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Several RC magazines around the world have asked us to write a monthly column. With the kind permission we will re-publish the column at our web site too so all of the XRAY fans can read the latest news and behind the scenes information. Enjoy.

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I am back from the Nürnberg Hobby Show, which was a small break for me after the last several very hectic months. As I reported in my last column, for the last few weeks and months we have been living our lives in the RX8 project which was extremely demanding; our approach of nothing less than perfect quality takes its share of time and an equivalent amount of stress. Even today we are still fine tuning the smallest details, we still work around the moulds to strive for perfection, and still some last minute changes and updates are being incorporated based on current (and frequent) feedback and reports from team drivers.

Almost daily we receive reports and feedback from the team around the world and with the exception of a few minor issues I was aware about, all the feedback was similar: the car is easy to drive, had plenty of traction and steering (even if the track conditions were not optimum) and the effects of small set-up changes were immediately noticeable. The majority of reported problems were the result from still-not-quite-perfect composite tolerances which created some vibrations, and also the 2-speed was more difficult to set-up as the moulding of the shoes required some adjustment. All of those reported issues were already on our To-Do list and most of them were even already solved.

So what’s going on and what’s new? “Nothing” and “too much” at the same time. The most important news is that RX8 had its first real race debut and it could not have been any better. While I was in Nürnberg at the show to debut the car to the public, distributors and press, the annual US Winternats race in Florida was being held and Team XRAY USA was debuting the RX8 at the track! The RX8 was being raced at the hands of top racers such as Ralph Burch, Paul Lemieux, Mike Swauger and Jerome Renaux (from Europe). The early days were more difficult for the team as the car had to be kept away from the eager, prying eyes of public and press due to the upcoming release in Nürnberg.

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The first reports from the race were very positive as Paul Lemieux – for whom it was the first time running 1/8 on-road – set an early TQ in the first round of qualifying. As the qualifiers ended I was pleasantly satisfied to hear that Mike Swauger captured the overall TQ. I was also very happy to hear that the RX8 worked right away in the real race, as until now all the feedback and reports were only from private testing. My satisfaction got even better when I got news that Mike won the main final with Paul Lemieux finishing behind him in 2nd place. So on its debut race weekend, the new RX8 managed to claim TQ, the win, and a double-podium finish!

There could not have been a more successful and impressive debut, nor greater satisfaction from the entire team who worked on this project. I hope that even more satisfaction with the RX8 will come in the long run as the public gets hold of it and realizes what an amazing car it is. Oh, and another extra-good news was that Ralph Burch won the nitro touring category race and as such added another great achievement victory for him and NT1 after claiming the World Champion title.

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While the team was enjoying the racing, I was busy at the Nürnberg show where interest in the RX8 was extremely high. Despite the 1/8 on-road category suffering in popularity in the last few years, it is still considered the “king” category, something like F1 in motorsports. Everyone was interested to see what the RX8 was all about, so the XRAY booth was full all the time and I was enjoying the buzz. The exhibition atmosphere always eats me up and it is always fascinating to see how the industry has been changing and moving around within a year.

The 2011 Nürnberg show did not bring any revolutionary or industry-changing news. However it confirmed the ongoing trends both in products and in the industry shifts as such. It is always fascinating to watch the newcomers and their activities as well as the well-established companies and their usually small but sometimes also radical changes in the strategy here and there. This year confirmed the ongoing domination of the off-road cars popularity in any form, either electric or nitro, and in professional racing models, RTR kits, or even cheap toys.

The ongoing trend was also visible in the structure of the exhibitors. Many of the long-standing companies did not show up at this show, while plenty of new brands which did not exist last year presented at the show with a full product portfolio (especially with plenty of different off-road cars in all different scales, nitro or electric powered, 2WD or 4WD). I did not use the words “new companies” on purpose, because many times we see the same products just being rebranded and those are really not new RC companies bur rather are a company rebranding OEM products trying to grab their piece of the pie. Nowadays it is super easy to be a “new RC company” by buying OEM stuff from China, putting a brand on it and getting in the business mill.

