Yachts at a marina in Shanghai. China's fast-growing economy is giving more people the ability to buy pleasure boats. Pei Xin / Xinhua
The interior of the Fortuna, a luxury yacht. It made its maiden voyage on May 18 in Qingdao, Shandong province. Xu Chongde / for China Daily
The number of leisure boats in the country is expected to increase to 100,000 by 2020
China's yacht industry is expected to enter a new and promising stage with full-speed growth in the coming years, a sector association said.
The number of yachts in the country will increase to about 100,000 in 2020 from about 3,000 last year, with the value of China's yacht business estimated to be 50 billion yuan ($8.16 billion) by then, the China Cruise and Yacht Industry Association said in its annual report released in May.
The government's support for marine tourism is also a positive signal for the industry, said Zheng Weihang, secretary-general of the association.
An improvement in infrastructure for yachts, such as marinas, was urged in an outline for the tourism and leisure industry released by the State Council in February, Zheng said.
Also, China's fast-growing economy is giving more people the ability to buy pleasure boats, which explains the surge in interest for boating and boat ownership in recent years.
In addition, yacht manufacturers are finding ways to make the boats easier to operate, industry insiders said.
"I think that in the near future, boating will become a new lifestyle for mainland residents, who prefer self-driving, just like it happened in Hong Kong," said Lars Petersen, general manager of Jebsen Marine, the sole dealer of Italian yacht brand Riva and the United Kingdom's Fairline.
He said that China's yacht industry is now in its first phase, but that it will soon move to the second stage in terms of different usage of the boats.
The second stage means that customers will increasingly change their use of the boats from business purposes to entertainment activities, which will add to the demand for smaller yachts to enlarge the clients' portfolios, Petersen said.
The industry's association echoed Petersen's words.
"Due to the growing number of wealthy people and an upgrade in consumption levels, the demand for small and medium-sized yachts will explode," the CCYIA said in its report. "The market size of the private yacht market will be about 35 billion yuan by 2020."
The increasing sales of private yachts are also an indication of the country's improved luxury-consumption patterns.
The Fortune Character Institute - a luxury industry research and consulting company - said in its China Yacht Report that the total revenue of the country's yacht market reached 1.75 billion yuan in 2012, with the luxury yacht sector accounting for 780 million yuan.
Figures from the institute also show that the compound annual growth rate of China's yacht market was 732 percent from 2006 to 2011, while the growth rate of other luxury items fluctuated.
"The soaring rise means that the consumption patterns of Chinese wealthy people have seen an upgrade and both the luxury vehicle and yacht sectors will become their targets," said Zhou Ting, director of the institute.
But Chinese multimillionaires, who are about 1.4 million and spend 1.56 million yuan every year on average, are still at an initial stage when it comes to their understanding of yachts, Zhou said.
Luxury yachts will become an important lifestyle choice for Chinese wealthy people, she added, as 51 percent of the respondents said they will purchase a private luxury yacht, according to the institute's report.
However, the middle class rather than the wealthy are expected to become the main consumers of yachts in the future, business insiders said.
"Luxury yachts led the industry at the beginning, but small and medium-sized boats will become the bulk of the yacht economy," said Zheng at the CCYIA.
Based on the experience from the international market, small fishing yachts and sailing boats priced between 300,000 and 800,000 yuan will become the most popular boats, he said.
"In the next five years, the market for these two kinds of yachts will see a good development," he added.
In Zheng's opinion, middle-class families, who will be able to afford the two types of small yachts, will support the growth of the market.
And for people who can't afford to spend hundreds of thousands of yuan on leisure boats, yacht rental companies will be a good option, Zheng said.
Foreign yacht manufacturers are also expecting a boom and they're already eyeing the Chinese market.
For instance, the Hong Kong-based Jebsen Marine plans to set up eight dealerships in Beijing and other coastal mainland cities over the next two to three years, in a bid to meet the rapidly increasing demand for luxury boats.
And other companies are also vying for the Chinese market.
"China now takes the No 1 position in our global strategy, as the emerging markets led by China are offsetting our waning business in mature European markets, which were seriously impacted by the economic slowdown," said Bjorn Ingemanson, president of Volvo Penta, Europe's largest industrial and marine power systems provider.
Volvo Penta invested 500 million yuan in the Chinese market in the past three years, and the rising leisure boat market in China will be the company's major growth engine over the next years, he said.
"China is somehow like an early teenager in the yacht industry, eager to learn and growing fast," he said.
In 2012, Volvo Penta sold around 5,000 marine engines in China, a 15 to 20 percent year-on-year growth.
The yacht engine builder is now targeting 15 percent annual growth in the coming years, Ingemanson said, though the business in China is still relatively modest compared with those in Western markets.
"We will see a sharp growth trend there," he added.
He said that his confidence comes not only from the rising local market, but also from the fact that more European-made boats are being imported into China.
Data from the CCYIA showed that the number of boats imported to China increased 63.27 percent year-on-year in 2012.
The United Kingdom and Italy are the two main exporters, industry insiders said.
"International yacht manufacturers have a very bright outlook in the Chinese market, as their sales in China are increasing sharply," said Zheng at the CCYIA.
A growing number of European yacht manufacturers are planning to set up plants in China.
At the same time, domestic companies are also acquiring foreign players.
In 2012, China's equipment manufacturer Weichai Holding Group Co Ltd - the largest subsidiary of the Shandong Heavy Industry Group - bought a 75 percent stake in debt-laden Italian luxury yacht maker Ferretti Group for 178 million euros ($229.53 million).
Other leading yacht brands, including Azimut Yachts, Princess and Sessa Marine, also expressed interest in having production bases in China.
"It's a good (place) for the struggling European marine industry, which shrank by 50 percent compared with 2008," said Ingemanson.
And the move should also be positive for China's yacht industry as the foreign rivals' foray into the local market may help domestic players improve their quality standards and technology amid the intensifying competition, he said.
Meanwhile, Chinese companies are facing two distinct business situations.
Most Chinese yacht makers mainly exported their production in the past, while others moved into the domestic market earlier and grabbed some market share.
For instance, Zhuhai Sunbird Yacht Manufacturing Co, a major manufacturer in China, posted total revenue of 582 million yuan in 2012, up 46.9 percent year-on-year, according to the company's annual report.
The manufacturer, which has a 47.5 percent market share of China's special yacht market, forecast that they will get and deliver special yacht orders worth 500 million yuan in 2013.
But some other Chinese manufacturers have to deal with dwindling sales due to the lackluster global economic situation.
Dalian in Liaoning province, a city that developed a yacht industry some years ago, has about 15 yacht builders with an annual output of 250 million yuan, but the city's leisure boat industry saw a 50 percent drop in sales in 2012, the CCYIA said.
No more than 20 percent of the yachts made in Dalian are sold to domestic clients and the shrinking global market had a great impact on the companies in the city.
The lack of support facilities is also limiting the sales of leisure boats.
There were 46 yacht clubs in the mainland by April 2013 with 6,404 berths, but berths are still in short supply, the CCYIA said.
That situation also translates into business opportunities for Chinese investors.
The Fortune Character Institute said that marinas are the most promising investment in China's yacht sector.
"The Chinese real estate industry will show stronger interest to invest in the yacht industry," Zhou at the institute predicted.
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(China Daily USA 06/12/2013 page14)