Caprice Lam took 90 minutes to close his first luxury-yacht sale – from the time the customer stepped aboard the 62-foot (19-metre) vessel on Hainan Island to the moment the bank wired the 35 per cent deposit.
“I don’t even have his name card,” said Lam, hours after the 13 million yuan (HK$15.5 million) deal at a boat show in the tropical resort of Sanya last month. “He just gave me his cell phone number, called his bank and paid the deposit.”
The sale shows how the mainland’s industrial base is breaking into the most expensive luxury markets. While wealthy mainlanders typically entered markets for jewellery, clothes, cars and planes through United States and European brands, Lam works for Xiamen Hangsheng Yacht Building Co in Fujian province. It is one of at least half-a-dozen mainland yacht builders competing in the country’s nascent nautical market with global leaders such as Azimut Yachts, Ferretti Yachts, Princess Yachts International and Brunswick Corp.
“This is a sign of China’s own industrial confidence,” said Ryan Swift, Hong Kong-based editor-in-chief of Asia-Pacific Boating magazine. “A yacht is a very complex product requiring all the engineering of a house, which has to float, survive waves and have a fine finishing on the inside.”
This time, mainland companies are entering a luxury market early. While the country has as many as 400 US dollar billionaires, there are only about 100 Chinese-owned yachts longer than 60 feet, according to Rupert Hoogewerf, who compiles the Hurun Report of wealthy Chinese. In the US there were more than 7,000 yachts that size in 2006.
In Zhuhai, Sunbird Yacht is building two vessels it plans to ship to Italy in July. The buyer, a Milan boatyard, plans to unveil the craft at the Genoa boat show in October.
Sunbird’s boatyard is operating seven days a week to meet the deadline. On a recent afternoon, about 20 labourers were working on the first of the yachts, a 70-footer. They sanded the teak decks by hand and sealed tubes of electrical wires. Carpenters assembled the wooden spiral staircase leading to the bridge from the deck below.
Sunbird’s staff of 400 is capable of making about 20 boats a year. Large-yacht building is new to the mainland, and workers lack the skills and experience of their Western counterparts, said Filippo Bertoni, a naval architect from Perugia, Italy, who designed the export boats for Sunbird.
“That first boat was like a school boat for them,” said Bertoni, who expects the vessel will require 100,000 man hours to make, a task that would take an Italian crew 35,000 hours. “For the next boats, they will be faster.”
The yacht builders show how Chinese companies are moving into higher-value products as inflation and rising wages pare the country’s competitiveness for cheap manufactured goods and assembly plants.
Sunbird pays unskilled workers at least 2,000 yuan per month including overtime, rising to three times that for electricians and carpenters, according to Charles Luo, vice-president of international business. While that is more than double the average provincial wage, it still allows the company to build its boats for about 30 per cent less than foreign competitors.
With 43 per cent duties on boats imported into China, “we have a huge advantage over foreign brands”, Luo said.
Still, some Chinese buyers are willing to pay a premium for a European yacht. Wang Da-fu, chairman of developer Shenzhen Visun Real Estate Group, bought a 72-foot Pershing made by Italy’s Ferretti to entertain clients and help add cachet to his marina in Sanya.
“If I don’t buy a foreign boat, how can I ask others to?” said Wang, who is also a Ferretti dealer.
Luxury yacht builders also have to tailor boats differently for the Chinese market. For many local customers it is out with the big sun decks and water-sports facilities popular in the US, and in with mahjong salons, karaoke machines and large galleys.
Boat owners need special permits to travel on their yachts from one province to another and are restricted to China’s coastal waters.
The largest Chinese-built boat so far is a 45-metre (144 feet), steel-and-aluminium hull vessel under construction at Hong Kong-based Kingship Marine’s shipyard in Zhongshan, that carries a price tag of nearly €18 million (HK$207 million), about one-third less than it would cost if built outside China, said Diana Liang, director at Kingship.
With a yachting culture less than a decade old on the mainland, local manufacturers are tapping foreign expertise. Hansheng works with UK-based design expert Bill Dixon, while some of Sunbird’s boats are designed by Seattle-based Brian Holland. Qingdao Nauticstar Marine Co paid €13.8 million to buy Italian yacht builder Cantieri Navali di Lavagna last year.
“The purpose of the acquisition was to help us tap the global market,” said Hou Jie, Nauticstar’s general manager at the company’s shipyard in Jimo, an hour’s drive from Qingdao.
In 2005, Hudson Wang, president of Xiamen Hudson Yacht & Marine, began making inflatable craft and now makes boats up to 75 feet long for brands including Pearl Motor Yachts, a British firm. He plans to launch his own brand in two years.
One of Hudson’s customers – Rhode Island-based Gunboat – sells luxury, catamarans. Its founder, Peter Johnstone, said in an e-mail that there’s still a “made- in-China” bias to overcome in the international market. He has sold three 60-foot boats made by Hudson to buyers in Germany, the US and Taiwan.
“There will be naysayers, however I’m very confident in what we will achieve,” he said. “The quality and detail is on par with any of the top yards in the world.”