Three quotes land for the same product: $4.20, $3.85 and $2.90 per unit. The usual question is why the third is cheaper. The useful question is what each of those numbers is made of. This article is for buyers purchasing from China at $30,000+ per order who want to read a quotation rather than simply haggle with it, and it takes the factory price apart into the components that actually drive it.
Six components inside one number
The FOB price you are given is the sum of six things that behave nothing like each other:
- Material and components — 30–60% depending on category
- Labour — 10–25%, driven by region and automation level
- Tooling amortisation — anywhere from zero to a substantial share, depending on who paid for the mould
- Batch and changeover — fixed costs divided by your volume
- Packaging — 3–8%, and the line most carelessly quoted
- Factory margin — 5–15% at a genuine manufacturer
Plus a seventh element that is not a cost at all but shapes the price as much as any of them: the export VAT rebate.
Material: the only part that moves weekly
This is the component that makes a quote "valid for 15 days" — and makes that clause honest.
Steel, polymers, copper and aluminium track commodity markets. A factory that holds a price for three months without qualification has either built in a cushion for volatility (which you are paying for) or has not thought about it (and will come back asking for a revision).
What follows from that:
- In commodity-led categories, ask for the base. For metals it is entirely normal to index the price to a quoted benchmark with a recalculation formula — see importing steel from China.
- Specification outweighs haggling. Steel grade, coating weight, polymer density are tens of percent of the price, and they are exactly where a factory economises when you have not pinned the parameters down. How to pin them: the factory spec sheet.
- A lower price nearly always means different material, not superior efficiency.
Labour: why the map of China shows up in the quote
The wage gap between coastal and inland provinces is real and visible. A plant in Dongguan and a plant with identical machines in Anhui do not have the same cost on labour-intensive operations.
Do not read that as "go inland". Inland provinces trade cheaper labour for costlier domestic trucking to port, a thinner component-supplier base and usually less export experience. For labour-heavy products the move inland pays; for assembly-led products it often does not. Who makes what where is mapped in China's manufacturing clusters.
Tooling: a one-off cost shown to you every month
The least transparent component. Moulds, dies and fixtures run from a few thousand to tens of thousands of dollars, and a factory has two ways to share that with you:
- Invoice it separately — you pay for tooling; the unit price is lower
- Bury it in the unit price — "free tooling", with the cost amortised across an assumed volume
The second looks friendlier and costs more: if you never buy the volume the amortisation assumed, you overpay on every unit. More importantly, the tooling stays with the factory — and with it your ability to walk. Full treatment in mould and tooling cost and ownership in China.
"Free tooling" is not a gift. It is a loan you repay on every unit, and the collateral is your ability to change supplier.
Batch size: why MOQ is not a sales manager's whim
Every production run carries fixed cost: changeover, first-article samples, scrap during ramp-up, and the minimum material purchase the factory's own supplier imposes. None of it depends on whether you ordered 500 units or 5,000 — it simply gets divided by your volume.
Hence the non-linearity that confuses buyers: between 1,000 and 3,000 units the price can drop 20%; between 10,000 and 30,000 it might drop 3%. You are not "earning a volume discount", you are spreading the same fixed block more thinly. Once that is exhausted, further negotiation comes out of factory margin — which is narrow to begin with. How to work the threshold: what MOQ is and how to lower it.
Packaging: the 3–8% nobody costs
Factories quote packaging by default: the cheapest corrugated board, a standard master carton, no marking. If you did not specify it, that is precisely what you get — and you find out when the consignment arrives crushed or fails a retailer's requirement. In the other direction, over-specified packaging adds 5% for no benefit. What to specify is in packaging development in China.
The export VAT rebate: a structural discount from the state
A manufacturer pays domestic VAT on its inputs and recovers part of it on official export — headline rate 13% for most manufactured goods. This is not factory generosity; it is built into the export price.
Those rates move with policy, sometimes abruptly: from 1 December 2024 China cancelled the rebate on 59 categories and cut it from 13% to 9% on a further 209, photovoltaics and batteries among them. Prices in those categories rose with no change whatsoever in underlying cost.
Practical use: if a price jumps 3–4% with no explanation on the material side, check whether the rebate rate for your code has changed. And note that a supplier without its own export licence never collects the rebate, which makes its price structurally higher — see paying in RMB or USD.
Margin: where it sits and how much of it there is
A genuine manufacturer's operating margin on an export order is typically 5–15%. That is narrower than most buyers assume, and it is why aggressive "minus 25%" negotiation does not produce a discount — it produces a quiet material substitution.
A trading company adds 5–20% on top, and its price can still undercut a direct factory quote when it consolidates volume across clients. The question is not whether there is an intermediary but whether you know about it and what it does for the money. How to tell: factory or trader.
Season: the same number in different months
The same SKU at the same factory is priced differently across the calendar:
- October–January — the pre-Chinese New Year peak: the queue is full, discounts are scarce, lead times stretch
- March–May — the post-holiday trough, and the best window to negotiate
- August–September — the ramp for Western Christmas shipments
Between the best and worst window, a mid-range category sees a very real 5–10% plus weeks of lead time. The calendar is in China's production shutdowns and the Chinese New Year 2027 calendar.
How to take a quotation apart
Instead of "give me your best price", ask four questions. A genuine manufacturer answers them within a day; an intermediary flounders:
- What share of the price is material, and what is it indexed to?
- Is tooling inside the unit price or invoiced separately — and who owns it?
- How does the price change at 2× and 5× volume? The shape of that curve shows where your real threshold sits
- What exactly does packaging and marking include at this price?
And separately: if one quote sits 30% under the other two, look for the difference in specification, material grade, or the fact that it is not a factory — not in efficiency. Verification is in the China factory checklist.
What we do with this
We do not ask for a discount, we ask for the breakdown — then benchmark it across several factories in the same category, confirm the supplier owns real production and an export licence, and lock the specification so the price cannot be "reduced" by changing the material. 340+ verified suppliers over seven years; projects in our case studies.
See supplier search and supplier verification, or write to contact@silkwaysourcing.com or WhatsApp +380 97 883 4765 and we will take your quotation apart.
