China has become the world's hottest market for luxury cars and superyachts could be next on the horizon.
The state-owned Shandong Heavy Industry Group could be in a position to benefit from the trend after its 374 million euro ($299 million) acquisition this year of indebted Italian yacht maker Ferretti, according to Forbes.com.
After a debt-to-equity swap, the Chinese company’s Weichai Group owns 75 percent of Ferretti, which ran aground after yacht sales peaked in 2007. Its markets in Europe and North America subsequently went south and Ferretti found itself saddled with debt from the boom years. Now it’s betting on rising wealth in China and other emerging markets to energize the sales of its luxury boats.
Speaking at a press conference in Beijing, Weichai Group chairman Tan Xuguang said he was exploring ways to integrate Ferretti’s engineering and branding strengths into the group’s Chinese operations, which are focused on commercial vehicle engines. Ferretti will continue to operate from Italy, where it builds most of its yachts. (It also has a facility in Miami.) Tan said future orders for China may be finished in Qingdao, a port in Shandong. But he emphasized that Ferretti will remain an Italian company.
Tan said Ferretti’s debt had fallen from 760 million euros to 116 million after its financial restructuring. Royal Bank of Scotland Group and Strategic Value Partners hold the remaining 25 percent of the Italian company. Tan did not provide revenue guidance for Ferretti, which reported revenue of about 500 million euros in 2010-2011.
So far, it’s strictly a minority taste. Total sales in 2011 were reportedly about 17 boats. That barely scratches the surface of the potential market, Ferruccio Rossi, managing director of Ferretti, told Forbes.
“The market is in a very early stage in China,” Rossi said.
Rossi compared the trajectory with sales of luxury cars, which ramped up as wealth spread in the 1990s and 2000s. “The next luxury segment that will enjoy this robust growth will be yachts,” he predicts.
Given the headwinds in Ferretti’s core markets, that would be welcome relief.