Caprice Lam took 90 minutes to close his first luxury-yacht sale, from the time the customer stepped aboard the 62-foot (19-metre) vessel on China’s Hainan Island to the moment the bank wired the 35 per cent deposit.
“I don’t even have his name card,” said Lam, hours after the 13 million-yuan ($2 million) deal on April 2 at a boat show in the tropical resort of Sanya. “He just gave me his cell phone number, called his bank and paid the deposit.”
The sale shows how China’s industrial base is breaking into the most expensive luxury markets. While wealthy Chinese typically entered markets for jewellery, clothes, cars and planes through US and European brands, Lam works for Xiamen Hangsheng Yacht Building Co in Fujian province. It’s one of at least half-a-dozen Chinese yacht builders competing in the country’s nascent nautical market with Azimut Yachts, Ferretti Yachts, Princess Yachts International and Brunswick Corp.
“This is a sign of China’s own industrial confidence,” said Ryan Swift, Hong Kong-based editor-in-chief of Asia-Pacific Boating magazine. “A yacht is a very complex product requiring all the engineering of a house, which has to float, survive waves and have a fine finishing on the inside.”
This time, Chinese companies are entering a luxury market early. While China now has as many as 400 dollar billionaires, there are only about 100 Chinese-owned yachts longer than 60 feet, according to Rupert Hoogewerf, who compiles the Hurun Report of wealthy Chinese. In the US there were more than 7,000 yachts that size in 2006.
In Zhuhai, two hours from Hong Kong by ferry and car, Sunbird Yacht Co is building two vessels it plans to ship to Italy in July. The buyer, a Milan boatyard, plans to unveil the craft at the Genoa boat show in October.
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Sunbird’s boatyard is operating seven days a week to meet the deadline. On a recent afternoon, about 20 Chinese labourers were working on the first of the yachts, a 70-footer. Workers sanded the teak decks by hand and sealed tubes of electrical wires. Carpenters assembled the wooden, spiral staircase leading to the bridge from the deck below.
Sunbird’s staff of 400 workers is capable of making about 20 boats per year. Large-yacht building is new to China, and workers lack skills and experience of their Western counterparts, said Filippo Bertoni, a naval architect from Perugia, Italy, who designed the export boats for Sunbird.
“That first boat was like a school boat for them,” said Bertoni, who expects the vessel will require 100,000 man hours to make in China, a task that would take an Italian crew 35,000 hours. “For the next boats, they will be faster.”
The yacht builders show how Chinese companies are moving into higher-value products as inflation and rising wages pare the country’s competitiveness for cheap manufactured goods and assembly plants.
Sunbird pays unskilled workers at least 2,000 yuan per month including overtime, rising to three times that for electricians and carpenters, according to Charles Luo, vice president of international business. While that’s more than double the average provincial wage, it still allows the company to build its boats for about 30 per cent less than foreign competitors.
With 43 per cent duties on boats imported into China, “we have a huge advantage over foreign brands,” Luo said.