During the first three months of 2008, our staff conducted our annual survey of over 200 North American builders of diesel powerboats to determine what changes had occurred between the 2007 market and that for 2006. For 2007, Power Products Marketing estimates total North American diesel powerboat production amounted to about 4,225 boats, which was a 16.5% decline from our revised estimate of 5,065 boats for 2006. North American production had jumped nearly 15% in 2004 and another 10% in 2005 to a record level, mostly attributable to a surge in export business. But since then production appears to have headed in a downward spiral after an initial downturn of nearly 8% in 2006.
Bankruptcies, Closings and Consolidations
We encountered the following developments during our first quarter 2008 research that could be a harbinger of things yet to come:
- Albin declared bankruptcy, effectively closing its doors in October of 2007
- Comano Marine was purchased by Bracewell Boatworks in mid-2007
- Doral Boats International was reported to be up for saleSeptember 2008 Volume 10, Number 9 INDUSTRY TRENDLINE SERIES
- Mainship closed its Midway plant and transferred production to its St. Augustine and Silverton New Jersey plants
- Maxum closed Salisbury, MD plant in November of 2007, transferring production to North Carolina
- PDQ was acquired by Pearson Composites
- Sea Ray announced closing Merritt Island and moving production to Knoxville/Riverside during mid-2007
- Shamrock closed their Florida plant in August of 2007 to move to North Carolina, but production did not resume
Domestic vs. Exports
According to our analysis, about 30% of all North American-built diesel powerboats were exported overseas in 2007. This compares with 22% in 2006, 19% in 2005, 13% in 2004 and 12% in 2003. In fact, unit exports increased between 17-18% for 2007. These are mostly going to European customers, many of which are sterndrive configuration. Since 2003, exports have increased nearly two and a half times in the span of four years. Many of these boats typically have Volvo Penta, Yanmar and MerCruiser propulsion engines. These export numbers mask the more severe decline in the domestic segment of the production mix, which by our count appears to have declined 10% in 2006 and another 26% in 2007.
Analysis By Length
Inboard cruisers sold domestically continue to suffer the worst in the 31 feet and under category for both gas and diesel. For diesel, all categories less than 60 feet in length suffered severe declines in 2007 on top of declines in 2006, although the worst hit appeared to be boats 26-36 feet in length. Boat sales between 60-79 feet, however, appear to have held up reasonably well. Large megayachts 80 feet and over appear to have declined nearly 10%.
Analysis By Propulsion Type
Based upon our analysis, there were about 170 boat builders in North America that produced diesel-propulsion powerboats in 2007. These would include the largest volume builders producing hundreds of boats annually to the smallest custom builders that might only produce one boat a year or every other year. About 67% of all diesel powerboats produced in North America in 2007 were twin inboard configurations, which has been fairly consistent over the last 5-6 years. About 13% of the boats were single inboard, which also has stayed consistent in recent years. About 17% of all 2007 production was sterndrive, up from 15% for 2006, still 60% single engine and 40% twin. This sterndrive increase can be explained by the sharp increase in the percentage of production going overseas. There were about 30 boats produced that had triple inboard engine configurations, mostly high performance/ offshore boats. Jet propulsion applications still have about a 2% share, based upon our tabulation.
Analysis By Boat Type
We categorized all the diesel powerboats we tracked that were produced in North America during 2007 by boat type and compared them with previous years. According to our analysis, about 23% of the boats were sportfish designation, which include convertibles, compared to 28% in 2006, 27% in 2005 and 30% in 2004. About 42% of all boats produced in 2007 were sport cruisers, from 30 feet and even less all the way up to nearly 80 feet in length. This compared with 36% in 2006, 35% in 2005 and 31% in 2004. So there appears to have been a noticeable shift that occurred from sportfish to sport cruisers in the course of a year. About 22% of all boats produced in 2007 were motor yachts, between 30 to 80 feet in length, remaining fairly consistent compared to 23% in 2006, 24% in 2005 and 23% again back in 2004. Another 6% of diesel powerboats produced in North America in 2007 were trawlers, up from 5% in 2006, 5% in 2005 and 7% in 2004. Many trawlers sold in the U.S. are in fact produced in the Far East and imported into the U.S. for sale. About 5% of the boats are a combination of launch/tenders, most of which are large diesel-powered rigid hull inflatables (RHIBs) propelled with either a stern drive or jet drive configuration. This percent has been very consistent at 5-6% over the years. The remaining group is superyachts or megayachts that comprises just 1% of all production annually and typically source twin engines 1400 horsepower or more each. These custom luxury yachts are 80 feet and over in length and by our count numbered 53 built in the U.S. and Canada during 2007 in which we determined the engines were actually laid. This compares to 58 in 2006, 56 in 2005 and 43 we counted in 2004. The high water mark was in 2000 during which 80 superyachts were built in North American yards. Thereafter, the market declined steadily until the bottom in 2004 but it appears the recovery in this luxury niche could be shortlived with the prolonged uncertainty in the stock market.
