Tuesday, November 24, 2015

Two-Wheel Electric Scooter Shortage on Horizon

Since couple of days ago, China customs has been cracking down on the export of the two-wheel electric scooters.  None of the products to be exported through most of the China’s major ports will be allowed to go out.

This is due to a patent infringement law suit filed by some idiot in China.  Idiot because Chinese law allow for design patent that is based on infringing the mechanical patent owned by Segway.

We are lucky to have our products shipped already, so it does not affect us.  However, a lot of the other sellers who still don’t have their products exported will NOT get their products.  If the freight forwarders they’ve engaged have very strong “connections,” they might still get a pass.  But the palm-greasing fee will definitely add into the cost of their products.  This will be a very minority since there just aren’t that many people who has such good connections.

I expect this dog-and-pony show will be there for a few weeks.  And then, perhaps, the Chinese customs may choose to release the products already made, waiting at port.  Or maybe not.  One can never be sure about China and its policies.

This blockade is most certainly going to affect the supply of the product.  I expect a supply shortage, temporary or not, will be on the horizon very soon.  Selling prices will undoubtedly go up due to the limited supplies.

Nonetheless, this supply shortage will only affect U.S. sellers.  For China sellers, they are sending the orders one-by-one and the Chinese customs may not want to bother with holding them up.  Again, this is not for certain.  In any case, this shortage will benefit China sellers.

When and if Chinese customs again allow this product to be exported, there will be a flood of supply that appear on the market at roughly the same time.  Sellers will be very eager to dump the product.  I expect by then, the selling price will dip well below $200.  Sellers will be forced to liquidate the inventory at a loss just to cover some of the costs already spent on the products that has been sitting and waiting for weeks.

If this product is going to stay permanently on the Chinese customs blacklist, then I expect it will become a turning point in the popularity of the product.  Since only China sellers can offer this product, most American consumers will tend to stay away.

This blockade affects generic and branded products alike.  Even expensive brands such as Airwheel, Ninebot, and American brands such as IO Hawk will be not be exempted.