Yacht builders steer past the rocks

Domestic manufacturers of luxury boats suffer plunge in orders due to crisis Sector argues that Spanish tax regime is a disincentive for potential owners

The largest luxury yacht made in Spain, the 46-meter Steel Amaranta by Astondoa.
The largest luxury yacht made in Spain, the 46-meter Steel Amaranta by Astondoa.

None of the 100-meter-long, glittering yachts favored by Russian billionaires and oil-rich sheikhs has been built in Spain. However, between 2004 and 2007 Spain was on the point of finding a place among the leading yacht manufacturers in Europe and rubbing shoulders with Italy, France and Netherlands. In 2007, 507 new yachts of over 12 meters in length, 90 of which were over 18 meters, were registered in Spain. Five years later, in 2012, the market has shrunk, with only 30 vessels of over 18 meters being registered out of 500 in Europe as a whole, according to the Spanish Association of Large Yachts (AEGY).

The future had been sufficiently promising that Spanish shipyards made an enormous effort in terms of investment in design, installations and marketing to increase the range of their products to include bigger and more sophisticated boats. It was in 2008 when Rodman of Vigo, which was established in 1974, but had only been in the recreational segment of the shipbuilding market for a few years, launched its Muse line of vessels designed by Fulvio de Simoni, one of the industry's most acclaimed designers. Although not many of the biggest yachts were sold, it seemed only a matter of time before the Spanish yacht-building industry would be making vessels of up to 200 meters.

Then the crisis and a plunge in domestic demand as a result of it dashed all those hopes, leaving international markets as the only solution. Nowadays, Spanish builders of large yachts sell practically nothing in Spain. "Currently, 90 percent of our sales are overseas in China, Russia and the United States," says Jesús Hernández, commercial director of Santa Pola-based Astondoa, the largest Spanish yacht manufacturer and the only one that specializes in luxury vessels of between 17 and 60 meters. The situation is the same at Starfisher, a Galician manufacturer that specializes in small yachts of between six and 12 meters, a segment of the market that has weathered the economic storm somewhat better. "In 2007, we sold 80 percent of our vessels in Spain, but that figure has now fallen to 50 percent," says sales manager Luis Silva.

The shift toward overseas markets wasn't easy. "When the domestic market sank and companies wanted to start selling overseas, many of them found the challenge overwhelming; they lacked the necessary resources to meet the demands of the export market," says the secretary general of the National Association of Nautical Companies (ANEN), Carlos Sanlorenzo. Some indebted companies — such as Altair and Menorquín — had to call in the receivers and folded. "Many shipyards in the Basque Country, Almería and Catalonia, with annual turnover of between 30 and 50 million euros, disappeared. Some 60 percent of the productive fabric of the industry was lost."

We've only built one large yacht for a Spanish client; the rest went overseas"

What was left was a handful of companies of a certain size such as Astondoa, Rodman, Starfisher, Belliure and Sasga. Rodman, which apart from yachts of between six and 24 meters, makes vessels for professionals such as patrol and rescue boats, had to focus on the latter because that segment "was not so badly hit by the crisis," says the company's marketing director, María Herrero.

Even Astondoa, which built the largest luxury yacht made in Spain, the 46-meter-long Astondoa 150 Steel Amaranta, has suffered. "In 2002 we were making 100 boats a year; now we make 15," Hernández says. Then, the company had 400 people working in its shipyards and factories, but the workforce has since been slimmed down to 150.

While, Spanish manufactures have been languishing in the doldrums for the past five years. The big manufacturers in Europe, better equipped to survive because of their very size, have been winning market share globally, above all in emerging markets. In Italy and France, for example, the market for new luxury yachts is around 950 million euros a year, while in Spain it is under 100 million. The gross value added for the country generated by the sector in Italy is around 7.186 billion and only 1.057 billion in Spain. Slimmed down by the crisis, domestic manufacturers now have to compete with giants such as Azimut-Benetti, which has annual turnover of 720 million euros.

This difference in scale undermines the ability of Spanish companies to design new models and compete in prices. "The big boatyards can call on very powerful infrastructure and other resources, which allows them to manufacture more cheaply. That means that for this type of yachts, Spanish buyers are opting to buy outside of Spain," says ANEN's Sanlorenzo. Astondoa's Hernández concurs. "We've only built one large yacht for a Spanish client; the rest went overseas." Cost pressure has led Rodman to shift part of its production to Portugal where qualified labor is more cheaply available than in Spain.

Spain has one of the lowest ratios of boats per inhabitant in Europe

Sources in the sector believe it will not be possible for the industry to recover unless the domestic market is developed. Spain has one of the lowest ratios of boats per inhabitant in Europe at one for every 200 against one for every 100 in Italy. Regulations regarding leisure boats and their tax treatment act against the sector. While in the rest of Europe, such vessels are levied only value-added tax, in Spain there is also a registration tax on top of VAT, which increases the fiscal burden to 33 percent of the purchase price. That is why Spaniards and also foreigners who live or come here prefer to register and moor their boats in other countries.

Leon von Ondarza, the secretary general of AEGY, argues that if the registration tax were removed, "it would attract more boats to the Spanish coast, improve the quality of tourism, help increase the sale of yachts, encourage spending and bring in more VAT revenues." He says large yachts in Spain are relatively expensive, with vessels of between 25 and 30 meters going for between five and six million euros and those of 60 meters for 30-40 million. Herrero points out that Rodman's most expensive model, the 24-meter-long Rodman Muse 74, sells for around 2.5 million euros. But the building of the yacht is only the tip of the iceberg, with the industry attracting a whole gamut of ancillary activities such as radio-communications, electrical components, furniture and steel.

However, no matter what is done to help turn the situation around, players in the industry are fully aware that it will be very difficult for the sector to relive the boom it experienced in the middle of the past decade, and for that reason conquering overseas markets will continue to be vital. As a result, despite the drop in sales and the layoffs, companies are preparing to launch new lines. The most spectacular of these is the Astondoa's top-of-the-range Top Deck, a new concept in yacht. Rodman has had quite a lot of success with its Spirit 31 and Herrero explains that the company is working on a new model, the smallest version of the luxury Muse, named the Rodman Muse 44. This is generating some optimism in the sector. "I am convinced that through exports we can return to the levels we saw before the crisis," ANEN's Sanlorenzo says. "Our brands are growing in favor and are increasingly popular and highly regarded; we're winning international prizes, the big boatyards are still there and have even become stronger, and we have an increasingly wider range of models," he adds.

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