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Bye, Bye Bubble

Editor-in-chief Gary Reich

Editor-in-chief Gary Reich

For the past few years, waiting lists for new boats have largely been interpreted as a good sign for our industry — a scattering of tea leaves illustrating unprecedented demand for boats that’s good for everyone, from builders to engine manufacturers to components suppliers. I’ve seen these long wait lists wielded at boat shows as sales and marketing tools. “We can’t build enough of them, they’re so popular,” one sales rep told a customer at the Miami International Boat Show in February. Another phrased it this way: “We’re out two years. If you want one, you better act.”

While the record demand has been a source of confidence and inspiration, current data suggests that the best is likely over. Indeed, if you start peeling back the onion layers, there are signs that the so-called “Covid bubble” — the surge that the pandemic spurred in new-boat sales and demand — is now in our rearview mirror.

Looking at new-boat registrations starting in June 2021, for example, an obvious trend begins to emerge, with a couple of exceptions. The data, which Soundings Trade Only sources from Statistical Surveys, illustrates that only sailboats and electric-powered vessels saw growth. Every other category was down by double digits.

The July 2021 data shows double-digit declines across all categories. Yachts 66 feet and larger showed growth in August, as did the sail and personal watercraft segments, but the meat of the market — 11- to 65-foot powerboats — was all in decline. Signs improved slightly in November and December 2021, but by February of this year, data showed new-boat registrations down across every category. The outlier was pontoon boats, which had modest 2.8 percent growth.

It’s fairly clear that not all this shrinkage can sensibly be blamed on decreased market demand. The builders and components manufacturers I spoke with at the Miami show said supply-chain issues were as bad as they’d been in the past two years. Looking forward six months, they predicted that things would get worse before getting better. Long wait lists for new boats may not be the blessing we’ve considered them to be after all.

“I have a crisis meeting every night at 10 p.m. to discuss what we’re doing to combat supply issues,” Navico president and CEO Knut Frostad told me in February. “We beefed up our sourcing team a lot. So it’s not really about strategy and long-term thinking. It’s about this raw brute force.”

Advanced Systems Group president Brett Dibkey said something similar: “We’re dealing with it in large part through heroic efforts of nearly 4,000 people in the organization who, in many cases, are working day and night, seven days a week, to overcome supply issues as much as possible.”

It’s reasonable to assume that long waiting lists are not just a product of flaming-hot demand, but also of supply shortages. One builder at the Miami show told me, under the condition of anonymity, that his company had nearly 24 boats sitting outside the factory floor, waiting on engines and components.

Two weeks after that conversation, Russia invaded Ukraine, almost immediately unleashing a new set of headwinds against the marine industry. Oil prices set records, as did prices for diesel fuel and gasoline. Sanctions against Russian oligarchs left unfinished megayachts in European factories. Boat and yacht imports to Russia stopped. Ukrainian boatbuilders walked off the factory lines in Poland and returned home to fight for their country. Boat factories inside Ukraine closed, and coatings giant Akzo Nobel walked away from its resin-production facilities in Russia.

Where things go from here is any­one’s guess.

I encourage you to check out our reporting on the Covid bubble on Page 46, and learn how the war in Ukraine is affecting the industry on Page 20. Our Economy Report, Pulse Report and By the Numbers, which we publish every month, also have interesting pieces of data that can be helpful for business-planning and getting a real-time read on the industry.

Certainly, the sky is not falling, but I do think that smart industry participants already are preparing, or soon will begin to prepare, for a post-Covid-bubble world. 

This article was originally published in the May 2022 issue.

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