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Jun
2015

Luxury yachts & Private jets April 2013

Yacht market overview

Due to the global economic environment in 2012, the boat and yacht industry also underwent a challenging time, and many international yacht manufacturers suffered funding and cash flow problems; the overall International yacht and sailing boats market decreased by 70% and 85% respectively, yet the motor and sailing yacht import and export volume in China grew 20-30% year-on-year.

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Why few Chinese families have boats?

In recent years, due to the support of the Government, the domestic yacht manufacturing industry in China has developed very rapidly. A variety of products have made it to market, many of which are affordable to wealthy families. In addition and by comparison, to the mature territories in Europe and USA, the development of the yacht economy is in its infancy as the per capita GDP was relatively low. The per capita GDP in China is now more than US$5,000, yet the boat remains a toy for the rich.

The following points form part of the reason:

  • In the new Vehicle and vessel usage license plate tax (VVULPT) came into force in 2012, as a result taxes on yachts are listed separately, and are much higher than before. The tariff on the imported yacht in China is at least 43% in total that includes ordinary customs duties, VAT and consumption tax.
  • Infrastructure for yachts is still very poor in most of the cities in China and there are only a few water areas that are open to the public. For example, in Shanghai only 20 small public berths have been built. Many yacht owners chose to moor their boats in Hainan or Qingdao instead.
  • According to the NDA group report published at the 2013 China international boat show in Shanghai last week: In China the marina membership fee is on average about 1 Million RMB and represents around 20% of the purchase price for a large cruiser, by comparison in the US the ratio is only about 0.6%, or about US$5,000.
  • Pollution is also a problem here. There are few crystal clear rivers that can be found near a city, and people will not enjoy their weekend sailing in this kind of environment.
  • Culturally Chinese people do not have any tradition to spending a weekend with their family or friends, sailing, fishing on a boat, or in and around the water. This culture will take time to develop and mature.

Few wealthy Chinese have knowledge about boats and boating

For the Chinese HNWIs, they still eager to own a luxury yacht, the main reason still remains as a means to show off their wealth and use the boat as a business platform. A recent survey carried out by Fortune Character magazine indicated that 63% of HNW respondents would consider buying a yacht in the future but only 6% had any knowledge of yachts, 37% couldn’t even remember a yacht brand name.

How many yacht brands can a Chinese HNWI mention?

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With a market still in its infancy, brand awareness is critical among this wealthy group, and an ideal opportunity for international brands, whether they currently have a presence here or not to begin building their market here.

Policy

National Tourism Administration treat the yacht industry as an important part of the development of water tourism in the “12th Five-Year Plan”, 17 provinces and cities are involved. For example: during this plan, the Shanghai Government will strive to build 300 yacht berths on the Huangpu River, and establish a dedicated waterway for yachts. The objective is that with the support of these new policies, boat ownership will no longer only be a rich man’s game, but become a healthy lifestyle for all people.

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A new business model in China: shared ownership

Chinese are considered as hard working, but they do not know how to enjoy their life, working too often and taking too little leisure time. They do think about spending a million to buy a yacht and hundreds of thousands of RMB a year for maintenance fees, yet they know they would only use it a few times a year and hence it is very uneconomical.

However this situation may change. In Shanghai, more than 20 people have become the first group to participate in the “Partner buying yachts” project. At the end of last year, two domestic companies launched shared yacht ownership business projects. “This is new to the Chinese consumers, they still need time to accept this kind of business, but we are confident!” commented a sales woman from Shanghai Double Happiness Yacht co.

At the L4 marina on the Huangpu River, are moored two yachts, one a 48-ft and another 65-ft in length. Of the two, the 48-foot long yacht has ten or more owners, and the 65 ft Alaska boat is owned by 8 people. The shared owners are mainly private company owners and senior white-collar workers.

Currently a berth on the Huangpu River cost 600 thousand RMB (US$97,000) a year. Other costs such as maintenance, repairs, hiring a captain and crew, fuel etc. are approximately 300 – 400 thousand RMB. Buying a yacht together can reduce the cost. According to the shared ownership contract the sailing cost is about 800-2000 RMB per hour; or for about four or five thousand RMB ($800) they can spend 2 – 3 hours on the Huangpu River with their family and friends.

Procedure

When compared to private aircraft regulations, those for yachts are much simpler. For a short voyage, yacht owners only need to report to the local maritime administrative agencies before the first voyage, but the voyage range is very limited. For example, in Shanghai people only can sail on the river between the Lupu Bridge and the Yangpu Bridge which is the core area of the Huangpu River, otherwise they need to report to the government. For a longer voyage, perhaps between different provinces, or sailing out to sea, the procedure will be very complicated and owners need to report to and get approvals from multiple departments.


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