Saturday, November 15, 2014

Economics & Why $25 AR15 receivers and $300 AR15 Rifles will be on Shelves Soon

Economics & Why $25 AR15 receivers and $300 AR15 Rifles will be on Shelves Soon

Dandy functioning
$39.99 Palmetto Armory
Lower, Anderson Uppers, and
MicroMOA Overrun barrel
created a wonderful pistol build
Back just a few years in the ancient times of the year 2000 there were less than 29 or so manufacturers producing AR15 receivers and rifles. I wish I had the exact number, however according to my research it would appear that under thirty is the generally accepted number for that time period. Now fast forward to 2008 as a noted socialist event organizer from overseas assumed the presidency and a liberal heavy congress convened. We justifiably all feared "they" would be coming for our guns. Well its not like it didn't happen... they did try and still are.

The explosion of AR15 manufacturers began at that point and has not stopped even beyond the current market sales downturn of the firearms industry. As of 2013, there were an estimated 500 AR15 manufacturers in the US and that does not include import manufacturers. It seemed everyone and their brother was producing AR15 receivers and rifles either themselves or via OEM relationships. Most were just "Me Too" products with their logo on the side of some existing manufacturer. Even giants like Mossberg, Ruger and Smith & Wesson got in the game backed with competition crushing marketing programs. Shooting from 29 AR15 manufacturers to 500 is over seventeen times the number of AR15 manufacturers in 2013 as were estimated in the year 2000.  Even with bloated AR15 sales that is a lot of slices of just one AR15 sales pie to slice up. If the panicked frenzy of AR15 buying had continued in 2013 and 2014 it would not be an issue, however it did not.

2013 was a little soft from a firearms sales perspective and 2014 firearms sales began with a deafening silence and a quiet panic from people who have never even considered having to do "marketing". Many new firearms manufacturers just ramping up production in 2013 and 2014 were shocked at the lack of demand for their Me-Too products and wondering where all this supposed demand for AR15s was. I have heard from more than one of those original 29 manufacturers that the firearms bubble has burst and they are facing some challenging financial times after such a boom up until 2013. Some of the most respected names in AR15s are now facing financial shortfalls they have never experienced. Many of these newer manufacturers are now terrified that sales out are not equaling bills coming in. This puts the squeeze on everyone.

Its easy not have have to worry about budgets and financial planning when your company has a continuous twelve month backorder. Having rode the ".com" bubble, I can tell you that fiscal responsible behavior from new business owners is not created in the best of times, it is created when you have to try really hard to make every penny count and you are maximizing efficiencies. To meet "perceived" demand, I saw first hand people with no machining or business experience jumping into million dollar manufacturing equipment and real estate purchase agreements and taking even bigger business loans. Even in the best of times this is risky behavior.  I actually had several Congressman approach me willing to provide free land, building, and grants to me if I was willing to bring new firearms manufacturers to create jobs... looking back it was a low risk opportunity that I should have jumped into, however where would that company and those jobs be now.  It really is a economics 101 supply glut issue. There are just too many AR15 manufacturers on the market to support a sales demand far less than what manufacturers need to produce and sell to survive and even right now I can buy a lower receiver for the price of two pizzas.

The reality was that liberals politicians were the best salesman the firearms market has and likely will ever have. That entire political fiasco drove "gun people" to buy way more than they ever had and drove even "non-gun" people to suddenly develop a "I had better buy some guns now or never" attitude.  The sales spike of all firearms and ammunition was more than a rather small and incestuous cottage firearms industry had ever seen. Those who were already up and rolling with production made the kind of money during that bubble which allows them to retire stunningly rich all within a five year period.  Even those manufacturers who had excess capacity from aerospace or machining businesses, were able to jump in and start churning out wildly custom premium priced AR15 parts and rejoice when they began raking in giant piles of cash simply for just making receivers and a handful of custom parts. The "me too" manufacturers jumped into the market as well. Some did well... some not so much.

Most companies made significant facility and equipment investments to start making or increase current AR15 capacity which required bank loans and more workspace. Top shelf $2500 AR15s rifles begin slipping to $2000 to move excess inventory which pushes the $2000 ARs to $1500, and so forth until you get to the $500 AR15s which end up being pushed to the $300 range.  Excess capacity leads to a glut of individual AR15 parts on the shelves at prices unseen in well over 20 years. As an example, I have been picking up blemished $39.99 Anderson Manufacturing and Palmetto State Armory upper and lower receivers, $80 Nibo BCGS, and $100 barrels over the last month from various sources. Even now, patient DIY AR15 builders can build nicely appointed AR15s well under the $400 mark. $300 AR15s on the shelf and $25 blemished lower receiver are not that far off if the glut continues.

Stay tuned folks... if you think prices are low now, wait until late 2014 and 2015 and I would almost guarantee complete AR15s will be less than a cheap iPad and stripped lower receiver will less than the price of a large pizza.

UPDATE 2016 - As one fan noted below, some of my predictions came true. At one point I did purchase several Anderson AR15 lowers for $25 each and during Christmas 2015 we did see $300 AR15s. Now of course our best gun salesmen is back at it with 2nd Amendment limiting executive actions so we are starting to se prices rebound now. Stay tuned folks, its going to be a wild 2016 and 2017 for gun sales.


Unknown said...

I think this article deserves an update. Your prediction came true.

Unknown said...

Where so?