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Why are ships usually unprofitable in industry?

Author
Caesar Shepherd
Juro Political Extraction
#1 - 2016-09-12 05:02:29 UTC  |  Edited by: Caesar Shepherd
Before I buy a blueprint, I always check to see if the input materials cost less than the output product(s). I find it strange that my most profitable BPOs are the cheap ones like missiles, ammo, and some modules and rigs... And I can get some pretty big profit margins off these items ( > 30%) if I sell them before the market crash. However, it seems that > 90% of the BPOs for ships (of all types: frigates, cruisers, capitals, industrials, etc) are either huge losses or just barely break even at 10%ME. This makes no sense to me - I'd think that stuff that's harder to manufacture would have larger profit margins. I am mostly referring to T1 ships but the few T2 products I've checked look even worse.

The only theory I have regarding this is that ships are primarily manufactured by large null-sec or WH corps and alliances which build ships for defense rather than for profit. So they would use their manufacturing capabilities to be self-sufficent in remote areas far from hisec markets but occasionally dump excess ships which they got "for free" or at a reduced cost since their ore-buyback programs often buy ore at a markdown. Never been in a nullsec corp though, so I could be completely wrong here.

Any insight here? I'm mostly just curious.

Caesar

--- Edit ---

I looked into some T2 ships (and other items) and found that many of them did indeed have decent profit margins before considering invention costs. But the cost of datacores seems to kill most of the profits...
Sheeth Athonille
Rabid Dogz Mining
#2 - 2016-09-12 05:14:22 UTC
Some of the ships have been hit by tiericide and have had their mineral costs increased, so those who made them before hand built them at a significantly lower mineral price.

Other possibilities would be that they get their minerals cheaper (alliance buy programs), build them in upgraded outposts, or they are possibly selling them at a loss to get rid of stock.

You'll find that a lot of people seem to want to build ships rather than modules because of the mindset "they're big, so they must be profitable", and never bother to run the numbers, so they end up selling at a loss. But hey, the minerals I mine are free, right?
Rhivre
TarNec
Invisible Exchequer
#3 - 2016-09-12 05:41:16 UTC
Sheeth Athonille wrote:


You'll find that a lot of people seem to want to build ships rather than modules because of the mindset "they're big, so they must be profitable", and never bother to run the numbers, so they end up selling at a loss. But hey, the minerals I mine are free, right?



This is definitely part of it.

I stick to T2 modules. because, well, 1 ship uses up to 8 guns for example, and both T2 and T1 ships use T2 modules.

T1 modules are primarily used in T2 manufacturing, as you either fit meta or T2 modules to your ship, and use faction or T2 ammo.

The number of people who just build T1 ships without checking the profit is far higher than the number who randomly select a T2 item and build it without checking.

T2 in a very few cases (primarily low volume items) is affected by T2 BPO holders, but, this is a very small segment of the market.

T2 prices also lag behind today material prices as people buy anything up to 1 month in advance
voetius
Grundrisse
#4 - 2016-09-12 11:15:38 UTC

There can be different reasons depending on the individual ship, some are:

- null sec manufacturing as you pointed out in the OP

- with T2 ships and Crius, the old -4/-4 default copies were all changed to iirc 8/16, which is better than you can do with any decryptor. So, someone coming back from a break of a couple of years that had some of the old copies suddenly finds that they are now worth building.

- the starter missions hand out T1 frigates and destroyers, so it's possible that people are buying them up in rookie systems at a steep discount, well below their mineral cost

- there are ship builders that churn out large numbers of cruisers, BC and BS at POSes at the lowest possible cost. Some of these are well known in the Haulers Channel. So you need to be very efficient to compete with these people and it's possible they are sourcing mineral locally at below Jita price (yes, that sounds a bit like MIMAF, but you could also look at it as a type of mineral compression, and if you can't sell the minerals at Jita sell but can sell them compressed into ships at the equivalent of Jita sell then it's perfectly rational).

- tiericide and increased mineral content could account for some as stated by Sheeth

- and of course, people not checking their total cost to build.
virm pasuul
Academy of the Unseen Arts
#5 - 2016-09-12 11:54:11 UTC
Tech 2 ship manufacture can be very profitable, even from invention.

The trick for me seems to be making savings on the raw materials.
Each time you purchase the materials from the market you are paying taxes. You'll then pay taxes again on the finished item when you go to sell it. If you can avoid a few steps worth of taxes that helps. e.g. really simple stuff like manufacture your own construction blocks with PI.

