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Actually, it is all about economy of scale! Tooling and design cost are the by far most expensive items on the calculation sheet of a locomotive. These cost easily run into the 6 digit figures on the lower end for a Diesel and the upper end for a steam engine. Figures of $200k are quite normal. A production run of only 1,000 locos would bring the amortization up to $200. Add to that the material value and purchased parts like motor etc. you are at $230 for a loco - without labor cost, which are an estimated $40 in China and about 2.5 times that amount in the US. Total cost before any mark-up would in that case be between $270, if made in China, or $330 if made in the US. With a mark-up of 100%, this would bring the sales price up to $540 and $660 - nobody is going to pay that for a "mass"-produced loco. Production batches must be significantly higher to allow for market pricing. I don´t think a manufacturer would produce a locomotive that sells less than 2,000 or even 5,000 pieces. Now to the myth of production in the US would bring the price up into astronomical regions. Yes, it would be more expensive to produce a loco in the US, but it´s not the labor cost driving that. Overhead costs are much higher in the western world, as EPA and Hazmat rules do cost a significant amount of money - money a Chinese manufacturer can (still) save due to the more relaxed attitude towards environmental and safety issues. Would you agree that labor costs and environmental & safety cost in Germany are higher than in the US? Official statistics will confirm this. If that´s correct, how come a small German business called Bemo is producing their highly detailed Swiss narrow gauge locos in Germany and are able to sell them at prices between $300 (DCC ready) and $400 (DCC & sound), including 19% VAT. The answer is economy of scales - their production batches run are much higher than just 2k pieces.
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