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[Richard230]

I hate to say it, but every morning I read my newspaper's business section and as you know there has been a lot of talk about our Brain Trust placing tariffs on Chinese-made goods. As you may also know, most of the parts that Zero uses to assemble their motorcycles in California are made in China and presumably will be hit with these proposed 10% and then 25% import tariffs.

Right now the business reporting pundits are of the belief that China will not back down and make America happy again and that a full-blown tariff war will result. If that happens, I don't see anything good coming out of this war for Zero. If their battery, motor, controller and frame imports all get hit with a 25% tax, they will have to pass it along to their customers - most of whom will throw up their hands and head back to the ICE motorcycle market if Zero prices increase by 20%, as would likely have to happen for Zero to stay in business. If that happens it is going to be bad news for Zero and its customers and possibly the future of the electric motorcycle market and manufacturing in the U.S. 

[Fran K]

 "battery, motor, controller and frame "

That sure is not what the local dealer lead me to believe.  I was told of his trip to the factory.  I can not recall it all but he described making the battery.  The cells look sort of like file folders.

Generally these forums make a political section often only visible to folks that are logged in.  Not sure of the owner/global moderator wants to comment.

Fran

[Richard230]

I am not trying to make a political comment, but an economic one. If tariffs go up, so will Zero prices, in my view. And no matter what your politics are, that affects all Zero owners and potential future customers in one way or another. (Used Zero prices might go up, as an example.)

I have visited the Zero factory a couple of times. The frames are made in China and I have seen their shipping boxes. The battery cells are made in a Chinese factory and are assembled into the battery case modules at the Zero factory by their employees. My recollection is that the Sevcon controller is also made in a Chinese factory and shipped here to be installed on the chassis.  And I wouldn't be surprised to hear that the fairing parts also are sourced from China. The suspension is made by Showa, in Japan or some other Asian country, I assume. The J.J. Juan brakes probably come from Spain. I think the dash display may come from Thailand.  If there are any U.S. manufactured and sourced parts on the Zero, I can't think of any.  Maybe someone knows more than I do. 

[Richard230]

I think I will summarize my thoughts and then shut up, unless someone would like to discuss this matter further:

If Zero's imported parts get taxed upon entry into the U.S. then Zero will likely have to raise their retail prices accordingly as they likely don't have enough economic clout to force their suppliers to cut their wholesale prices to compensate. If Zero's prices increase noticeably, then that will likely cut into their yearly sales. If that happens the company might have to compensate by making internal staff or design adjustments to either reduce their product costs somehow or accept lower yearly sales numbers. Neither of these options are going to be good for the company, their customers, or the future of the electric motorcycle industry.


Just to give you an idea how at least one large companies plans to deal with the tariff situation:  My daughter works for a small division of a very large multi-billion dollar company that sources everything they sell from different Chinese manufacturers. They had an internet meeting recently where the employees were told not to worry about the effect tariffs would have on their sales. The company believes that they purchase so much stuff each year from these manufacturers that they will be able to force them to lower their prices to compensate for the cost of the import taxes.  Personally, I don't know about that, but that appears to be the "company line".  In any case, I really don't think that plan would work for Zero. 

[Apriliarsv]

I don't know how it will all play out. But I do know one thing , it will be interesting.
China has been kicking our azz in trade for decades. They don't fear us at all. We
owe them trillions in debt, and they steel billions of dollars of our military tech.
With no fear of us doing anything. All our former elected idiots had to do was tell
China that just cost them half the debt we owed them.
Look at it this way. We have been playing cards for a while. A new dealer just walked
in and shuffled the deck. 

[Erasmo]

Starting multiple trade wars isn't really shuffling the deck, more flipping the table.

[T.S. Zarathustra]

I'll tell you how this will end. Other countries will start to make electric motorcycles with much cheaper parts than US companies have access to. Then those bikes will be imported to US, making Zero go out of business because they cannot compete on price.

[Richard230]

Hopefully Zero has been aware of the possibility of tariffs targeting the many parts that they import from their Chinese manufacturers and has pre-ordered and received enough parts to assemble the 2019 models.  Then they could skate by for at least a year without needing to raise prices significantly.  If the situation is still going on for another year, then just about every company and consumer is going to feel the impact of this trade war in their pocketbooks one way or another. 

[Apriliarsv]

I don't know why our president has such a problem with HD.
It's almost like he thinks Milwaukee is part of canada.

If people think the trade war hurts wait until they have to start paying the debt down.

[Erasmo]

Didn't the current administration increase the US debt by 5,6 trillion this year, raising it about 20%?

[Richard230]

Didn't the current administration increase the US debt by 5,6 trillion this year, raising it about 20%?

That sort of thing really goes against my conservative financial leanings.  I have always tried to make my income exceed my expenditures all my life. And I don't know why governments can't do the same, except that it is just too easy to print money when things get tight. (Actually, I do know why most governments tend to go into debt, but this is not the venue to discuss politics.)

[T.S. Zarathustra]

Hopefully Zero has been aware of the possibility of tariffs targeting the many parts that they import from their Chinese manufacturers and has pre-ordered and received enough parts to assemble the 2019 models.  Then they could skate by for at least a year without needing to raise prices significantly.  If the situation is still going on for another year, then just about every company and consumer is going to feel the impact of this trade war in their pocketbooks one way or another. 

You miss the impact of having to borrow money to purchase parts you might not need for up to a year, plus all design faults that will be impossible to fix between batches, and that those parts might have to be scrapped due to low demand. Purchasing far in advance is very risky business.

[Richard230]

Hopefully Zero has been aware of the possibility of tariffs targeting the many parts that they import from their Chinese manufacturers and has pre-ordered and received enough parts to assemble the 2019 models.  Then they could skate by for at least a year without needing to raise prices significantly.  If the situation is still going on for another year, then just about every company and consumer is going to feel the impact of this trade war in their pocketbooks one way or another. 

You miss the impact of having to borrow money to purchase parts you might not need for up to a year, plus all design faults that will be impossible to fix between batches, and that those parts might have to be scrapped due to low demand. Purchasing far in advance is very risky business.

I agree. It certainly is a gamble. But it is worth considering if you are pretty sure that tariffs will be imposed upon your suppliers. How else can you keep prices under control?  If Zero prices need to be raised by 10 or 20% due to the tariffs that is going to be a tough sell to their customers.  Of course, by now this is just hot air, as whatever is done, is done.  Hopefully all will be reveled in a month or so.