Interesting take on the cost of boats - from the wake perspective

[buechsr]

7 hours ago, chrislandy said:

Anyone who doesn't think the prices are nuts, is nuts themselves.

If the manufacturers are not operating on huge profits (not dealers, the manufacturers) then they are doing it wrong. In the video, it says (paraphrased) "If the boats are twice as big, then it costs twice as much to build", complete hogwash and shows the misunderstanding, lack of knowledge or naivety of the interviewer/ee. 

 

For context, different market, same thing though.

For example, 300k you can get a new 32ft Haines cruiser, max 26mph, 6 berth (double in bow), kitchen, lounge, sundeck, head, shower, etc... Haines 32 Offshore | 10m | 2024 - Berkshire | Boats and Outboards 

10x the boat, materials, technology than a base model 300k "surf" boat and you can guarantee they are making a decent profit with very low volume production  

At 300k it’s virtually stripped down.  It doesn’t even have a plotter.  Either way, call it a $400,000 boat (assuming pound and $ 1:1). I take your point, but there really isn’t a ton of profit margin on wakeboats.  They vary by product mix and options but it’s not as if the big 3 are “making” tons of money.  Malibu has never even paid a dividend to my knowledge.  I don’t know about MC.  If you want to look at ridiculous pricing, look at the 35-50 foot center consoles by yellowfin, pursuit, Parker, and invincible.  You can easily eclipse $1M for what is basically 2 slabs of fiberglass with live wells and bolt on power.  22 foot bay boats eclipse $100,000, easy. 

Acknowledging that ski/wake boat prices are outside of reach for most doesn’t make them “nuts”.  If capitalism suppported a significantly cheaper option, the market would’ve spoken. The latest attempt to do so was by Heyday.  To my knowledge, they’re not exactly blowing it up, yet you can get one for basically 1/3 of the price of the big 3.  There are significant performance and feature differences between them, which is why the market obviously gravitates towards the higher performing boats.  if people really wanted a significantly cheaper ski boat alternative, the market would’ve supported the carbon pro, tige 20i, hydrodyne, Toyota, Infiniti, etc.  People have just clearly demonstrated they are willing to spend more for a premium ski boat. Whether that is justified by its performance, options, and features, that’s for everyone to decide for themselves, but the market has clearly spoken of the lack of demand for cheaper alternatives. 

 

[Horton]

@buechsr

The margins on wake boats are more significant than the margins on ski boats. if not at the manufacturing side, definitely at the dealer side. On the other hand, if you're watching the Malibu thread, you're hearing about a giant dealer network that appears to be in deep deep sheep dip. I don't think anybody on staff at Tommy's is out buying a new Ferrari. They can't afford luxury items 🙂 

I'm actually skiing tomorrow with a nefarious character who previously owned a boat dealership and now works in the center console space. Maybe I can get him to shed some additional light.

update: The character whom I will from now on refer to as Dr. Nefario just called me and said that the gross margins the ski boat manufacturers are probably well below 20%. The actual data is available in the public financial records available here on the inner tubes. Look it up if you want to double-check me.

[Hallpass]

8 hours ago, DvarianDan Johnson said:

@BlofeldStudy Ferrari……… 

Ferrari is a pretty good example to support your point.  Gross profits of 50% are more in line with numbers of the luxury apparel companies you have mentioned.

Interestingly, others like McLaren and Rolls Royce have much more modest margin profiles, closer to those of Mastercraft.  

Bugatti, which is owned by Volkswagen is really interesting.  I have read that they lost $4-6M on every Veyron model sold.  They were thrilled that the Chirons would make a profit at all.  Which, to me says there is a limit to what even the ultra rich market will support.

I understand your point that inflation has little to do with how the rich spend on Luxury.  They continue to buy extravagant homes, extravagant cars, extravagant yachts, designer clothes and handbags, blah, blah, blah.  However, I just don't see that the margin profiles of Ski, wake and surf boats fit in that category.

My $.02.

