Ed Kapuscinski wrote: "First, ER isn't doing all their manufacturing in the US. I know, for a fact, that their trucks come from China (the land of no copyrights...)."
I am not quite sure what you are trying to imply with this comment, but this kind of talk has come up from time to time, and I believe it deserves a response.
When you say that you know for a fact that ExactRail's N-scale trucks come from China, where does this kind of factual insight come? Comments of this kind imply inside knowledge, and I am interested to know from where it comes, especially when you attach to it the phrase 'the land of no copyrights?'
For matters of the record, ExactRail does source our N-scale trucks from a vendor in China. For what it is worth, we also source our wheelsets from this same vender. By the way, this Chinese vendor also supplies the wheelsets for Intermountain, ExactRail, BLMA, Fox Valley, Reboxx, and most likely for Atlas going forward, and others as well. For ExactRail, it is the one of only a very few things that have outsourced tooling for our models.
Per the N-scale trucks, there is no model train company owns the tooling for the N-scale trucks in question. It is not the case that any model train manufacturer paid for this tooling. Rather, it is the case that a Chinese vendor paid for this tooling, and this Chinese vendor makes this tooling available to any of his clients. If a person is spreading rumors to the contrary, then I would suggest that: 1) they are deliberately engaging in slander or 2) they know not where their tooling ends and Chinese-owned tooling begins.
The fact that we source N-scale trucks from a Chinese vendor is very much an exception to our business model. As you know, ExactRail has a large machine and product development department. Tooling is a time and investment intense process, and ExactRail is proud to have a fully realized and professional tool shop--with machining centers and injection molding presses. We bear the investment and maintenance costs of these machines, which, as you may know, is considerable. Furthermore, we employ veteran Master machinists and specialized engineers proficient in mold design. We mold much of our own plastic in house, and this requires people to perform QA on plastic shots, to desprue them, to inventory and prepare shipments to our manufacturing partner.
However, ExactRail competes in an environment with other manufacturers, and some of these manufacturers are far in bed with Chinese partners. In fact, there are some who are in bed to the degree that a Chinese partner may offer tooling at significantly reduced cost, no cost, or generously amortized costs on some projects. It serves the interests of Chinese-partner to offer a deep discounts of this kind, because when a model train company is strapped for cash, the Chinese-partner can enable a project that can make money through the unit production costs. The upshot is that these Chinese companies also own many of the assets which make the model train companies a viable business. When a Chinese vendor undercuts or generously amortizes the cost of tooling, consumers still expect ExactRail to be competitive despite these circumstances.
As everyone on this list knows, the industry is amid a dynamic shift. This shift poses challenges on different manufacturers in different ways. Unlike Micro-Trains and Kadee, we don't have a massive OEM coupler market to serve as a revenue center and subsidy for this venture. We are doing our very best to offer highly detailed models at the most competitive prices we are able. We weighed our options carefully. Given that we design, engineer, tool and injection mold in our own Orem, UT facilities, our company is framed differently than nearly all of our competitors. As such, the demands on our company are different. We felt that we needed to strike a different course to continue serving our customers well.
I trust that there are some who are inclined to disagree.
If so, I hope that there is an understanding that we are doing our best to serve the industry amid the evolutionary influences of the internet, massive cost increases in China and a shrinking dealer network. We do it with no malice. If we are wrong, then we will pay for it with our livelihoods. If we are not wrong, then we will be an option for modelers among many different options.
Best regards,
Blaine Hadfield
Vice President, Product
ExactRail
