Report on price increases: Will sailing soon be too expensive? Part 3: The situation of the shipyards
Lars Bolle
· 09.01.2022
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Uncertain times are dawning for buyers of new yachts. As YACHT reported in issue 1/2022, delivery times for boats have increased considerably in some cases; two years from ordering is no longer a rarity. The main reason for this is the strong demand for yachts. "We are seeing an increased interest in water sports," says Jens Gerhardt, Chief Technical Officer at Hanseyachts AG in Greifswald. "Under coronavirus conditions, we have all realised that you don't always have to fly far away to have a good time. There are also aspects such as climate awareness, which drives people to holiday on their doorstep." But purely financial considerations are also a reason to buy a boat:
We have massive inflation, which I have never experienced before at the age of 54," explains Gerhardt. "People are ordering boats like crazy because they think it will be so expensive in three years' time that they will have to ask themselves whether their salary can still keep up.
Markus Schlichting, spokesman for Bavaria Yachtbau in Giebelstadt, has a similar assessment of the current situation: "Demand has increased dramatically. However, production capacities cannot increase just as quickly, both at our shipyard and at the suppliers." This is because the necessary raw materials are becoming scarcer and more expensive. "In the past, we might have received a supplier part within three months, but today we have to reckon with an order taking 18 months to arrive," says Schlichting.
The increased demand from shipyards is having an impact on the entire production chain. Because a yacht consists of so many different parts that come from a wide variety of manufacturers, the shipyards as producers of the end product are faced with two major problems: expanding their own production capacities in the face of rising raw material prices, while at the same time being dependent on suppliers.
This means that we have to stock up much more than before. The warehouses are getting bigger and bigger, which of course also costs money," says Schlichting.
Gerhardt also reports problems in the supply chains: "Since mid-January 2021, we have had very large bottlenecks in the large engines, and since March there have been shortages of many smaller parts." This is mainly due to a development in the economy. "There is a shortage of a lot of raw material-related products in Europe, which we outsourced to Asia in the 1980s - be it ceramics for toilets and washbasins, plastic for panelling or fittings or stainless steel parts. You have to order all of that extremely early so that it's ready on time."
For the customer, this means that they have to specify their boat months earlier than before, otherwise the required parts cannot be procured in time. Nevertheless, processes that were previously almost unknown are sometimes required.
Due to this uncertain delivery situation, we have to touch the boats several times and also store them temporarily," says Gerhardt. "At the peak, we had 60 boats with only a handful of parts missing, but with unknown delivery times.
All of these factors combined - increased demand, more complicated production conditions and rising raw material costs - are leading to longer waiting times and higher prices. "Our boats had two unscheduled price increases in 2021," says Gerhardt. It is normal for prices to rise by around two and a half to three per cent per year due to increases in energy costs and wages, for example. "In April, we also increased prices by around two per cent. That was pretty much exactly the increase for resin - the price had tripled temporarily. This is the raw material that has increased in price the most for us."
Metal, wood and resin - these three product groups account for around 50 per cent of the cost of a sailing yacht. "On 1 June, prices rose by a further four per cent," says Gerhardt. "That's about one and a half per cent more than they usually rise. With both increases combined, the relative increase in 2021 was about twice as high as usual."
The situation is similar at Bavaria: "We normally publish a new price list once a year, always in August," says Schlichting.
At the end of 2021, we already had our third price list. We increased them in April, in August and on 1 November," says Schlichting.
The galloping updates to price lists are due to the longer delivery times. "We still work according to the system that the customer signs a contract and then receives their boat for the agreed amount." However, the delivery time is now 18 to 24 months instead of the three to six months it was until recently. "We would be exposing ourselves to a high risk if we were to guarantee a favourable price for 24 months," says Schlichting. "We therefore have to calculate the price that is likely to be realistic in two years' time."
The longer the delivery time, the greater the shipyard's safety margin. According to Gerhardt, the new Hanse 460 sailing yacht, for example, is fully booked for two financial years at Hanseyachts. "I open a new price list every year, estimate the price increase up to the delivery date, and the customer either orders or doesn't." However, this does not apply to all models. "A Dehler 30 od is relatively small and can therefore still be delivered quickly, while the Dehler 34 or Hanse 315 have a medium delivery time. For these, for which the order and delivery still fall in earlier financial years, the surcharges are not as high as for longer delivery times. For these, we have to factor in a price increase over several years."
For Gerhardt, there is no improvement in pricing in sight, even if demand falls. "We will see significant increases everywhere, not just for yachts. And prices are one-way streets. At some point, we will have the pandemic behind us. But after a pandemic, everything is different, especially prices and wages rise: demand increases because people haven't been able to spend anything for years and now want to enjoy life. So luxury goods that allow you to do this increase in demand. And what better way to enjoy the world than with a boat?"
However, yacht buyers could be spared another development from other sectors of the economy for the time being. For example, many motorhome manufacturers no longer provide any information on final prices or delivery dates. And flexible prices are no longer a rarity in the construction industry. For example, carpenters charge for labour hours at a fixed rate, but timber prices are calculated at the current daily purchase price. The client can benefit from this - or lose out. However, it is hardly possible to plan a final price in this way.
With so-called fairness clauses, you can tie parts of the price to a raw material," explains Gerhardt. "In the case of a sailing boat, this would be the three main raw materials metal, wood and resin, at least.
But a sailing yacht consists of thousands of parts, how would you document that? Open clauses with end customers are still difficult at the moment, but it shouldn't be ruled out for all time."
Bavaria takes a similar view. "We don't offer flexible prices, which is why there are several price lists per year," says Schlichting.
What does this development mean for prospective buyers - should they buy or wait and see? "Inflation is actually already here, we just don't see it in the interest rates yet because money is being printed against it. But that won't last forever," comments Gerhardt.
My tip: buy, spend money, invest in values, even go into debt. Houses, caravans, things of value. Boats, boats, boats. Not only do they retain their value and are inflation-proof, they also bring joy. I don't have much in the way of bitcoins in my account. But I do when I'm lying on the aft deck with a drink in my hand watching the sunset.