 

 

[Horton]

@Hallpass okay treat me like a 7th grader and please explain what @DvarianDan Johnson is trying to say. The boat companies are not making huge margins so how is the comparison to Ferrari a valid comparison? 

[buechsr]

2 hours ago, Horton said:

@buechsr

The margins on wake boats are more significant than the margins on ski boats. if not at the manufacturing side, definitely at the dealer side. On the other hand, if you're watching the Malibu thread, you're hearing about a giant dealer network that appears to be in deep deep sheep dip. I don't think anybody on staff at Tommy's is out buying a new Ferrari. They can't afford luxury items 🙂 

I'm actually skiing tomorrow with a nefarious character who previously owned a boat dealership and now works in the center console space. Maybe I can get him to shed some additional light.

update: The character whom I will from now on refer to as Dr. Nefario just called me and said that the gross margins the ski boat manufacturers are probably well below 20%. The actual data is available in the public financial records available here on the inner tubes. Look it up if you want to double-check me.

I agree with you generally, but Malibu's GPM on an Axis is not likely far from GPM for CC on a SN.  On the "dealer" side, margin is just what people will pay a dealer in profit.  Hard to draw bright-line rules but surely there have been prostars sold where the dealer made 20+%, and NXT deals where it's <15%.  But to the point, sure, anything thats more expensive yields more margin for each step to the consumer.  

Yes, GPMs are publicly available.  It's harder to decipher by product mix, however.  All I've ever garnered are averages, or at least profit/units, although Malibu does break out product mix of Axis to Malibu, but not among the M series and "regular" Malibus.

We're not in disagreement as to the (lack of) PM.  I previously said: "there really isn’t a ton of profit margin on wakeboats.  They vary by product mix and options but it’s not as if the big 3 are “making” tons of money.  Malibu has never even paid a dividend to my knowledge.  I don’t know about MC."

I'm in agreement with you (I think) that cost of good sold for the big 3 are remarkably high.  And inflation has been partly to blame for that no doubt.  

[Hallpass]

1 hour ago, Horton said:

@Hallpass okay treat me like a 7th grader and please explain what @DvarianDan Johnson is trying to say. The boat companies are not making huge margins so how is the comparison to Ferrari a valid comparison? 

I don't believe his comparison of Ferrari to ski, wake, and surfboats is accurate at the current margin rates of Malibu or Mastercraft, and that has been my point/contribution here. 

Those of us whose primary sport, hobby, competition is skiing, wakeboarding, surfing, don't think of the boats as luxury items.  They are tools necessary to participate in our sport.  But the fact is, most of the world looks at 125K ski boats, or 300K surf boats as an unnecessary luxury item. 

I believe to Dan's point , if Mastercraft decided tomorrow that its wake boats were 500K, that would put them in a class with Ferrari, Gucci, etc.   There is still an element of the population, that won't care.  They don't care about inflation.  They don't care about interest rates, they just want it.  Might be for status.  Might be because they only want the best (subjective).  Maybe just because we mere mortals cannot.  But there is an element.  High end luxury companies charge, because they can.

Is MC or Malibu in a position to do that and remain in business?  I don't think so.  

Ferrari shipped about 13K units last year world wide, and about 5K units in the U.S.  There units were up 3%, revenues up 17% and net operating margins were up 3%.  Inflation, high interest rates, global economy issues seemingly had no impact.

 MC Shipped around 3500 units with only 5% outside North America.   Unit sales were down 5.3% and revenue was down .6%.  And, that is with modest margins compared to Ferrari.  My opinion, these boats are not in that ultra-luxury, inflation proof category, even thought they are quite expensive.

I am not a CFO, accountant, or economist.  Just one guy's $.02 (or $1 if a Ferrari).

 

[Horton]

@Hallpass maybe I'm just being dense. I don't disagree with much of what you said above.  I have doubts that MasterCraft could double the cost of any boat and still sell any. it is a competitive market.  My question is how does this have a bearing on the current cost of ski boats? I sort of feel like this conversation is turned into circular logic. 

