Originally Posted by THD
On China builds, I read an interesting article the other day in a trade pub I get. It seems that China is fairly rapidly losing the cost benefit it has had. Labor costs are rising. There are still substantial quality control and build consistency issue that increase warranty costs. Not to mention a lot of uncertainty in dealing with the bureaucratic structure in China. Add the transportation costs, and building in China has become much less attractive. It is interesting that the same issues arose with building in Taiwan. Taiwan addressed the issue by helping good yards develop the infrastructure, and then the yards, along with the government, worked hard to have a very high quality, well trained work force. China is not there yet.
More builders are going to be building back in the US in the upcoming years. One example, Gunboat just bought a yard in Wanchese, NC and is moving production from China back to the US. Among the issues mentioned above, they also discovered that 6 months after introducing their 60', built in China, the yard was offering knock offs for sale in Asia.
Actually this has happened in manufacturing many times over the years. One country would become low cost and five years later it was at the upper end. I remember manufacturing in Jamaica and the cost benefits, but soon the costs there were double nearby countries.
Now, the other thing we found was that labor and weight were the keys. As to labor if you took capital intensive rather than labor intensive businesses then the savings were minimal. If items were light then offshore logically saved far more than heavy items. You see concrete fences imported from Venezuela, you wonder what is buried in the posts, or at least customs does.
I was involved a bit recently in looking at a boat builder that manufactures in the far east but sells the majority of their boats in the US. I figured that they could build in the US and be less expensive than their current landed cost. Now they weren't the most efficient builder so could improve where they are.
But builders like Hatteras/Cabo and Westport are competitive. All the sportsfishing boat builders are. Then look at Sea Ray, Carver/Marquis. Then all the runabouts. Look at where Ocean Alexander is building their 120' MY. Christiansen is building it in the US.
The largest boat builders in the world are not in low cost labor countries. Italy has the largest. The Netherlands, the UK, Germany. Ultimately the Chinese builders will survive or not based on quality. Nordhavn is priced high and sells fine. Other builders like Horizon have been there for decades and done well. Horizon has done well in Taiwan. But when it comes to building boats for sale in the US market, I'm convinced today that you can build them in the US as cost effectively as anywhere.
Now if you're talking about a blouse or pair of shorts that's just not the case.
One other comment. While labor costs and wages have been a tremendous advantage for Chinese builders, there were other factors too. They spent the money to build first class facilities and to train workers. Many of the US facilities lagged decades behind. Now when it comes to runabouts and lake boats, there are some incredible US facilities. But they are very limited when it comes to Trawlers and MY's. Some of the US builders here, those that have stayed current in technology, are doing well. Others have failed to change for decades and are surviving based on commercial building.
Look how many Princess, Sunseeker, Ferretti, Pershing, Riva, Benetti, Azimut and other yachts from Europe are selling in the US. Same labor costs as US plus the shipping. And again I'll mention sportsfishing boats. The US builders own the market.
Now similarly I know US builders hoping to make inroads in the Far East. Maybe short term, but long term it will not make sense for those in China to buy US built boats. Marquis has a China dealer. There really aren't any Chinese builders concentrating in their size and type boat. But the moment one does, the cost disadvantage of buying from the US will be quite significant and the quality little different. Now still some will buy simply because the boat they like is built in the U.S. Similarly, some buy the boats built in China with the cost having little influence but it's the boat they really like.