With the dramatic expansion of the toy car market, it is easy to focus on the success stories for small-scale manufacturers. The truth is that we have had some companies that have left the toy car market in recent years for one reason or another. It may be constructive to look at these stories as well. Why do toy car companies fail in this business?
Remember Road Champs? Jakks Pacific is the parent company and they still produce some diecast cars in small-scale. Fifteen years ago, Road Champs were well known in the toy car markets. Their products were carried in all the 'big box' stores. They had a good mix of U.S. and international models and the quality was equal to that of their direct competition. They offered unique models like the Chrysler LeBaron and Buick Riviera convertibles. Their most recent series included cars with adjustable suspension, They also produced a line of cheap 'clam-shell' diecast cars much like those from Yat Ming and others.
Golden Wheel made a splash with their small-scale models. The best known ones were their four-car sets in taxi, police and fire colors. A '52 Chevy, '59 Checker and '96 Chevy were excellent but an odd pre-war model is best forgotten. Collectors who missed these sets are still looking for them. Golden Wheel also offered a variety of cars, trucks and commercial vehicles in their regular diecast line. All castings were decent with good colors and tampos. They came in clear plastic boxes and included a Ferrari F50 and Dodge Viper GTS as well as less exotic models. Today, Golden Wheel does not seem to offer small-scale models, focusing instead on other scales and vintage replicas.
Cooee Road Ragers were an Australian effort to offer classic Aussie muscle cars. The last I heard, they were no longer in business.
Tiger Wheels are still operating but new products have slowed to a trickle this past year compared to previous years.
There do not seem to be any active Eastern European or South American manufacturers of small-scale toy cars at present.
Companies like Summer, Pioneer and Yat Ming seem content to simply offer the same old models with just a handful of new 1:64 scale castings.
The reasons for these less-than-success stories are many and varied. Still some common themes can be identified. The primary reason may be the dramatic increase in licensing costs. Big car companies have forced toy car makers to pay huge sums in order to gain permission to reproduce models in miniature. To avoid licensing fees, companies like Majorette and Motor Max actually had their castings re-done to make them more generic. Maisto and Majorette have tried fantasy lines and even Hot Wheels and Matchbox have increased the percentage of no-licensed fantasy models to save money. For small companies, licensing fees are a major problem.
Getting shelf space at the big chain stores is another major challenge. In order to get space at Wal Mart, Target or Toys-R-Us, the wholesale price must be cut to the point of very little profit. Huge orders must be provided and un-sold stock may end up dumped at liquidation prices. Brands like Jada and Muscle Machines are facing these same obstacles and even Johnny Lightning has seen their shelf space greatly reduced at the big stores. Smaller toy car companies really don't stand a chance in the big retail chains.
The Chinese market has essentially created a monopoly on the manufacture of small-scale toy cars. Even South American and Eastern European workers cannot compete with the combination of skilled workers and the world's lowest worker pay rates. The ability to make toy cars outside of China has all but disappeared.
Prices of basic toy cars have not increased since the 1960's. This means that these toys are now selling for cents on the dollar when adjusted for 40 years of inflation. Companies like Road Champs and Golden Wheel had to price their products higher due to lower production runs, resulting in fewer sales and the ultimate failure of their toy car lines. Welly, Real Toy, Maisto and Motor Max are having a tough time making money with toy cars priced less that $1 today. .