Sure, but then companies don't have an incentive to make more if they can't sell it at a profit margin to justify opening more factories and hiring more people, especially if it's only a momentary surge. Long after the corona virus becomes a distant memory, we still have entire assembly lines just sitting there unused. Assembly lines that cost millions. A company isn't going to invest $10m in a new plant if they don't expect to be making at least that much back in profit.
Then there's the comparatively very few people who actually know how to make these ventilators. Do you think they're going to put in 100 hour weeks for free training everyone who walks through the door? Hell no. Demand goes up, price goes up. They will absolutely demand pay raises and extra compensation for not having a life for that period of time.
Let's say the production cost of a ventilator is $15,000, and they sell them for $25,000. I've dealt with the nightmare that is dealing with Government contracts in the past. Now throw in rent, utilities, insurance, payroll, consultants that know how to navigate the mess that is government purchasing (and across all 50 states, and on the federal level, and countless local levels) legal, freight, and other business expenses. That ventilator now really costs the company an average of $18,000. About a 28% margin which is actually a little low for a manufacturer.
Assuming no kickbacks and assuming the Government pays the company quickly with checks, the business is now making $7,000 per ventilator. Ok cool, now how many do they need to sell to make back the $10,000,000 the plant cost? 1428 ventilators is roughly their break even point.
Sure if they can make and sell 15,000 in a short time and sell all 15,000 in a short time, then just shut down the plant, they can make $90m in profit. Too bad that's not how real life works at all. They'll probably end up making 25,000 and finish with having 6,000 just sitting rotting in a warehouse because the pandemic is over and no one needs a ventilator anymore and of course you're going to make more in case someone calls and says "I need 4,000 ventilators by ASAP". Plus you will definitely have some people back out when turns out they didn't need so many. So now the company is at $460,000,000 in expenses (25,000 x $18,000, plus the $10m) and they've made 475,000,000 ($25,000 x 19,000) in revenue.
So company invests almost half a billion dollars to only make $15,000,000? And go through all that risk, work, and headache? That's barely a 3% margin. So yes, you can understand why companies may want to bump up that $25,000 to $30,000. Now they make $110,000,000. Now they're at a 20% operating margin. Which is about what a company like 3M would operate at.
I mean it stands to reason the price is higher because demand had surged in the last but still. Fuck china.
Charging more during a crisis is price gouging
Sure, but then companies don't have an incentive to make more if they can't sell it at a profit margin to justify opening more factories and hiring more people, especially if it's only a momentary surge. Long after the corona virus becomes a distant memory, we still have entire assembly lines just sitting there unused. Assembly lines that cost millions. A company isn't going to invest $10m in a new plant if they don't expect to be making at least that much back in profit.
Then there's the comparatively very few people who actually know how to make these ventilators. Do you think they're going to put in 100 hour weeks for free training everyone who walks through the door? Hell no. Demand goes up, price goes up. They will absolutely demand pay raises and extra compensation for not having a life for that period of time.
Let's say the production cost of a ventilator is $15,000, and they sell them for $25,000. I've dealt with the nightmare that is dealing with Government contracts in the past. Now throw in rent, utilities, insurance, payroll, consultants that know how to navigate the mess that is government purchasing (and across all 50 states, and on the federal level, and countless local levels) legal, freight, and other business expenses. That ventilator now really costs the company an average of $18,000. About a 28% margin which is actually a little low for a manufacturer.
Assuming no kickbacks and assuming the Government pays the company quickly with checks, the business is now making $7,000 per ventilator. Ok cool, now how many do they need to sell to make back the $10,000,000 the plant cost? 1428 ventilators is roughly their break even point.
Sure if they can make and sell 15,000 in a short time and sell all 15,000 in a short time, then just shut down the plant, they can make $90m in profit. Too bad that's not how real life works at all. They'll probably end up making 25,000 and finish with having 6,000 just sitting rotting in a warehouse because the pandemic is over and no one needs a ventilator anymore and of course you're going to make more in case someone calls and says "I need 4,000 ventilators by ASAP". Plus you will definitely have some people back out when turns out they didn't need so many. So now the company is at $460,000,000 in expenses (25,000 x $18,000, plus the $10m) and they've made 475,000,000 ($25,000 x 19,000) in revenue.
So company invests almost half a billion dollars to only make $15,000,000? And go through all that risk, work, and headache? That's barely a 3% margin. So yes, you can understand why companies may want to bump up that $25,000 to $30,000. Now they make $110,000,000. Now they're at a 20% operating margin. Which is about what a company like 3M would operate at.
That’s a long winded defense of shady business practices. No wonder you’re a shill