Almost all of us who have anything to do with pleasure boats, wonder how is the boat market going to be in the future? And where is it going from here? Do pleasure boats have any future? Will the trend of owning and selling boats be a larger market or will it suffocate like many luxury products due to the roller coaster ride of the world’s economy? What will particularly happen in Asia? Asia being the big part of world’s economy, what part will it play in boating industry? Which country will be the major market? China, India, Indonesia perhaps? Importantly what steps should be taken today, in order to create a better market in these countries for the future.
In Hong Kong we are realizing the obvious saturation of boating market and almost all dealers and manufacturers of boats are pointing towards China. A lot of European manufacturers are also pointing at India. Making these 2 countries the biggest potential boating markets.
Let’s talk about China first and realize that in 2005 we had big hopes for the boating business in China, we thought that the boating industry will be huge by the year 2010. Well, we are in 2010 now and China clearly has not picked up to that level of prediction, so the market is still slower than what the lot of industry experts had predicted 4 or 5 years ago. The reason behind that is China’s rules and regulations in pleasure boat industry. Taxation and licensing rules are very unclear in China. As a matter of fact, the rules are different for different states in China. Mainly for new boats, tax is about 40% of the boat’ value.
The infrastructure however, is simply fantastic, China’s development of marinas are in the best speed that one can hope for. But what is missing in this picture are the number of pleasure boats that are floating on the waters of China. There are definitely buyers for a high end expensive yacht, but the the support and maintenance of that yacht still not expertised, is uneasy and therefore costly. In any country even in Hong Kong, people are prepared to shell out a substantial amount of money to own a luxury yacht but what they are not willing to do, is to put a lot of time and over spend on upkeep and maintenance. Another thing that people are not willing to do is of course pay taxes and go through a long governmental procedure to acquire a license. This issue however is been tackled by marina clubs in China. Few clubs now assist in providing necessary licenses for their members who are willing to pay the cost of such service. Another way of handling this issue, is that the China buyers simply keep and use their boats in Hong Kong. This obviously will overcrowd Hong Kong’s marinas and not help much to boost sales into China.
A way to overcome this issue, in order to create a better regulations in the future for pleasure boats in China, is for brokers in Hong Kong to sell more low priced / good quality used boats into China. If we are to stop hunting for clients only for high end yachts worth many millions of Euros and direct more marketing towards the younger and median rich clientele, It will create a lot more pleasure boats in the waters of China. The market will respond in a very positive way. Forbes list of 2010 confirms that there are 64 billionaires in China, which makes it No.2 in Billionaires list. however, a point to note that there are over 900,000 people whose net worth is more than 10 million RMB (USD 1.3m), Majority of these people are of less than 39 years old. And even a larger and younger population which fall up to 5 million RMB worth.
There are definitely more number of people who are willing to spend a little initially to try out a boating venture. We have to keep in mind that boating lifestyle is not very common for China as yet. So the importance should be given to bringing more boats into China, which are not very expensive and good in quality.
This very concept will fill the marinas, forcing the management to grow and also provide a decent opportunities for shipyards and engineers to work in this sector.
This will also force the government to look into creating manageable regulations in terms of licensing and taxing for pleasure yachts, and if the growth of this concept is healthy it will undoubtedly create much more friendly and hassle free market for the very wealthy to buy the high end yachts. In any case, China will have a large boating market, but to make it earlier than later, depends on our actions today.
India! Lets talk about India.
One of the biggest advantages India has is that Indian mentality and lifestyle is very adaptable to western lifestyle. India adapts and accepts ideas, culture and products from the west very easily. High number of Indian population speaks in English. In India almost everyone will understand you if you speak English. If you are a non-Indian company, you can easily find an educated work force in India. It is also easy to set up a shipyard and to train workers in a specialized industry in India due to India’s language capabilities and good educational level among the population. India has been a British colony for over 150 years and the rules and regulations of the country are still similar to that of Britain in many ways. Another advantage to grow the boating market in India is the expertise of the Indian media and advertising professionals in terms of marketing.
GDP growth of India is currently 7.2%, It is no.5 in the number of billionaires list and India currently holds approximately 200,000 millionaires with net worth of USD 1 million to 10 million, and a far larger population of people worth slightly less. India’s upper middle class population is expected to grow about 10 times in the next 10-15 years.
But here are the set backs! India’s political system is a chaos, corruption exists in many sectors and things become inefficient, especially if you want to start a new industry. An example of inefficiency in India is that to start a private company there are about 13 different legal procedures that one has to take and the time frame takes minimum of 30 days. While in Hong Kong this very same procedure is done with high efficiency in less than 45 minutes.
One major concern is that the infrastructure growth in India is incredibly slow. Due to its own democracy and differences in political groups, it is difficult to commence any kind of infrastructure. The marina which was due to be built more than 5 years ago in south of India is still not ready. Therefore the speed of development of marinas and likewise developments is a lot slower than what they could have been, if the political system was more sound. Of course the major problem remains for Indian boat owners to keep their boats. Because currently there are no marinas with standard berthing facilities in India.
A good point again, being the world’s largest democracy the rules and regulations are flexible in India, and with its plus points, if the luxury boat business does reach a good start like having few working marinas and a small number of boats to begin with, the Indian market for boats will see faster growth than of China’s boating market.
The traders and dealers of boats in India also need to convey a message that boats are not just for the super rich and make them look more affordable and common in their marketing strategy, and to start this, cheaper and good quality boats need to be floating on the water. More power boat chartering businesses also can boost the industry in this initial stage.
I am also sure it wont be too long until I can cruise the beautiful waters of India and China on a private yacht with safety and with ease. Await for that day.