In late 2017 and early 2018. We have come across a few people who have lost their deposit after they ordered a new boat. The factory has shut down leaving them little or no refund. Some of the people who have lost their deposits are also contemplating legal actions against the yacht dealers.
Here are some tips that can avoid you from loosing your hard earned money. Thanks again for your time to read this. I hope this is of some use.
Honestly I am not an expert on legal matters, so I cannot tell you what law can help you, or what disclaimer or a clause in the agreement can help you. Yes, there can be clauses in agreement that in case a factory shuts down then you can go after certain people, maybe it’s the official dealer or someone else. But that is still putting you in a legal battle.
So here are few wisdom points I have learned through out the years, of course nothing can be full proof. But they make a lot of sense when buying a new boat.
- Avoid new factories : O.K, that sounds like I am not helping a young start up or a new creative idea. After all if no body bought from Henry Ford, we will still be riding on horses. But you have to understand boating business, renting a shipyard, buying equipment, mould, workers, expertise, designs, management etc. It is huge expense and the costs and difficulties are almost impossible to contemplate. Even if you start out to open a lemonade stall you will encounter unexpected expenses and rules and regulations that you didn’t even know existed. So in this business there is a lot of risk for a new guy and he might get financially stuck in his initial phase and walk away with his hands in the air leaving the financier wondering what to do. Stay away from new companies. Most of them cannot survive up and down of financial markets too.
- Do a bit of homework on who is the factory owner : In recent years especially after 2008 financial melt down, even some very big and very famous factories had come to the brink of bankruptcy and sold their shares and businesses to others. Especially to businessmen in China. Now I have nothing against them, I love them, they are great! ( I don’t want to get arrested for this article please). But I think, just having capital does not mean having expertise. But think about behavioral aspects of humans in economics. If I treat my business as my passion, I am going to work through it in the hard times and I really know the business on ground zero. I can still handle and finish orders when half of my employees have left. But if I am an investor the minute I see downfalls, low profitability, and some other data, or even if my other businesses are more profitable than my yacht manufacturing. I will just cut loss, sell it off, close it or whatever and walk away. Also, if my finance is coming from capital markets then again, the movement of capital or stock markets is going to affect my yacht manufacturing. You don’t want to get stuck in that mess. Trust me. Especially if you have a 70 footer which is going to take 12 months for delivery.
- Early deliveries or Stock boats : You are safest buying stock boats which are ready in the factory. But, then you limit your choices such as engines, sometimes some options in layouts etc. The smaller the boat is the more general it is. For boats up to 40 footers, the layouts are very similar and generally things are not that different. But as it goes bigger the boat can change a lot. Mainly for big yachts the factories will not make it until it is pre-ordered. One way you can get it as stock ready in factory is when an existing client cancels their order. This rarely happens and factories also get greedy and don’t necessarily give a better deal depending on the market. Again having said that, a good factory will be busy through out the year and getting a quick delivery is not possible. But it should not be too long such as 7 or 8 months. But up to 3 or 4 months should be acceptable. In this case look at the market and ensure that people have bought this brand and the factory has been building boats for a while.
- Travel : Some times when you go and see the factory, you immediately know if the company is keeping busy. If deliveries are late because of demand or deliveries are late because there is a labor strike and factory cannot afford pay rises. This can get you stuck in deliveries. When you see the factory, the hustle bustle going on, there is enough equipment and boats are sitting on mould, workers working etc. It is safer. Compared to a factory which is almost empty.
- Choose a right agent : O.k, buying a good boat from a good factory through a wrong agent can also be a disaster. If you take for granted every one’s wisdom. Because there are people who will take your deposit or put the part of it somewhere else. While factory is doing their job honestly the dealer in the middle might have misused the funds in order to make more money. It can be something like putting less deposit to the factory and putting money to pay his bills or do other smart-ass investments. Yes! people like that exist! and there have been cases where factories have been waiting for payments while customers have paid and the money is nowhere to be found. So choose the right agent, who will also let you communicate with factory and you know the status. Again, if you actually go visit the factory you will also get a good contact to follow up directly with factory in case the agent is not available or having a health issue or whatever.
- Too good to be true deals : Again, this economy has its funny moments, some people make a fortune by getting something so cheap and then selling it for a right price. Yes it can happen. But you are now stepping in a dangerous territory. Most scams happen when someone gets greedy, the greed blinds you. You go in a dodgy shop to buy a stolen Rolex watch for quarter the price and you think it is real? it can be! but often it is fake and you are duped! So, do investments and make money in an area that you are expert in. If you are not expert in boats, run away from too good to be true deal.
- Experience & Reputation : Experience and Reputation is everything in this business. When buying through an agent, you can ask previous buyers about the agent. You can ask some industry people. (Maybe his competitor may give you a wrong information to kill his deal) but still generally people are honest at least in Hong Kong’s boating industry. But if there is someone who has a bad reputation of having disputes with his clients or in their deals, asking around can avoid you being the next victim. Also sometimes an agent can be good but just does not have enough experience in the field and can’t tell a bad factory from good. So yes, again be aware. But also be wise. If some other dealer criticizes the boats or the brand your agent is selling without giving you real evidence or conviction. Then don’t believe such person. Criticizing a competitor without real evidence is a sign of dishonesty. You don’t want to be around dishonest people while doing business.
- Agreement : Finally check the agreement and read it carefully. Especially all items, delivery processes, etc, and make sure all costs are covered including deliveries, insurance and there wont be surprise expenses for you. Visit the factory if not too far, talk to existing owners, use your own judgement and look for red flags if the agent is not being fully transparent. But do not be too scared, if you have a reputed yacht dealer who has been around for a while and a decent factory. It is usually safe. Normally only honest companies survive this business in the long term.
Hope you find this article useful, please feel free to suggest me if i have missed anything.