Major Builders
The top ten diesel powerboat builders in terms of numbers of boats produced in 2007 were Sea Ray, Mainship (including Luhrs and Silverton), U.S. Marine (Meridian, Bayliner and Maxum), S2 (Tiara line), KCS (Cruisers and Rampage lines), Carver, Regal, Thunderbird, Cabo and Viking. Most all have consistently been in the top ten since at least 2000. The top five builders together accounted for 40% of all North American 2007 diesel powerboat production compared to 44% in 2006. The top ten builders as a group comprised 53% of the total versus 58% in 2007, 61% in 2005 and 62% in 2004. This loss in share among the top five builders can be explained by the significant decline in Sea Ray and U.S. Marine production, perhaps as a result of increased penetration from the other major builders ranked 4-8 offering Volvo Penta’s IPS system (see Market Shares). Brunswick’s entire Boat Group, which comprises Sea Ray, U.S. Marine, Hatteras, Albemarle and Cabo produced nearly 1,200 diesel-powered boats in 2007, representing nearly 28% of the total North American production in itself.
Propulsion Engine Trends
Of the 4,225 boats produced during 2007, we determined that there were about 7,475 diesel propulsion engines sourced compared to about 8,900 in 2006, 9,550 in 2005 and 8,700 engines in 2004 and 7,500 units annually between 2001 and 2003. According to our calculations, about 7% of all 2007 engines were 200 hp and under, about 525 engines. INDUSTRY TRENDLINE SERIES INDUSTRY TRENDLINE SERIES Approximately 22% was between 201 and 349 hp and another 40% was between 350 to 500 hp. About 21% of all engines were between 501 and 1000 hp and the remaining 10%, over 750 engines, was over 1000 hp. These 2007 percents reflected a slight shift from the 350-500 hp category to 501-1000 hp as a result of a number of builders introducing larger boats to offset the declines in their smaller boats.
Market Shares
If one were to include repower propulsion engines in addition to engines sold into new construction powerboats, Cummins MerCruiser has long been the leading supplier of diesel propulsion engines sold into the North American powerboat market, primarily due to its relationship with certain semi-captive Brunswick accounts. Based upon our analysis, the four leading suppliers’ shares for 2007, 2006 and 2005 appear to be as follows: CMD and to a lesser extent Yanmar have lost share to Volvo Penta since 2005 as a result of Volvo Penta’s successful penetration of their IPS system, which has gained momentum since it was introduced in 2004. Both OEMs seem to have underestimated the success of the innovative IPS system and were too slow in developing competing systems, which require significant testing and investment from boat builders. By the time both OEMs were ready to market their Zeus systems, the industry had drastically turned down leaving Volvo with the only established pod system in production boats among a dozen or so of the major volume builders. This also hampered Brunswick’s Sea Ray and Meridian in particular who were unable to develop competing pod systems from CMD in time before adverse market conditions necessitated cutting off all such investment. Caterpillar has lost significant share since 2000 when their share was about 26% in new construction boats and they no longer compete below 450 hp, although their dollar volume has been healthy because of their focus on larger engines, such as the C32 and C18-series. However, they appear to have lost significant share to both MAN and MTU in engine sales over 1000 hp during 2007. These four OEMs continue to dominate the diesel propulsion market up to 1000 hp with over 90% of all engine shipments with MTU and MAN making up most of the balance. Total engine sales for 2007 amounted to just over 9,500 units with repowers accounting for between 21-22% of that. Yanmar is estimated to still have slightly less than half of all new repower engines going into North American diesel powerboats. Repowers are believed to have declined slightly overall in 2007 by almost 2% compared to engines sold into new construction that declined by just over 16%.
2008 and 2009 Forecast
Based upon our discussions with boat builders we interviewed during the first half of 2008 and more current input from other sources, it appears North American diesel powerboat production, including both inboard and sterndrive segments, is headed for a prolonged decline through 2008 and well into 2009. In fact, we expect it could be even more severe than the one encountered in 2007, given the deteriorating state of the U.S. economy, stock market and consumer confidence. We project 2008 production could be off 25% or more with the domestic portion declining by at least a third. Even overseas exports are expected to decline by perhaps 10% as European boat consumption appears is coming to a grinding halt, lagging the U.S. economy. It’s entirely possible that 2009 production could drop to levels not seen since 1995 and 1996 when production totaled 2,500 boats annually that followed the 1993 repeal of the disastrous luxury tax. Just when this market will bottom out is anybody’s guess. The key indicator to watch, though, is the Dow Jones Industrial Index. As soon as that stabilizes and trends upwards, count ahead 10-12 months. That point may not be until well into 2010…if then.
David Crocker is a Senior Partner with Power Products Marketing, 7525 Mitchell Road, Suite 203, Minneapolis, MN 55344, Phone: (952) 893-6870, E-mail: dcrocker@powerprods.com. Michael Brugioni is a Market Analyst with the firm who helped gather information for this article, E-mail: mbrugioni@powerprods.com.
