Cutting out the middleman – buy direct from the shipyard
Buying a new yacht
When you thing about buying a new yacht, there are a number of ways you can go about this. That decision will be largely driven by the type of yacht you are buying. An off-the-shelf production boat, a semi-customised yacht (perhaps at a Chinese shipyard like us) or a bespoke superyacht? Clearly when you build a yacht which is bespoke, you will have an intense relationship with the shipyard. You will employ a naval architect and various specialists to manage the project and deliver your one-off specification. Probably, you will have your design in mind. You will then, most likely, go out to tender to find a shipyard capable of delivering what you want.
At the other end of the scale, when you buy a production boat from a boat dealer, you have very little to say about the specification. Perhaps there will be some standard choices to make. Teak or cherry interior? White or black counter tops? Choice of engine size? There could be a fairly long list of options to choose from, but they will be fixed. You won’t be able to redesign the boat or specify equipment outside of the standard list. Customers normally order this type of boat from a local boat dealer. They may even have stock boats and you will get delivery of your new boat in a fairly short timescale. You will have no contact with the shipyard or manufacturer and this buying process is similar to buying a car
In the middle of these extremes is the growing market for semi-customised yachts. Our Selene most definitely falls into this category along with many others from Chinese shipyards. The shipyards for these types of boats base the designs on a standard yacht. This is usually a basic boat for which they have a set of moulds (for FRP boats) and designs. When comparing different builders, check what they include in the basic specification. This can vary a lot and may artificially make a particular boat look cheap or expensive. Technically, its possible to buy a standard boat – but nobody does.
A semi-customised yacht is normally unique – with every owner having different design ideas and technical requirements. Often the same model boats are quite significantly different from each other! It depends on the cruising grounds and individual owner tastes. An owner who plans to sail the world has very different needs to a coastal weekend cruiser.
When you buy a semi-customised yacht, there could be a fairly long process of design. The complexity will depend entirely on you. When you place your order, the shipyard lay the hull since the structure of the boat is not changeable. You also make some of those standard option choices for the base construction. Then you start going through each and every system onboard. You can make modifications to the factory standard wherever you want to – within the constraints of the integrity of the hull.
The dealers have to work for their money!
Rather than simply working through a standard order form, the boat dealer needs to work with you to find out what you need and help you specify your boat. If you don’t have a lot of technical knowledge, the dealer will share his experience of other owners, and help you find solutions. They will liaise with the Chinese shipyard on your behalf to instruct them on the build decisions. These boats are built to order – there is no stock. The build process for a semi-customised yacht is generally 18 months to 2 years. During this time most owners make several trips to the shipyard with the dealer to see the yacht taking shape. Your contract is with the dealer and your stage payments go to them – they deduct their slice before passing money over to the shipyard.
But – there is another way!
Direct shipyard order
Instead of working with a local boat dealer you can cut out the middleman and order directly with the Chinese shipyard. If you are fairly knowledgeable about what you want, then there is not much value to be added by putting a dealer in between yourself and the shipyard when it comes to design decisions. You can get in touch with other owners, try to look at their boats for ideas and research yourself online for different technical solutions. It takes time, but if you have that time available it could be worth the effort.
Pros and Cons
The price will evolve as you go through the process because the shipyard price each modification individually. It’s very easy to get carried away and end up with a final price much higher than you planned! Some dealers will try to push you this way – sign the order and we’ll work out the rest afterwards. We would recommend you don’t do that. Instead have at least the layout and main systems designed before you sign. This keeps the shipyard sharp on the pricing of extras, but it demands a reasonable level of knowledge in advance.
Of course, you save a lot of money when you buy a new yacht direct. Sometimes that can be up to 20% of the boat price (the boat dealer margin). If you don’t ship the boat to your home country, you may save even more money in shipping costs and import taxes. This can be as much as several hundred thousand dollars for shipping and 20%-30% again for taxes, depending on where you live.
The money you can save on a semi-customised yacht when you purchase direct from the Chinese shipyard is a big prize. However, you must be prepared for the additional work which comes with that and the additional money you will need to invest to get the boat into the right state on delivery. Believe me, the boat dealers do earn their money after delivery! For some people who don’t have the skills or the time to take this on themselves, paying this additional dealer fee is worthwhile.
So – if you decide to go into the direct purchase arrangement with your eyes open, you can also benefit from huge savings on your boat purchase. But, you then need to think through certain decisions. These decisions will be driven by the level of your technical skills, your plans for future cruising and your personal situation in terms of the time you have available and where you want to be.
Throughout the build, you will need to have the time and money available to make regular trips to the Chinese shipyard. We would recommend spending a week at the yard every three months, and towards the end of the process more frequent, shorter visits. You will work directly with a factory project manager to confirm the specification instead of working with a local dealer. You may even get to know the people on the shop floor who are physically putting your boat together.
The benefit of being at the yard is being able to monitor in person that the workers properly understood the instructions. You can make sure they make the modifications as you intended. When you do this, there are no surprises on delivery – and you will see everything in the boat from the bottom up. This can be a good thing or a bad thing – the process will be stressful and fun! You will probably end up knowing every inch of the boat, which can be very useful when it comes to being a self-supporting cruiser.
As soon as they lay the hull, the shipyard will open a “tax free book” with the Chinese authorities. Everything purchased for your boat goes through this book – so equipment imported from abroad arrives tax-free into China. Only locally procured materials are subject to Chinese tax.
