Where is my free market?

[Odin]

Recently getting into (or rather trying to get into) building black rifles, all I seem to see anywhere is "OUT OF STOCK" posts and 6-24 month back orders. My question is; WHERE IS MY FREE MARKET? How is it that there can be such overwhelming demand for these products and no supply to speak of? Shouldn't companies be running their lathes 24 hours a day to fill this demand vacuum? And shouldn't we be seeing a move into this market by manufacturers in previously unrelated fields? This is not what I was taught in economics. It seems to me that when a manufacturer can see these items daily trading at 3 to 4 times retail value, they would be burning the midnight oil to pump these products out as fast as possible, be that with more machines or more hours. The only logical conclusion is that there is something stopping the move to production to meet demand. Any idea what it is? It cant possibly take 24 months to make me an upper! What is going on here?

[Obviously a Plant]

It's harder to justify investing in more equipment or labor if your business can be legislated out from under you at a moments' notice. Until they have better assurances from the government, I suspect most ar companies will be happy to keep their current workers employed as much as possible...

[Odin]

That may be, but wouldn't it seem the initial investment cost would be recouped in only a few months sales? I mean they are selling secondary for 4X what the manufacturer wants in some cases. Meaning that if they were previously manufacturing at a 20% profit they can manufacture now at a 320% profit! I don't think it is the economics of it. It has to be something else don't you think?

[Obviously a Plant]

The FFL requirements for manufacturing arms or ammunition means the market is anything but "free". It is not a business that outside companies or organizations can jump into or re-tool for.

Maybe a bolt carrier assembly is not the simplest thing to make, or the current price is a reflection of a prior investment in being able to make dozens at a time... If I took the time to mill one myself, it could only be called a hobby, because I'm sure it would take me more than a week to get it right--at best.

Existing manufacturers are also limited by the credit they can obtain or the amount of their own profit they are willing to risk... A good deal of them might not think that America can afford or sustain the current gun buying lust, and then the market could be flooded with parts that the newly unemployed are selling.

From my armchair, the economics seem fairly clear. I don't think the secret communiques from the new White House or the ominous, unmarked cars parked outside have done much to influence the sound business acumen of our domestic firearms industry.

[Dr Rockso]

I think they're doing pretty well. A couple months ago you couldn't find hi-cap magazines or lower receivers without a ridiculous markup, now they're back to (close to) their pre-panic prices. I'd imagine this is a result of the manufacturers pumping out these fairly easy-to-produce components at a rate much higher than normal. The upper assemblies are going to take the longest to rebound simply because there's a lot more involved in producing them.

[Steve O]

That may be, but wouldn't it seem the initial investment cost would be recouped in only a few months sales? I mean they are selling secondary for 4X what the manufacturer wants in some cases. Meaning that if they were previously manufacturing at a 20% profit they can manufacture now at a 320% profit! I don't think it is the economics of it. It has to be something else don't you think?

yield management.

http://en.wikipedia.org/wiki/Yield_management

The manufacturers have set production levels, and a constant demand.
So why would they invest in more factories in the possible event of future legislation putting them out of business.

So instead of expanding, they sit there, making their products as fast as they wish, charge 200% more....and we buy it....

But you want them to spend millions on new factories under the fear that they can be shut down anytime new AW legislation passes?
I most certainly wouldn't invest in that company....

[elSquid]

That may be, but wouldn't it seem the initial investment cost would be recouped in only a few months sales? I mean they are selling secondary for 4X what the manufacturer wants in some cases. Meaning that if they were previously manufacturing at a 20% profit they can manufacture now at a 320% profit! I don't think it is the economics of it. It has to be something else don't you think?

I think your number are off - what do you imagine the _average_ increased markup due to Obama is?

It's certainly not 4x. That would be "standard" CMMG carbine uppers going for $2K, Saigas going for $1400, M1A SOCOMs selling for $7K... and those would have to be MSRP prices for the manufacturers to see the benefit.

OTOH, if you want to buy my NIB 16 inch Saiga 7.62x39 for $1400, PM me!

-- Michael

[CALI-gula]

Well, if it's free, why would anyone buy it?

.

[squishyhead]

The manufacturers have set production levels, and a constant demand.

This is the very thing that pisses me off about Springfield Armory. I asked this same questions a few months back when I put a $1000 deposit down for an M1A. Apparently SA has a long standing tradition of not changing any of their production procedures, regardless of supply/demand. Right now they know how much people want their firearms, and they know they'll still be there whenever they get around to making enough.

The one problem I see with that is what almost happened with me. I had to choose between investing $2000 in an M1A which meant waiting, or building an AR-10 that I could be shooting much sooner. I'm never one to rush a major purchase, so I had no trouble choosing the M1A, but they're definitely losing a lot of business from those people who aren't patient. It just doesn't make sense to not consider increasing your production levels when there are customers saying, "I've got 2K to spend on a rifle." Why would you ignore that and say we've already met our quota for this quarter, and be willing to lose all that business when you can make more?

[CalNRA]

That may be, but wouldn't it seem the initial investment cost would be recouped in only a few months sales?

you have no idea how much quality precision equipment required to make rifles cost, do you? People tend to think (to paraphrase an article I read a few years ago) gun companies are thee huge faceless companies that turn out racks and racks of products like an I-pod factory, but the reality is very different.

On top of that, in order to meet the demand they also must hire new people. With the administration threatening to ban this and that, why should they risk being stuck with all new expensive equipment AND more employees to pay when the chips fall?

[trinydex]

on the whole topic of yield management... wonder if all this housing crisis ******** would have happened if we just kept the same number of houses and charged a billion each....

[tankerman]

Try looking harder. I've seen uppers and lowers for sale by vendors on this site. No shortage of accessories.

[tankerman]

Guess he's not really that serious about "building black rifles".

[audihenry]

That's your market at work, bud. You're subject to the laws of supply and demand. Guess what happens to your drinking water supply if there's a major emergency? Yep, you dry to death!

[Steve O]

This is the very thing that pisses me off about Springfield Armory. I asked this same questions a few months back when I put a $1000 deposit down for an M1A. Apparently SA has a long standing tradition of not changing any of their production procedures, regardless of supply/demand. Right now they know how much people want their firearms, and they know they'll still be there whenever they get around to making enough.

I'm just guessing here....but this is no different than De beers controlling the flow of diamonds...

If Springfield releases to much M1A's to their retailers, those retailers are forced to compete with lower prices to clear inventory.
If Springfield controls the flow to a slow but steady rate, and finds that sweet spot, the retailers don't have to compete that hard as the hot item will sell out almost instantly!

Like when I got my Romy WASR-10 For $350 in 2006. Say the factory made 500k WASR's that year and sold them for $350.
They realize that no matter how many they make they sell for $350...so why not make less, and sell them for $450...then $600... what are they now $800??

I've noticed that the gun industry is like no other. I swear some factory can make crap, and still sell it.
Remember when everybody was talking crap about Del Tron. Well now everyone has a Del Tron and they are back ordered...

I don't know. I'm not an expert. Just a commodities analyzer.