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Taiwan's Yacht Builders Not Popping Champagne Corks Despite Advancing to Globally No. 4 in 2016 Rankings

Taiwan's ban on cross-border navigation of watercrafts also dampens growth of sector locally

Jan 21, 2016 | By Steve Chuang

Global market demand for luxury yachts (with length exceeding  80 feet) has gradually risen over the last few years (photo courtesy of Horizon Yachts).Global market demand for luxury yachts (with length exceeding 80 feet) has gradually risen over the last few years (photo courtesy of Horizon Yachts).
While recent TV news platforms as CNN, CNBC and Bloomberg having aired stock market turmoil globally, with crude oil and iron ore prices continuing to plunge to impact major mining firms as BH Billiton and even the financial health of Saudi Arabia, coupled with global economic growth as well as China's being forecasted to slow in 2016, which inevitably rattles investor sentiments as well as bottom-lines of American firms that generate sizable revenues in China and overseas, one wonders if the one-percenters of the world still have appetite for yachts.

But, the global market for luxury yachts, namely megayachts and larger superyachts with length ranging 80 feet to 200-plus feet, continues to rally from the trough seen in 2013, while Taiwan advances to the fourth spot in the global top-10 luxury yacht builder rankings issued by foreign market observers in 2016. Notwithstanding, local yacht makers seem not ready to pop champagne corks since having been shaken by the anemic growth some years ago.   

Sustained Uptrend
Global market demand for megayachts and superyachts has stayed on a sustained uptrend over the past few years after being seriously dampened in 2013 mainly due to the EU debt crisis.

The latest report publicized by U.K.-based Boat International Media, recognized as one of globally best known yacht magazine publishers, on its January, 2016 issue of ShowBoats International states that global new orders for luxury yachts have continuously expanded over the past two years, to 755 units in 2016, compared to only 692 units ordered in 2013.

Of the total luxury yachts on order this year, the report indicates that 558 are motor driven, 84 sailing, 55 expedition, 40 open models, with the remainder being sport-fishing models. Worth mentioning is that demand for open yachts continues to shrink, while that for the other four categories remains robust.

By total length of luxury yachts to be built, Italy remains atop the list of globally top-10 yacht-building countries, with 286 vessels on order to be filled throughout 2016, as reported by Boat International Media. The country alone commands a nearly 40-percent share of the global market (in total yacht length instead of units to be delivered), with three domestic yacht builders, Azimut / Benetti, Sanlorenzo and Ferretti Group, occupying the top-3 spots of the world's biggest 15 yacht company rankings as stated by the U.K. magazine publisher.

World's Top-10 Luxury Yacht Building Countries by Yacht Length
Ranking Country Total Length (Meter) Share of Total Length of Yachts to be Built Ordered Units
1
Italy
10,907
39.4%
286
2
The Netherlands
3,858
13.9%
68
3
Turkey
3,325
12.0%
71
4
Taiwan
2,248
8.1%
74
5
The U.S.
2,039
7.4%
57
6
The U.K.
1,955
7.1%
64
7
Germany
1,378
5.0%
14
8
China
876
3.2%
23
9
United Arab Emirates
676
2.4%
15
10
Norway
442
1.6%
6
Source: January, 2016 Issue of ShowBoats International
The Netherlands and Turkey come second and third in the ranking with market shares of 13.9 percent and 12 percent, as well as 68 and 71 luxury yachts with total length of 3,858 and 3,325 meters, respectively, this year.

Taiwan makes significant progress in the 2016 ranking by jumping two notches to the No. 4 place, mostly thanks to impressive growth in its order book. Boat International Media's data show that the island is going to fill orders for 74 luxury yachts with total length of 2,248 meters this year, for a global market share of 8.1 percent to soar by 38.85 percent from 1,619 meters produced a year earlier. Among Taiwanese yacht builders, Alexander Marine and Horizon Yachts squeeze into the top-15 yacht company list, at No.4 and No.9, respectively, compared to the No.14 and No. 10 spots they occupied in the 2015 rankings.

