Last year, Swiss yacht management company Floating Life
International oversaw the delivery of a 45-meter expedition yacht for an Italian
client from a commercial yard near Yantai in Shandong Province, reportedly at
the knockdown price of $6.5 million. And at the 2007 China Boat Show in Shanghai
in April, the Mega Yacht Group, a joint venture between Wuhan Nanhua High-speed
Ship Engineering and Cavendish White, presented plans for a range of superyachts
up to 100 meters. Steel cutting started in July on the first 67-meter yacht,
codenamed Project Midas. The vessel will be built to Lloyd’s and MCA
certification. Nanhua High-speed Engineering is a former commercial shipyard,
and its transition to private yachts is unlikely to be straightforward.
Top: The Ocean Alexander yard. Middle: Security staff. Bottom: A steel hull at Kingship. (Click images to enlarge)
China’s potential as a yachtbuilding superpower lies not so
much in its unlimited supply of cheap labor (indeed skilled labor is in
short supply and often poached by competing companies) as in the development of
yachting industrial cities and boatbuilding clusters such as the Shanghai
Fengxian Yacht Industrial Park or the Zhuhai Pingsha Yacht Industrial Zone. To
date, operational efficiency has been hampered by limited access to suppliers
and, in extreme cases, yards have had to re-import materials such as
marine-grade plywood that were originally produced in China. Overseas marine
suppliers have been quick to recognize the problem and set up local factories,
including composite specialists High Modulus, refrigeration suppliers Isotherm
and engine manufacturers Caterpillar, Rolls-Royce, MTU and Mercury. It is a
business model that has proved successful for the electronics and automobile
industries. By gathering boatbuilders and equipment manufacturers in the same
area, these industrial yacht zones should provide synergies and savings for
everyone. As to whether owners should look to build a custom superyacht
in China, my answer is, "Why not?" I was positively surprised by the
cutting-edge facilities and equipment during my tour of a dozen yards across the
country. The skills are already in place and, with expert guidance from outside
consultants, can only improve in the future. Having said that, there is a
downside to building in China for the unwary that should not be overlooked. The
legal framework, where it exists, is tortuous, and domestic business partners
must be chosen with care. As in other Chinese industries, counterfeiting is not
unknown, and some methods of low-cost mass production are inappropriate for
foreign investors who have international reputations to maintain. One cautionary tale is that of American-owned CMI, which was
contracted to build six 110-foot steel yachts in 2004. Within 18 months after
subcontracting the Huangpu Shipyard to carry out the work, CMI declared
bankruptcy and $90 million of investment disappeared down the drain with nothing
to show for it but six rusting hulls. There are cost-effective opportunities out there for
prospective owners who are willing to venture into an exciting economic and
cultural environment that does not yet possess the experience and pedigree of
the American or European yachtbuilding industry. The best advice to adventurous
investors would be to approach the table like savvy poker players—armed with
knowledge, diligence and patience.
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