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This year it was no different, again there were plenty of all-new brands and it was no surprise that almost all of those new companies were from Asia (primarily China). Year by year the Nürnberg exhibition has more and more booths of Chinese companies increasing in quantity and size. The potential is evidently huge and we can expect that more and more of the traditional companies who will not be able to survive the price war will get pushed out. Year by year I see this trend, also demonstrated by the ”what’s going on” at the Nürnberg show. Everyone who has been more inside the RC industry will agree that recently everything has been moving and happening quicker and faster. I have been in this industry more than 30 years but things have never been faster and the pressure has never been greater, and I really do not know what still can and will happen.

So what’s going on? Things are moving faster like in all industries and like everything in our lives. In the current world economy it is logical that customers are always looking to get the maximum in their investments, so things like “quality” and “my favorite brand” are becoming secondary evaluation criteria. New RC brands appear now faster than ever, and the quantity of new companies grows faster than the amount of customers proportionally. In such a very overcrowded market where everyone wants to be “the one” company that survives, business methods are changing fast (usually for the worse) as everyone wants their piece of the pie (or at least to survive).

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An excellent example is the 1/8 off-road market. You can easily see now maybe up to 50 different brands fighting for the same customer. Take a typical medium-size country where you have on average 30-40 hobby shops focused on racing products. Of course there are usually several times more hobby shops, but those who are really focused on racing and will offer service and support and have technical knowledge make up only a fraction of the total. So you take 50 brands being available in the market and 40 hobby shops in a mid-size country, and you will get that nowadays almost every one of these dealers is also a distributor for some off-road brand and usually also a distributor for some engine, fuel and easily a distributor for several brands of tools (which number not in dozens but probably in the hundreds).

You may say that a customer does not care and I agree. It is logical that everyone wants to get maximum value for their money, and you may argue that with higher supply there will be lower prices for the end customers. That is completely true until the break-even point is reached, which I believe has already passed in the RC industry. The reality behind the facts is that a hobby shop being a distributor at the same time means that the particular product will get into the country only through that one particular shop. At first glance someone may think that a dealer makes a fortune as he earns profit for being both distributor and dealer… but in most cases that is not the case. If the dealer wants to “push” the new brand, the way is either through pricing or through winning races to gain a better reputation.

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For most dealers the “price way” is the logical step which puts the dealer/distributor into a price war from which there is no going back. A new customer walking into a hobby shop will be logically offered that particular brand as the dealer will want to sell the product he imports. And at the end there is also no surprise that a dealer concentrates on one or a few brands only because with such an extensive line-up of different brands in the market it is impossible for any dealer to carry all the different products and provide appropriate service. So at the end the choice for the customer gets smaller. So when a customer has a desire for a different brand than he gets offered locally, there is no other choice than to look at an online hobby shop.

For those companies that did not choose the “price strategy” the only other way is to build their brand based on racing achievements and build a desire from potential customers who will either try to get the product locally or will end up buying it online or directly. To have good race achievements you need to have few top-level drivers who may have chances for good results. To have such drivers you need to expect to invest a lot, and at the end the results may never come or the return on investment may not be adequate.

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Of course the team in the racing industry is the foundation of each serious company who spends time testing and developing the products, but it is something strange at regional races when maybe more than half of the drivers are sponsored drivers. If this tempo continues, in a year or two all drivers will be sponsored. The final effect will be that to carry a team will be so expensive that it will not be profitable for most companies to cover because of decreasing sales as the pie gets smaller each time a new company enters the market. At the end only those companies who have income from other segments of the market or a completely different industry will be able to afford to carry a team, or they will have to go out of business or sell their company to new investors like we have all seen happen a few times in the last few years.