Taiwan is the globally fourth-largest yacht building country in the 2016 global top-10 rankings issued by Boat International Media (photo courtesy of Kaohsiung City Hall).Taiwan is the globally fourth-largest yacht building country in the 2016 global top-10 rankings issued by Boat International Media (photo courtesy of Kaohsiung City Hall).

Meanwhile, the U.S. ranks No.5 with total orders for 57 luxury yachts, equivalent to 2,039 meters, while the U.K. fills the No.6 spot with orders for 1,955 meters of luxury yachts to be built throughout 2016. The U.S. and U.K. are home to Westport, Hatteras, Viking, Princess and Sunseeker, which are recognized as among the world's biggest 15 yacht companies.

World's Top-15 Luxury Yacht Builders by Total Yacht Length in 2016
Ranking Company Name Total Yacht Length to be Built Received Orders
1
Azimut / Benetti
2,580
63
2
Sanlorenzo
1,891
54
3
Ferretti Group
1,781
56
4
Alexander Marine
1,089
35
5
Amels / Damen
862
13
6
Sunseeker
829
26
7
Lürssen
815
7
8
Princess Yachts
760
25
9
Horizon
611
21
10
Oceanco
595
6
11
Overmarine
494
13
12
Feadship
482
8
13
Fipa Group
462
13
14
Gulf Craft
442
12
15
Heesen Yachts
418
8
Source: January, 2016 Issue of ShowBoats International
Anxious Nevertheless 
Despite the envious growth mentioned above in the Taiwanese yacht industry's order book, local builders remain cautious as the sector's health can plummet overnight on uncertain outlook of the global economy, which looks a bit wobbly so far in 2016 with global stock markets and commodity prices on a downtrend.   

One insider confirming the reserved sentiment is Secretary-general S.C. Chang of Taiwan Yacht Industry Association (TYIA), the trade group with membership comprising 39 yacht builders and 42 yacht-related equipment and material suppliers. He points out that the local industry's overall output value (nearly all generated from exports given that Taiwan has yet to allow a viable domestic market due mainly to tight regulations regarding watercrafts freely navigating between international ports for national security reasons) stood at only about US$180 million in 2015, slightly up 4.05 percent from 2014 but falling short of the original expectation of US$200 million. Such shortfall is mainly caused by the increasing hesitancy among global luxury yacht buyers toward purchasing in response to economic volatility, which has inevitably forced Taiwanese yacht builders to extend lead times generally to three to six months to therefore undermine the industry's overall performance to some extent.

Kaohsiung is Taiwan’s largest yacht production base that rolls out around 80 percent of megayachts ordered by foreign buyers (photo courtesy of TIBS organizers).Kaohsiung is Taiwan’s largest yacht production base that rolls out around 80 percent of megayachts ordered by foreign buyers (photo courtesy of TIBS organizers).

As to the industry's outlook this year, Chang concedes that it, at least throughout the first half of this year, may be not as rosy as the 2016 order book suggests, and overall output is unlikely to increase as significantly as expected until 2017, considering Taiwan's luxury yacht exports rely mostly on the U.S., Hong Kong and Japan markets, without benefiting much from the European and other markets of the world. He implies that the concentrated export outlets may as whole limit the industry's growth in 2016, especially when anxiety about global economic growth lingers and is exacerbated on many fronts, including China's economic slowdown, continued price drops of crude oil, rising geopolitical risks amid threats of ISIS terrorism which has even taken a recent toll in Indonesia, as well as growing territorial tensions across the South China Sea, and many others.

From another point of view, the simmering unease among Taiwanese yacht builders in reaction to market uncertainty as mentioned by Chang, whose current task in TYIA qualifies him to represent Taiwan's yacht building industry, makes sense, as most local builders have been disheartened by tepid growth for a long period of time. TYIA's statistics show the industry's production value shot to over US$200 million the first time in 2005, with average export unit price exceeding US$900,000; and even skyrocketed to more than US$300 million by 2008, mostly thanks to local makers actively moving upmarket to megayachts. However, since suffering continual steep drops in 2009 and 2010 in the aftermath of the global financial crisis, which had taken a toll on the global market for yachts, the industry's output value has hovered at the sub-US$200-million level to show relatively lukewarm growth for several consecutive years, not to mention the 2015 result that has disappointed insiders, despite moderately improving market conditions.