The main cost of a T2 hull seems to be the two racial moongoos e.g. Titanium Carbide and Nonlinear Metamaterials for Caldari.
The racial moongoos tend to vary quite a lot in price on the market. If like me you have to buy them from the market then buying them when they are cheap really helps profits probably more than any other factor. I tend to sink quite large ( for me ) amounts of cash into these when they are cheap. A spreadsheet allows me to see how price variations in raw materials effect the end price of the T2 hull.
I pretty much never buy raw materials near time of manufacture, always in advance at a favourable price.
I will however convert raw materials into components e.g. Quantum Microprocessors straight away. There's not much benefit to holding them as raw materials, and converting them to components means you can respond to the market quickly when you have everything you need ready to go.
Once I have a stash of all components, I then use those to react to the market, what's hot, what's about to be hot, and manufacture end T2 hulls as appropriate.

Non racial moongoos make up the next biggest chuck of build cost so repeat the above.

The downside of this approach is you tend to have a lot of ISK tied up in the production pipleine at any one time.

Don't play the 0.01 ISK game it's pointless, and a waste of time.

I make around 27%-39% margin on this method depending how greedy and how much of a rush I'm in.
It can be slow though, and you have to have a lot of ISK tied up at any one time. There may be others out there who would take my money and make more profit by selling a lot more smaller items more quickly for a smaller margin but turn over many times in the time it takes me to turn over once.


Zad Murrard
Frozen Dawn Inc
Frozen Dawn Alliance
#6 - 2016-09-12 15:08:09 UTC  |  Edited by: Zad Murrard
virm pasuul wrote:

Each time you purchase the materials from the market you are paying taxes.


Here we have one of the issues which affects many products. Above is actually earning by doing trading, ie. buying low with buy orders. Odds are one would actually make more money by just selling those products with sell orders rather than transforming them to ships.

If you buy from sell orders you do not pay any taxes.

Manufacturing profit is : buy material from sell order, manufacture, sell. The rest is trading profit, PI profit etc.

It is easy to make almost any item 'profitable' if one either buys them items with buy orders or somehow acquires them themselves. The problem is, that is not manufacturing profit.
Tipa Riot
Federal Navy Academy
Gallente Federation
#7 - 2016-09-12 15:41:05 UTC
My rule of thumb is, if it's profitable to build on current material sell prices, look at it ... then check what 2nd step production would add the most benefit (most times it's one item, sometimes 2, seldom 3), do that, two steps, that's all. Usually I sell then a mix of T1 and T2 products, to optimize slot utilization on a 2-day-cycle.

I'm my own NPC alt.

Harry Flowerpot
Three-Headed Monkeys
#8 - 2016-09-12 16:27:39 UTC
Apart from what everybody else said: I actually like just building stuff once in a while. And in those cases I don't really mind selling at a loss because it was fun building it. It's still a game for me, not a job.
Morgan Agrivar
Doomheim
#9 - 2016-09-13 04:45:51 UTC
I pretty much take salvage from my missions and make my own cheap T1 ammo. Makes me feel productive but going beyond that makes my head hurt.
Cooyaw
Cajun Fast Mart
#10 - 2016-09-13 12:32:12 UTC
While there we're some thoughtful responses. This thread made me feel dumber. Learn to trade? Maybe I'm crazy, sheet all my name is cooyaw
Mathra
Brutor Tribe
Minmatar Republic
#11 - 2016-09-19 21:03:51 UTC
I mine my own minerals, so everything is free and whatever I sell the ship for is pure profit Big smile
Sabriz Adoudel
Move along there is nothing here
#12 - 2016-09-20 08:36:43 UTC
Mathra wrote:
I mine my own minerals, so everything is free and whatever I sell the ship for is pure profit Big smile


This poster is being facetious, but MIMAF idiots (Minerals I Mine Are Free idiots) are among the most useful of idiots in EVE.

There are a number of ships whose price I watch, and if they fall below certain thresholds (usually after a MIMAF idiot floods the market), I buy them up en masse, create a short term supply shortage, then sell them into the spiked price.

I do this much, much more with modules. (I am sitting on over 15000 tech 2 sentry drones at the moment, although the supply spike was quite different here)

I support the New Order and CODE. alliance. www.minerbumping.com

General Muller
SA Incur-Mine
#13 - 2016-09-20 09:13:12 UTC
Sabriz Adoudel wrote:
Mathra wrote:
I mine my own minerals, so everything is free and whatever I sell the ship for is pure profit Big smile
I do this much, much more with modules. (I am sitting on over 15000 tech 2 sentry drones at the moment, although the supply spike was quite different here)

You should consider diversifying your assets a little more :)
Skia Aumer
Planetary Harvesting and Processing LLC
#14 - 2016-09-20 17:02:41 UTC  |  Edited by: Skia Aumer
Caesar Shepherd wrote:
null-sec

In any confusing situation - blame goons!

T1 industry in nullsec mostly has two segments: capships (including supercaps) and doctrine ships. Both are traded for profit locally. Moving capitals is a huge PITA these days, but subcaps are also really heavy - you can only pack 7 battleships in a jump freighter. Most of the times you get more profit by self-destructing it and getting insurance. No, goons do not affect your Jita prices for T1 ships.

