia for lower labor costs. From what I've been able to find with my aquantences (I used to run a manufacturing co.). Even though they still sing the praises of low labor cost. A deeper look shows that transportation costs and the customer service costs and inefficiency of distance and cultural differences of being so far away from the actual fabrication. These distance costs easily eat up most of the paltry (per unit) labor savings.
The Zap Zebra could qualify as "any mans/womans EV". At $10,000 to $12,000 the price point is "low". But as the canned corn example and thousands of others like it show, it could/should be significantly less expensive. Imported from China The Zebra has quality issues and performance issues. I would pay maybe $7,000 to own one. Since it takes many upgrades to make it a viable daily driver (my opinion)
Back to the original question. If you only save 5% to 7% per unit by outsourcing to Asia then why do it? It's simple really, By manufacturing in Asia an American company can sell itself a $3 product from it's Asian entity for $65 and then resell the product in the US for $75. The US portion of the American company shows little profit for US tax purposes! The take for outsourcing is the tax advantages! This is a "Free market" consequence. Different tax laws would discourage instead of encourage outsourcing.
How many of us know that to sell a car in China (not manufactured in China) a 22% tariff is charged by China. The tariff is reduced to zero if the importing company has a China based 50% (at least) partner in the product. For a China manufacturer to sell a car in the US they are required to pay a 2% tariff. We can't show up to a gunfight with a knife and expect to succeed. We can't keep buying into the retoric of the "free market" nimrods (electing them) and expect to do better, not worse, in the world market.
Aerowhatt