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Ceding the Midrange Ground

Foreign yacht builders are gaining on U.S. yards, just as they did in the superyacht and sailing segments
Sea Ray left a void for competitors to fill when it pulled out of the yacht segment.

Sea Ray left a void for competitors to fill when it pulled out of the yacht segment.

The post-recession economy has helped foreign builders gain traction against American yacht manufacturers, which have faced higher production and labor costs on top of currency-driven discounts on their competitors’ imports. While some U.S. builders have changed hands or quietly closed factories, more room has been created for competition from Europe, Australia and Asia.

“The dollar is very strong versus the euro and other currencies, and that makes their products more competitive than U.S. products,” says National Marine Manufacturers Association president Thom Dammrich. “And because of the retaliatory tariffs, we cannot export large yachts to Europe, yet they can export to the United States. No question, it’s a challenging market. Very challenging.”

Sea Ray’s decision to cease building yachts from 40 to 75 feet has already opened more opportunities for competitors. The Brunswick company had more than double the market share of its closest rivals.

“What makes it so concerning is that we’re talking about  a huge change to the companies in the U.S. that have the technical skills to build large yachts. That’s very different from smaller-boat building,” says Bertram Yachts CEO Peter Truslow. “There are very few builders that really know how to do it. It could be an industry that doesn’t come back unless we really change things.”

U.S. manufacturers built about 90 percent of cruisers (36 feet to 75 feet) and 80 percent of yachts (40 to 75 feet) sold in the United States in 2009, according to Info-Link Technologies. In 2018, just 60 percent of yachts from 40 to 75 feet were built in America, and those figures include Sea Ray, says Jack Ellis, managing director at Info-Link. If that share is evenly distributed among the top six competitors, the split will be closer to 50-50.

“It’s a little bit heartbreaking for me because my grandparents built boats in Michigan and Fort Lauderdale for a long time,” says Bob Denison, of the brokerage firm Denison Yachting. “My dad and uncles were part of that. To see that go away is no fun — emotionally it just sucks. It’s hard to digest.”

There are a handful of U.S. yacht builders that Dammrich cites as success stories: Bertram, Cruisers, Hatteras, Hinckley, Tiara, Marquis, Sabre and Viking, for example. “Yet the Italians, the Dutch, the Germans, the Chinese, the Turkish yards are all booming, and probably at least half of those sales are going to Americans,” Dammrich says.

Bertram CEO Peter Truslow is concerned about the future of U.S. yacht building.

Bertram CEO Peter Truslow is concerned about the future of U.S. yacht building.

Perfect Storm

The strong dollar has made materials more expensive, and the trade war has compounded that problem. Several companies that manufacture equipment for large yachts have moved offshore because of cost and labor pressures, Dammrich says.

It’s often said that some countries subsidize their yachting industries, but some argue this is no different than incentives from individual U.S. states. U.S. builders also face a tight labor pool versus highly skilled generations of workforces that exist in other countries. “Shipyards in Holland have a guy in the carpentry shop putting together furniture and grabbing a hammer out of the toolbox his father gave him,” Denison says. “There’s more pride in working with your hands in some parts of the world.”

The United States has full unemployment, squeezing wages and competition. An engineer Bertram tried to hire last summer wound up working at Elon Musk’s SpaceX.

“It’s really a perfect storm,” Truslow says. “It’s supply and demand on the workforce, high unemployment in Europe and low cost of currency, and a booming U.S. economy. Where else are they going to send the boats? They’ve got to come to the United States.”

New Markets

When U.S. boatbuilders in survival mode during the Great Recession were slashing research and development, builders from abroad were investing, says Chuck Cashman, chief revenue officer for MarineMax, which sells U.S. and foreign-built yachts. As America’s economy came back, a strong dollar gave the overseas builders a pricing advantage against models that hadn’t been refreshed in a couple of years.

“Europe collapsed about two years after we did, but they literally are just coming out of it now, and we’ve been out of it since 2011,” Cashman says. “There is also an aura to European boats.”

Groupe Beneteau held a steady course on product development between 2007 and 2010, says George Armendariz, CEO of Groupe Beneteau Americas, which manufactures four powerboat brands in Michigan and sailboats in South Carolina, but builds most of its motoryachts in France. Groupe Beneteau also invested in bringing new products to the U.S. during that time, including the Prestige brand for people previously unable to afford that type of yacht.

Overseas competitors also began to influence U.S. builders. Sea Ray, America’s largest producer of yachts in these size ranges, began to offer designs with European flair. When U.S. builders mimic European styles, they are setting themselves up for the European brands to take market share because they’re homogenizing the look, says Steve Potts, founder of Scout Boats.

“It’s a little bit of a chicken-and-egg situation,” Armendariz says. “Was that a reaction to us coming in and striking a chord with consumers, or was it the consumer driving Sea Ray to do that? It’s hard to gauge.”

Groupe Beneteau brands have added three dealers looking to fill the void Sea Ray left, but Armendariz says he is experiencing even more pressure these days from newer brands. “We have benefitted from that vacuum — these are coveted dealers that are looking for revenue they lost with Sea Ray pulling out of that segment,” he says. “But we’re working harder to get that business than we would’ve even two years ago.”

Americans might simply be losing interest in some segments, says Federico Ferrante, CEO of Azimut-Benetti USA. “I believe you’re seeing a migration away from convertible-style sportfishing boats to Italian motoryachts,” Ferrante says. “Nobody in the world builds a better type of fishing boat than U.S. builders. You’re seeing their growth with larger center consoles from Boston Whaler, Intrepid, Scout and other brands. Italian yachts, on the other hand, satisfy the need for beauty, with their sexiness of lines and elegance.”


Foreign Boats

The superyacht and sailing segments are now predominantly composed of foreign manufacturers. U.S. builders that once seemed insulated from foreign competition found themselves in a market-share free fall as overall unit sales plummeted and builders from abroad gained traction. The domestic superyacht segment became a shadow of its prerecession self, with builders including Trinity and Lazarra suspending operations. Today, Italy manufactures the largest number of yachts larger than 80 feet, more than the next three countries combined, Ferrante says.

The sailboat segment has gone from 90 percent U.S.-built to 40 percent, Ellis says, and that number includes Beneteau sailboats, which are mostly built at its Marion, S.C., plant. Excluding Beneteau, the 40 percent number from domestic brands drops to 14 percent.

The shrinking U.S. yacht segment also suggests that some previous owners are exiting boating altogether, Ellis says. Only 15 percent of large-center-console buyers previously owned yachts; going back 10 or 15 years, about 25 percent did.

The mainstream yacht brands couldn’t compete with cheap imports, though “uniquely American specialists” have thrived, Truslow says. Smaller boats have been unscathed because they’re not labor intensive enough to create an overseas advantage, and shipping costs become onerous.

“The situation is not good, but we are fighting every day,” says Marquis CEO Rob Parmentier, whose company is building a new Lexus motoryacht. “If you’re not optimistic, and not constantly thinking about how to gain a little bit more, you’re going to lose out. None of us U.S. manufacturers are ready to throw in the towel, I can tell you that. Don’t count us out.”

This article originally appeared in the February 2019 issue.



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