Stock Market

Expansion and Self Destruction of Yacht Manufacturers


The financial crisis of 2008 and 2009 placed yacht manufacturers in a very difficult position. The stock markets in and around in Asia were doing very well in the early 2000s. At that time China’s economic growth and infrastructure development was already high and the Chinese started showing an interest in luxury yachts. Boat manufacturers moved in on the opportunity and set up show rooms near the newly built marinas in China. Chinese boat shows such as the Shanghai boat show attracted even more manufacturers to the industry. Hong Kong was still the main port at that time, since Chinese buyers were buying and mooring their yachts in Hong Kong due to zero taxation in Hong Kong. All this interest in the industry created great hype and the industry grew steadily as more and more manufacturers rushed into China. Other industries across China were also doing very well and the affluence was growing at a fast pace. Many of the big luxury yacht manufacturers decided to expand to improve their delivery times and in doing so capture the markets. They also believed that expansion would be a low risk move, because even if European or American markets were to slow down, the Asian markets, especially China, would still have customers to absorb their production.

In 2007 the Hong Kong stock market reached a new high, and many news channels and so-called professional investors were once again saying that the market had reached a new level and would not fall again. Businesses were running smoothly, markets were booming and banks were lending. The hype surrounding China’s growth and affluence resulted in rumors amongst the manufacturers about how many boats were being sold in China. Agents and manufacturers exaggerated the numbers of high end luxury boats they sold. Due to this hype many yacht manufacturers around the world had taken on heavy loans, bought large amount of materials for construction, and were expanding their factories to a much larger scale. And then the unthinkable happened. The financial markets collapsed in 2008. Needless to say, many yacht manufacturers now faced bankruptcy. Although exchange rates were favorable for the Chinese, and some high-end customers did buy yachts to take advantage of the exchange rate, these sales were not enough to bail the factories out of their financial debts.

As the markets crashed, public companies started losing money and customers in most Asian countries stopped buying yachts except some customers from China. Most of the money of the Chinese customers was coming from internal development in China.

Even years after the market crash, yacht manufacturers still found it difficult to recover. Many famous Italian and British yacht manufacturers were taken over by Chinese firms. In 2015 many of the yacht manufacturers are still recovering. The effects of this recovery can still be seen today in many factories. Today it is still possible to buy brand new boats with engines and generators that were made in 2007, because factories are still holding on to the stock they purchased at that time.

The 2008 market changed the dynamics of the yacht manufacturing business. The reckless expansion to capture market share caused huge financial losses when the financial markets collapsed and forced many yacht manufacturers to sell their companies. Financially strong Chinese businesses saw the opportunity and bought many of the European yacht factories, moving control and ownership of some very famous brands from the west to the east.

I hope you found this article interesting and valuable. Thank you for your attention.


Source by Baggy Sartape

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