Casting a ray of optimism, Chang reports that a few Taiwanese yacht makers, who focus mainly on megayachts and even superyachts, have managed to achieve encouraging results over the past years. Alexander Marine is a remarkable example, which finished 2015 with turnover of NT$1.62 billion (US$48.35 million) for a whopping growth of 155.14 percent over NT$635 million (US$18.95 million) posted in 2014. The firm's production lines have reportedly been fully booked throughout 2017.

Reasons for Optimism
If the adage “Chance favors only the prepared mind” holds true, Taiwan's yacht industry has ample opportunity and capacity to witness its production value recover to the US$200 million level soon, partly because of the continuously rallying global market, and partly because of well-established reputation among global buyers who highly regard Taiwanese yacht builders for deft craftsmanship and production technology, as well as on-time delivery, thoughtful service and competitive prices, which often match or even exceed those offered by more expensive rivals. 

One notable event to show potential yacht buyers and leasing firms the world-class capacity of local and foreign yacht builders, and perhaps the foreseeable upturn in the yachting segment, is the upcoming 2nd Taiwan International Boat Show (TIBS), held March 10-13, 2016 at the Kaohsiung Exhibition Center in Kaohsiung, southern Taiwan, where Taiwan's major yacht builders, subcontractors and equipment suppliers cluster. With its inaugural edition having received ample praise from participants as a resounding success two years ago, the biennial show is expected to continue to impress international luxury yacht buyers.  

Organized by the Taiwan External Trade Development Council (TAITRA), a semi-official export promoter, in cooperation with the TYIA, the first TIBS hosted some 200 exhibitors from home and abroad in 861 booths, and exhibited 60 different yachts and sailboats indoors and at 20 docks outside the abovementioned venue, as well as a full slate of related parts and components.

Clearly a long-awaited event for global yacht buyers, the inaugural trade fair drew over 10,000 visitors on the first day, including buyers from such heavyweight enterprises as Sea Ray Boats, a subsidiary under the world's largest yacht builder, Brunswick Group; Malibu, a U.S.-based motor yacht supplier; Rodman Polyships, a veteran vessel builder in Spain; Isara Yachts of the U.K.; as well as Suzuki, Yamaha and Toyota of Japan. Throughout its four-day run, the show attracted over 70,000 global visitors to have kicked off a great start to a globally influential trade fair for yachts.

According to TAITRA, the 2nd TIBS will remain Asia's largest B2B (business to business) and B2C (business to consumer) trade fair dedicated to yachts, as over 200 exhibitors in Taiwan and from foreign countries, including China, Germany, Sweden, Australia, the U.S., New Zealand, the U.K., Italy, Singapore, Hong Kong, Canada, Japan, Korea, the Philippines and Indonesia, will be present to totally display 63 different vessels.

Besides local yacht builders with robust global profiles, such as Alexander Marine, Horizon Yachts, Global Yacht Builders, Kha Shing, Grand Harbour Yachts and many others, 16 internationally prestigious luxury yacht brands will also be on hand, including Princess Yachts, Bavaria, Delta, Galeon, Imexus, Jeanneau, Kimple, Marinekart and Monte Carlo. Such global representation will not only enhance the wow factor to the exhibition, but further underline Taiwan's sizable role in the supply chain of the global luxury-yacht sector.
The upcoming TIBS 2016 will remain Asia’s largest trade fair for yachts to drive Taiwan’s megayacht building sector (photo courtesy of TIBS organizers).The upcoming TIBS 2016 will remain Asia’s largest trade fair for yachts to drive Taiwan’s megayacht building sector (photo courtesy of TIBS organizers).


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