My bet is on MIMAFs living in highsec.
And dont overlook lowsec.
Mr Crowley
Among Shadows
Shadows of Eden
#15 - 2016-09-20 20:04:39 UTC
Caesar Shepherd wrote:
Before I buy a blueprint, I always check to see if the input materials cost less than the output product(s). I find it strange that my most profitable BPOs are the cheap ones like missiles, ammo, and some modules and rigs... And I can get some pretty big profit margins off these items ( > 30%) if I sell them before the market crash. However, it seems that > 90% of the BPOs for ships (of all types: frigates, cruisers, capitals, industrials, etc) are either huge losses or just barely break even at 10%ME. This makes no sense to me - I'd think that stuff that's harder to manufacture would have larger profit margins. I am mostly referring to T1 ships but the few T2 products I've checked look even worse.

The only theory I have regarding this is that ships are primarily manufactured by large null-sec or WH corps and alliances which build ships for defense rather than for profit. So they would use their manufacturing capabilities to be self-sufficent in remote areas far from hisec markets but occasionally dump excess ships which they got "for free" or at a reduced cost since their ore-buyback programs often buy ore at a markdown. Never been in a nullsec corp though, so I could be completely wrong here.

Any insight here? I'm mostly just curious.

Caesar

--- Edit ---

I looked into some T2 ships (and other items) and found that many of them did indeed have decent profit margins before considering invention costs. But the cost of datacores seems to kill most of the profits...


The answer is obvious. People are selling them at a loss for ISK. Could it be that eve markets have been reduced to essentially 1 region with 3 relevant systems... yes I think so. So quick, let's drive the prices down so MY stuff can sell instead of the other 30 guys in jita doing the same thing.

A centralized economy in a game like eve is doomed for failure because there is NO CHOICE. People will ALWAYS buy the cheapest, and that will be defined by how many are selling in 1 spot.

Support code and anyone else fighting to break up empire.
Tau Cabalander
Retirement Retreat
Working Stiffs
#16 - 2016-09-21 17:10:11 UTC  |  Edited by: Tau Cabalander
Ship stockplies are a lot larger than most can imagine.

There are literally years worth of ships stockpiled on some accounts, and there are probably hundreds or more of such accounts.

All these ships were constructed when the costs were lower. They can sell at a current materials cost loss, and still make a hefty profit.
Leida FireEye
Iron Eagle Industries
#17 - 2016-09-21 22:07:07 UTC
An additional factor that hasn't been mentioned yet - people often sell unused ships. The ships they sell go to station traders at below-mineral-cost prices. This enables the station trader to undercut the builder.
Zan Shiro
Alternative Enterprises
#18 - 2016-09-22 05:29:32 UTC  |  Edited by: Zan Shiro
Leida FireEye wrote:
An additional factor that hasn't been mentioned yet - people often sell unused ships. The ships they sell go to station traders at below-mineral-cost prices. This enables the station trader to undercut the builder.



And this works better for accounts woken up after market shifts or just old ships on some bitter's accounts. I have sold older ships to best sale price for the simple reason I still make good profit on them. Tiericide side effect....it shot most ships up in price. Sell pre tiericide ships and make some cash.

Had an old Kronos laying around. Went on a year break, So in that long time frame 300 mil got tacked on. Best Buy order like 290 mil profit for me. Just wanted it gone no isk war games, better things to do than work out that last 10 mil...if I even got it.

Have done this with lots of ships.
Oriella Trikassi
Trikassi Enterprises
#19 - 2016-09-23 16:21:34 UTC
There is an obvious answer - are you looking at Profit as opposed to ISK per hour?

The Spreadsheet says today:

Inferno Light Missile profit 22%, ISK/hour 5,100
Moa profit 4.86%, ISK/hour 303,000

The ISK per hour program says about the same, I just checked. Spamming out lots of missiles doesn't compensate for the higher price per unit of the cruiser.

So the question really is why does anyone make Light Missiles? The answer is I suppose cash flow, I started out manufacturing cheap stuff because I could only afford to buy cheap blueprints. No matter how profitable a Titan might be, I don't have the wealth to consider building one.

There is also the factory slot limit - each avatar can run a maximum of 11 jobs at the same time. Once you reach that limit as I have, you are going to stop using the lower ISK/hour blueprints.

None of this invalidates the interesting answers others have given! There are many reasons why prices are as they are, the devil is in trying to work out which one applies to a particular item.
Zenboca
Doomheim
#20 - 2016-09-23 19:34:21 UTC
Mathra wrote:
I mine my own minerals, so everything is free and whatever I sell the ship for is pure profit Big smile

Gold. Twisted
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