Lastly we now experience an all-new strategy by the manufacturers: a combination of both mentioned strategies. Now there are attempts to assign a team driver for a distributor/dealer, while at the same time bringing something completely new to the industry. Well, we will see how well this works in the long term.

In the last while we have seen plenty of team drivers moving around and plenty of things are going on in the industry. I frequently get asked why don’t we hire some top off-road driver to win a race. Usually I answer that XRAY is a family company and I am responsible for 100 workers and their families. As such all the turnover has to first of all be used to cover salaries, taxes, duties, bank loans, suppliers… and only after all these are covered we decide on whether or not the remaining resources will be invested into a team or new projects or new technologies which would help us produce our products more effectively to remain competitive to some level.

As such it is always a difficult decision where and how to allocate resources as effectively and efficiently and smartly as possible. On one side it is our competitive advantage that we produce all products in-house, but on the other hand it means that a lot of resources need to be constantly invested in servicing, upgrading, or replacing technologies. There is a lot of hassle behind which of course everyone else who buys OEM stuff from Asia does not experience.

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But back to the point. Yes, the team is extremely important and we always try to find the optimum balance of resource investment to ensure that Team XRAY will continue to be well represented at important race events. But most importantly we will continue to test and develop new products. Without the team, development would suffer a lot. However being a family company and having a goal of being in this business not only today but also tomorrow, we need to decide where and how to allocate the resources as well as possible. We could easily invest a short-term fortune to buy top drivers, but in the long term it would not be possible to spend more than you earn. We have seen some companies do that and they are now gone.

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The XRAY racing team has in an extremely short time achieved an extensive and impressive list of incredible results and victories, including the World Champion title, multiple European and USA titles, and hundreds of national titles all around the world. I have been very thankful to the entire team for their excellent work and the results achieved. With the last several hectic months where the industry has seen a lot of changes here and there, it was no surprise that some of our team drivers left for better deals. I wish everyone the best success with their new teams. The core Team XRAY has remained intact and we continue with our work and our dedication has never been stronger. We will wait until there will be time again for shifts.

Recently any time I get a question about how I evaluate the current changes in the market and the current situation, I say that being in this market so long and knowing the market capacity, manufacturing possibilities, development and production costs, team and racing expenses, I simply know that the current trend cannot be maintained and there will come a market shakedown where the weak or those with bad strategies will quickly be gone. As such, I try to look at the entire difficult situation with a positive outlook and a bit of humor when I say “Shake it, baby, shake it.”

I want to continue to live my dream and vision. We continue to design, produce, and offer our customers high-quality model racing cars; customer satisfaction in our products and service is our top priority. I feel great satisfaction when a customer reports (either online or personally at some race) his/her satisfaction with the product. This gives me great satisfaction for all the sleepless nights and all the hassle and stress we go through daily. Any time we get reports from team drivers about some good achievements and results, it is also another reward for our doing a good job. And this is what I like about my job and about what we have been doing. It pushes me forward all the time.

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It is middle of February and we are planning to start shipping the new RX8 in few weeks but still we are not 100% ready and we are still fine tuning small details. They may be very small details, but those at the end are those things that differentiate our product from anyone else. However, at the same time fine tuning those details is extremely expensive as they take a lot of time and resources. All the RX8 moulds were produced a few months ago but we still fine tune details here and there. To fine tune a mould means you need to assemble the entire mould, put it on the machine, run a small batch, let the parts stabilize for a few weeks and just after that measure all the parts to check for unexpected shrink deformations.

Based on the results you need to design and produce new electrodes, disassembly the mould, put it back in the manufacturing machine and fix the problem or get the parts of the mould to grinding machines, and then build the mould back again and run the entire process again. Sometimes it is possible to have a perfect mould the first time, but usually it is a long term process that takes a lot of time and the fine tuning adds 30-50% extra costs to the initial manufacturing expenses. As such at the end the cost for producing a typical mould is on average between €10000– 25000 depending on the size and complexity. At the end it is no surprise that composite parts for RC cars seem too expensive. It is not because of high profits but because the mould production is so expensive compared to the market capacity and quantity produced.