This means that you can make all your own purchasing decisions if you wish. Having determined exactly what water pump you want (for example), you can find it anywhere in the world where you can get the cheapest price and ship it to the yard for installation. You can procure equipment yourself which may not be available locally or you can ask the shipyard to procure. Buying it yourself is likely to be cheaper but as with everything, there are some pitfalls.
We purchased a large amount of equipment for Destiny and shipped it to China. There were a number of reasons for that – sometimes because of product availability. For example, we wanted particular models of kitchen appliances and these were not available in the Far East – so we imported them from Europe. Other times because of price – for example, with all our Victron equipment. When making these decisions, you need to consider the shipping costs in the equation. But don’t forget there is also the technical support, or lack of it, which may be available to the shipyard for installation. Remember, they won’t necessarily know how to install every make and model of equipment available. Reading manuals in English is not really an option as the shop floor installers can only read Chinese.
When it is complete, a semi-customised yacht built in China has to be exported from the country as “goods” by the shipyard – in order to make use of the tax-free construction. It is therefore impossible for you to take delivery of your boat in China – the shipyard has to export it to you somewhere else.
If you are buying directly from the Chinese shipyard, and not buying via a boat dealer local to you, then you need to decide where you will take delivery. From a legal contractual point of view, handover will undoubtedly be Hong Kong – whether you actually receive the boat there or put it on a ship to be sent to you. Cutting out the cost of the middleman (boat dealer) means you also cut out the checkpoints the dealer provides. You have to take responsibility yourself for acceptance testing and deal with any warranty issues directly with the yard. This could be with the help of a surveyor or not, as you choose. It was not possible for us to bring in a surveyor as all the borders were closed when our boat was ready.
Snagging and Warranty Issues
There will always be a long list of snagging issues with any new yacht, no matter the brand. The boat dealer is used to seeing them. They know the quirks of the shipyard and the things which are often wrong. When a dealer receives a new boat, they will just solve these problems well before the owner sets foot onboard. With no boat dealer, you have to be prepared mentally for what you will see. It can be upsetting! You also need to be ready for the work involved to fix things yourself. Many of these snagging items are small things that you would expect to be common sense. This can be a source of frustration and annoyance.
If you buy from a dealer, the boat will be shipped to them first. After they have done their checks, you, as the owner, take delivery. There normally follows a period of shakedown cruising. The dealer will also fix all the issues you find during that time (and there will be lots of them)! Only after then are you on your own – or working under the normal warranty system. When you buy a yacht direct, once again you have to deal with all the shakedown issues yourself or by negotiating with the Chinese shipyard for them to make repairs.
Or – bring the boat home ….
You could put the boat directly onto a ship and send it wherever you are. In this case, you transfer legal ownership in Hong Kong, perhaps without even seeing the boat or perhaps with just a cursory check. You load it on a ship to your home country and you deal with your commissioning and shakedown in your home waters. Of course, you would then incur the shipping costs and the import taxes wherever you are. But you still save the dealer margin, have the benefit of cruising where you know and working with your own local suppliers.
But how do you deal with all the warranty issues which will come up?
The shipyard may be happy to send you replacement parts (where you can prove there is a fault) but you won’t have access to their technical teams or manpower. The local dealers won’t be inclined to help you either as you have chosen to by-pass them with a grey import! Maybe you decide that buying with a dealer is not such a bad idea after all. Or maybe you have a solution for this and decide to ship your boat close to home.
So how did this go for us?
We decided to make a direct purchase – and not to ship the boat home, but to start our cruising from the Far East. Our plan is to cruise around the world anyway, so it didn’t really matter where we started. We chose Hong Kong as our commissioning centre because it is very close to the shipyard. Our yacht remained accessible for their technical teams. This was an issue to start with because the Chinese borders were still closed. However, as soon as borders opened, it was a simple task for the guys to jump on a bus and travel to Hong Kong for a week at a time.
Many who read our story are shocked by the amount of work needed on a new boat. However, much of this falls under the normal things to be found in commissioning and shakedown. These snags should be deducted from the cost savings we made on the purchase of our boat. These are the things that a dealer would fix before a new owner set foot on the boat. You would never normally see them! For the other larger issues, our proximity to China meant it was possible for the shipyard to come and make repairs.
It would not be true to say that we knew all this in advance! Our expectations were indeed different in the beginning, and we have learned a lot as the project has progressed. Only after experiencing the process do you realise what happens behind the scenes at a dealer. Our decision would still stand – the cost savings we have achieved are significant. But, if we did this again, we would make better preparations for the post delivery period and also manage the build process in a different way.
Are you thinking of building a new Selene?
The upside of our learning curve is that we have now developed a small consulting business. We now help other Selene buyers through the process of buying directly from the yard. Our first customer’s boat is due for delivery in the next few months. We have signed a contract with the shipyard to act as an introducer. Our clients get the dealer benefits in terms of design and support for us during the build process, without having to pay the dealer margin. This means that even if you are not a very experienced yacht person or clear about what you want/need, you can still take advantage of buying direct. We can fill in some of those gaps for you.
If you are interested in building a new Selene, get in touch with us first. Find out what we can do to help you! Our services are free of charge to owners who buy via us as the shipyard covers all our costs.