State of Boating…The Challenges of 2016

Considering a boat purchase at The 2016 Toronto Boat Show or in the spring?  Boat buyers entering into the bowrider, pontoon and fishing boat market may be in for quite a shock.  Why…..the devaluation of the Canadian dollar versus the US greenback coupled with ongoing boat builder reorganization and potential shutdowns.  Say what?  Most boaters and boat buyers do not have the access to know this information and some of it for obvious reasons is keep quiet.

Boat Buying Sticker Shock 2016

So what is going on and how does it affect my potential boat buying decision at the 2016 Toronto Boat Show or in the spring?  .  Lets start with Sticker Shock!  As of the writing of this article the devaluation of the Canadian dollar versus boat pricing at the 2015 Toronto Boat Show is approaching 20%.  What this means is for every $10,000 of retail boat cost the price increase is $2000.00.  So a $40,000 boat is now $48,000 plus you are on the hook for an additional $1040 of HST on top of that price increase.  So for an additional $9040.00 I the dealer have given you……nothing!  Any way around that….no….with one exception.  Any dealer stock that is 2014 or 2015 will be priced more favourably due to a higher Canadian dollar and that savings may in the area of 15 to 25%.   Every dealership will be approaching this problem from different directions.  Most will be pricing all 2016 boats in US dollars with conversion to Canadian dollars at time of actual delivery which unfortunately leaves the buyer in a state of not knowing their actual final cost….surprise!  Some and I expect very few, will price in Canadian dollars with built in buffers for exchange fluctuations.  Many will reduce their stock levels due to the uncertainty and will want you to catalog shop.  If a dealer has reduced retail unit expectations the push will be to higher gross margin on actual sales to required money in the till to pay the bills.   Or some may have stocked up where possible on 2015 product at significantly lower pricing that 2016.  ( This is our Option at Huntsville Marine with limited 2016 purchasing)  I expect many dealers to reduce their stocking level which means in tandem with low availability of good used boats…pickings or choice may be at the lowest level we have seen in some 20 years.

Toronto Boat Show 2016

When the boat buying market figures and digests the substantial 2016 price increases,  most likely in January, the scramble will be on for any deals on non current 2014 and 2015 boats.  The Toronto Boat Show will be a 100 % non current boat buying show for the first 5 days and then we all have to deal with the much higher pricing of 2016.   We may have to have Paramedics standing by in each display due to price shock for those who have not being paying attention.  There will be a change this year in the show regarding displaying  builders as some are no longer with us and the show costs have reached a tipping point where builders and dealers are thinking very hard on whether they are going to continue to display in Toronto.

Ontario Boat Dealers…Boat Builders Get Tough and some Are Struggling

Okay what else is going on?  Well there is some brand realignment going on right now as some dealers are not going to order 2016 boats at an acceptable level to that brand management.  Boat builders are positing to take over any successful ” A” level dealers or looking very hard for some dealer to stand up and order hard….got to keep those plant production going…shutdowns and restarts are expensive!   Who you thought was a dealer for brand X may no longer be the case.  What else….Quebec has a very high carryover of non currents and this is placing a significant amount of financial stress on some dealers.   With the investment level and risk reward situation in boat retail right now…some dealers are closing boat retail operations.  I fully expect a reduction in major boat retailers in Ontario of 10 to 15% in the next two years and a higher number in Quebec.

There is also a swing ongoing in stock boat inventory with respect to retail price levels.  With no real dealer margin on entry level boats dealers are stocking more high end boats.  The days of walking on a dealer lot and seeing large volumes of stock boats are coming to an end and soon!

Lets talk for a moment about the boat builders essentially all of which are in The United States.

Boat production…Only The Very Strong Are Surviving

A little known fact is if you look at boat unit production in the seven years prior to 2008 versus the seven years after 2008…the difference is 80%.  That is a huge number and this is why so many builders fell apart in the 2008/9/10 time zone. Recent information is that we presently have up to 5 well known boat builders in deep trouble and about to hit Chapter 11, be reorganized or sold for their parts.  None of these are brands presently represented by Huntsville Marine.  With the significant drop in production…there is a shortage of used boats and this placed strong upward pressure on used boat pricing.  The American dealers have crossed the boarder and have snapped up a lot of good used further exasperating the shortage problem.  There is a street fight ongoing between the boat builders for market share to keep those boat plants operational.  Cheating on boat content and build materials to hold pricing is evident on build quality in 2015 and 2016.   A great example of cheating right now is Volkswagen and their so called Clean Diesel mess!  The 18′ bowrider I/O is now considered extinct and many builders are not even attempting to build anything under 19′ especially in the fiberglass market segment.  The industry standard 3.0L sterndrive is gone and the 4.3L is not far behind.  New engines are here but new technology only adds to pricing.  Thank goodness we still in Ontario have an exemption on catalytic converters or there is another $2500 to $4000 on the price.  Volvo has added new engines for 2016 and the price increase is above $2500 per engine….Yikes!   I was told recently that Chaparral had a very significant price increase.

Turbulence ahead….strap on your Kevlar helmet and do the chin strap up…more to follow!