Demand for boats, especially large ones, declined as incomes fell and gas prices rose
Los Angeles, CA (PRWEB) June 10, 2013
The recession hit the Boat Building industry hard, especially since households make up about 50.0% of the industry's customers. The broader economic problems plaguing the United States reduced the amount of money consumers were willing to spend on luxury items, watercraft included. Heightened unemployment and reduced consumer sentiment during the recession caused demand for luxury boats to plummet. The industry attempted to make dramatic changes to operations, slashing production and operating costs in reaction to the sharp drop in consumer demand. Still, industry revenue declined an average of 7.0% per year in the five years to 2013.
Luckily for operators, 2011 marked a turning point for the industry. Economic recovery took hold and disposable incomes grew, driving demand for boats (much of this growth coming off the low levels of 2010). As the economy continues to strengthen from the worst of the downturn, these trends will continue to be more prevalent. IBISWorld expects the industry to generate $6.9 billion in revenue in 2013, up 3.7% from 2012. Profitability is the biggest challenge facing the Boat Building industry. Over the past five years, numerous boat builders filed for bankruptcy, while others incurred significant losses due to weak demand. “In 2008, consumers' preference for larger boats declined, and gasoline prices hit an all-time high,” says IBISWorld industry analyst Lauren Setar. Subsequent drops in oil prices failed to restore demand because rising unemployment and poor stock market and housing market conditions damaged consumer wealth. Increases in the price of steel also contributed to declining profit margins. Many operators cut costs by reducing their workforce and cutting production capacities. After widespread operating losses in 2010, the industry's profitability is expected to continue to grow in 2013.
IBISWorld anticipates that continued gradual improvements in the general economy, including returning disposable incomes and growing consumer confidence, will strengthen revenue through 2018. During that time, the industry will also benefit from increased demand from ocean and coastal transportation as well as efficiency improvements made during the economic downturn. According to Setar, operators able to successfully speed up production to align with demand while maintaining the efficiencies achieved during the downturn will be able to expand profit. The Boat Building industry has a low level of concentration and is considerably fragmented. IBISWorld estimates that the top four major players will account for less than 20.0% of US industry revenue in 2013. The majority of companies in the industry are small, independently owned operators. The level of market share concentration has decreased over the past five years; many small and medium-sized businesses have either been consolidated into larger companies or expanded to achieve greater scale and efficiency levels. For more information, visit IBISWorld’s Boat Building in the US industry report page.
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IBISWorld industry Report Key Topics
This industry builds boats, which are defined as watercraft not built in shipyards and are typically intended for personal use. This industry does not include ship building (IBISWorld report 33661a).
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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