Weaponry also has a discount season
On the occasion of the “Double 11” online shopping carnival, the US arms manufacturer also gave customers a surprise. The “Defense News” website reported that the Pentagon and Lockheed Martin unanimously decided to launch the “discount” F-35 “Lightning II” fighter aircraft, with an average unit price drop of 12.8%, falling below $80 million. So, under what circumstances are weapons and equipment sold at a discount?
Clean up inventory
In most cases, the sale of weapons and equipment is for the purpose of cleaning up inventory. For example, after the end of the Second World War, the US military warehouses accumulated a large amount of combat materials such as aircraft and tanks. To reduce costs, the Pentagon decided to clean up the supplies in a discounted manner. At the time, a “Stuart” tank sold for only $10. Russia also frequently discounts decommissioned equipment. The retired T-62 tanks are sometimes sold at less than 1%, and the MiG-19 fighters only sell for tens of thousands of dollars.
The non-UK is the one that deals with the strength and scale of weapons and equipment. The British Ministry of Defence held a defense exhibition in 2017 to sell weapons and equipment, even various military office equipment and second-hand military uniforms. The discount is surprisingly large – the original price is 65,000 pounds (1 pound is about 9 yuan) The military Land Rover only sells for £2,000; £3,000 can buy the £85,000 “Saxon” armored personnel carrier; the retired “Royal Ark” aircraft carrier originally cost £200 million and the processing price is only £3.5 million… It shows that the weapons sold by the British are basically below 50% of the original price, and some big guys are even as low as 20%.
Seize the market
Just as the United States lowered the unit price of F-35 fighters, there are also discounts on the sales of active weapons and equipment. The main purpose is to seize the domestic and international markets. The Russian-made Su-57 fighter is also a typical case. It has been reported that after receiving 16 orders from the Russian Air Force, Sukhoi will cut the unit price of Su-57 by 20% and immediately attract an additional 60 orders.
The K9 self-propelled artillery made in Korea is another example of seizing the international market at a lower cost. The data shows that the number of K9 self-propelled artillery exports has reached 500, surpassing Germany and other self-propelled artillery production countries. According to the analysis, the reason why Korean artillery is selling well, low price is the main reason – the unit price is about 3 million US dollars, only half of other similar products. In addition, in order to attract customers, South Korea also offers a “big gift package” at the same time as the low price. For example, in order to obtain a large Turkish artillery, South Korea not only lowered the price of the K9 self-propelled artillery, but also transferred a modern automobile production line for free.
The US “Public Machinery” website pointed out that advanced weapons and equipment rely on discounts to cut prices to seize the market there are hidden concerns. The manufacture of weapons and equipment is a very rigorous process. In order to maintain profits, manufacturers must find ways to cost, so that the quality of equipment cannot be guaranteed. For example, the F-35 fighters will bring a large number of orders for sale. Under the pressure of rushing time and reducing costs, Luoma has no time to solve many problems existing in the aircraft. The discerning customers have faintly seen the F-35. The quality has fallen. The website speculates that Sukhoi’s reason for lowering the price of the Su-57 fighter may be compromises in certain performances, such as the use of the 117S engine with the Su-35 fighter, rather than the Su-57 standard. The fifth generation aero engine “Product-30”.
In order to maintain their military product reputation and sales revenue, exporting countries are reluctant to discount their products. For example, the Russian Defense Ministry and the Federal Military Technical Cooperation Bureau jointly issued a ban, which does not allow Russian military industrial enterprises to sell weapons and equipment to foreign markets at prices significantly lower than their domestic procurement levels. The US Congress has also passed legislation requiring that if foreign military products are to be discounted, they must first report to the Congress and obtain consent.
However, this issue is not difficult for US arms dealers to solve. Bloomberg has reported that in order to circumvent the “discount authorization” of the Congress, the US government, the Pentagon and the arms dealers have converted the “depreciation” into a “dark subsidy”, which is to exempt some of the R&D expenses that overseas customers should pay to the arms dealers. According to a report released by the US Government Accountability Office, between 2012 and 2017, 99% of the US foreign arms trade was operated in this “dark subsidy”, involving a total amount of US$16 billion. For example, the missile defense system sold by Lockheed Martin to Saudi Arabia has no discount on the price, but actually reduced the R&D expenses of the $3.5 billion that Saudi Arabia should pay, and it was a misappoint.