Some suppliers are now “upside down” on amplifiers, meaning they are selling them at a loss.
Expenses on top of tariffs have turned a profitable car audio item into a loss leader, especially at the low end. Still, suppliers must churn out amplifiers to ensure sales of their highly profitable subwoofers. Several suppliers said, if Brand X amplifiers are not available, then Brand X will see a corresponding decline in subwoofers.
Which is why one leading supplier said it is underwater in amplifier profits but ahead for the year in total company profits due to increased subwoofer sales.
Chips for amplifiers have soared in price from 80 cents to $19 each. So a low end 5 channel amplifier requires almost $100 in chips, before any other parts are factored in.
Add tariffs of 25 to 30 percent, train fees that have tripled, truck fees that have at least tripled, and, as we have reported (weekly, it seems) container prices that are now up past $30K in some cases (from $3,500 pre-pandemic), and costs are not matching sell prices.
So an item that reliably delivered 30 percent profits is now upside down.
PowerBass, confirmed the trend. “What they are saying is exactly true,” said Erik Harbour. He compared producing amplifiers to buying lobster at a restaurant, where there’s no price on the menu. “We pay the market price, whatever it is, the day our production is completed. So there’s no way to properly forecast your profit margins and to know that you won’t be upside down.”
He confirmed, “If you are selling amplifiers, you are probably upside down. We’re getting back to a dollar a watt and consumers won’t pay that eventually.”
Another supplier said if it didn’t raise prices frequently, at higher levels than some of its competitors, it would be upside down on amplifiers. It couldn’t make up the profits on subwoofers because it can’t get the supplies it needs in subwoofers.
A fourth supplier said it is underwater on lower end amplifiers only. “There’s not enough margin to break even. It’s the promotional, doorbuster type products; no one’s making money on that stuff.”
He said the IR chipsets used in compact amplifiers have risen in price from $5 to $10 before the pandemic to $25 or $30. You need one per channel. “If you have a 4-channel amplifier, you do the math. That’s why it’s so costly.”