The composite material and production time are a fraction of the mould expenses partially divided into the particular product. Now consider that because of the increasing amount of manufacturers the possible production quantity of each part decreases, it means that the mould costs are divided into less parts and as such the part gets more expensive. So I agree that more competition forces everyone to decrease the prices but only until the break-even point when it makes no sense for the manufacturer to produce the part, or it forces to decrease the quality. So at the end it may happen that more manufacturers will mean higher costs as the RC industry is a relatively very small industry.

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Luckily as we produce all products in-house so we can keep control over production batches and rather run smaller batches more frequently (which also logically increases the overhead costs) but those companies who have to buy OEM in large quantities are in a more difficult position because if their stock becomes obsolete there is nothing they can do, just to try to fire-sale the stock which is again the start of price war. So does the RC market shake? Yes, and I still say “Shake it, baby, shake it” with tongue in cheek.

We still expect a lot of things to happen and things will continue to move faster and nobody knows what will happen or where things will end up. I only know that we will continue our work and be the last RC car company who does not produce in Asia. This will for sure be a tough task, but we will continue to do what we know best – how to design and produce the finest high-competition model racing cars. The 2011 product portfolio of XRAY has again been updated and is ready to blow away the results from the last few years. There are still plenty of new products on the task list and underway, so you may expect more exciting products in times to come. The racing calendar is long, so I will be with Team XRAY at many of the races and I will be more than happy to meet and talk with anyone. Thank you for your support in 2010 and we hope for your ongoing support in 2011 and beyond.


See you around the tracks. Enjoy the ride and ‘til next time.

Dipl. Eng. Juraj Hudy
XRAY Chief Designer

Archive:
Column #1 - Behind the Scene Stories
Column #2 - Worlds Flashback
Column #3 - T2'007 Debut
Column #4 - Designing the T2'007
Column #5 - Worldcup Review and NT1 Testing
Column #6 - Developing and Designing the NT1
Column #7 - Developing and Designing the NT1 - Part 2
Column #8 - Back to the Races
Column #9 - XT8 Truggy Development
Column #10 - Touring Car Development
Column #11 - Bling-bling Mentality
Column #12 - Hot Summer Washout
Column #13 - New Electric Touring Car
Column #14 - Off-road Development
Column #15 - My micro love
Column #16 - Back in the Dirt
Column #17 - Worlds Preparations
Column #18 - 808 Tests & Stress
Column #19 - Excited for the Worlds?
Column #20 - Statistics, Expenses Sheets, Production Analysis, Calculations…
Column #21 + Column #22 - Euros + Euros + Worlds
Column #23 - The Busiest Season Ever
Column #24 - In Between the Worlds
Column #25 + Column #26 - Well Developed or Overdeveloped?
Column #27 - Back to The Future
Column #28 - 2009 Kick-off
Column #29 - Crazy what?
Column #30 - Last indoor race of the season
Column #31 - Getting into summer season
Column #32 - Heading for the Euros
Column #33 - Testing - Always last minute, always new ideas
Column #34 - European Champion - title celebration
Column #35 - Time to move on
Column #36 - National Heroes
Column #37 - 2010 ready
Column #38 - Decade of Triumph
Column #39 - 2010 Racing Calendar
Column #40 - DHI, ETS & Nürnberg Show
Column #41 - World Championship Practice
Column #42 - EC indoor, EC 1/12, Silverstate, LRP Masters, Neo
Column #43 - Nationals All Around
Column #44 - Warm Warm-ups, Challenging Challenges
Column #45 - Electric Touring Worlds 2010
Column #46 - Team XRAY - World Champion!!!
Column #47 - Summer Vacation, 30x USA Champion Title
Column #48 - T3 Saga Continues
Column #49 - RX8 – What? How? When?
Column #50 - The Making of the RX8 – Part II