[Hallpass]

2 minutes ago, Horton said:

@Hallpass maybe I'm just being dense. I don't disagree with much of what you said above.  I have doubts that MasterCraft could double the cost of any boat and still sell any. it is a competitive market.  My question is how does this have a bearing on the current cost of ski boats? I sort of feel like this conversation is turned into circular logic. 

Wish I could read minds.  What's new, these threads tend to stray all over the map.

There seem to be a couple of opposite view arguments and a bunch of people, including me spending too much thought on this.  Some that think the costs are outrageous, and some that think the costs, while high, are supported.  A bunch of different opinions trying to support one side or the other, sometimes with innacurate comparisons, or emotional frustrations.

1. Dan threw out that inflation has little to do with how manufacturers price luxury items.  Probably true as evidenced by Gucci, Ferrari, and others.  The disagreement, I think,  is whether our boats fall in that category.  I don't think the public financials support that our boats are in that category, even though they are expensive. 

2. The original video presents a simplistic view.  Boats are twice as big, of course they cost twice as much.  My guess is that some people look at that and say really?  I don't think fiberglass cost twice as much.  I don't think upholstery costs twice as much.  Still only has one engine.  I don't think it takes twice as long to mold a 25 foot boat as it did to mold a 20 foot boat.  I call  bullshit, the manufacturers are just greedy.

There is so much that goes into the cost of making a boat - yes, basic materials; but also bigger engines raise cost more; labor has gone up everywhere, but particulary in Tennessee and Florida where there are huge building booms; gasoline for the company vehicles, electricity, water; cost of disposing of toxic substances; local taxes; increased medical costs for employees; electronic component costs have actually gone up in the last few years (rare in that industry) and we are putting more and more complex electronics in these boats;  cost of lawyers and payouts on lawsuits have gone up; on and on and on.

I have not seen full breakdown of all the costs, and how much each has gone up.  But, again, public financial reports show that margins are about the same as they were ten years ago.  I think those that read the numbers understand that the manufacturers are not gouging us, despite the fact that we don't like the high cost of boats.

3.  There are still many that believe that the manufacturers could make a low cost boat if they wanted to.    Even if true, these are businesses, not charities.  And two of the big three are publicly traded business.  They are obligated to provide best returns to their shareholders.  

If the marketplace supported the low cost builds, or if the margins could meet or exceed what the manufacturers make on the more expensive boats, they would make them.  Obviously, the boat companies don't believe the low cost boats meet these criteria.

Again, just one guy's interpretation of this thread.

[buechsr]

1 hour ago, Horton said:

@Hallpass maybe I'm just being dense. I don't disagree with much of what you said above.  I have doubts that MasterCraft could double the cost of any boat and still sell any. it is a competitive market.  My question is how does this have a bearing on the current cost of ski boats? I sort of feel like this conversation is turned into circular logic. 

In my simplistic response, I would say that the ski Boat market has demonstrated repeatedly that it does not want the cheapest way to provide a good wake and power delivery.  The majority of three event boat buyers are clearly demonstrating that they don’t mind paying a premium over a “base” model workhorse.  For example, virtually everyone was buying Malibu open edition TXIs.  Even though base motors are sufficient for most buyers, it sure seems that in the wild, engines are usually upgraded.  The TXI could be had cheaper than a ProStar yet Mastercraft sold way more ProStars.  The new Ski Nautique obviously got priced in the stratosphere, and although obviously more pro stars were sold than Ski Nautiques, it’s not as if correct craft hasn’t been able to sell them. I recognize that a higher percentage of correct crafts may be going to promo than MC, but It just seems the market has demonstrated that people don’t want a new, cheaper option to ski.  

[Horton]

@Hallpass that all makes sense.

Ok I got to get out of here before @Jody_Seal comments

[buechsr]

1 hour ago, Hallpass said:

 

Ferrari shipped about 13K units last year world wide, and about 5K units in the U.S.  There units were up 3%, revenues up 17% and net operating margins were up 3%.  Inflation, high interest rates, global economy issues seemingly had no impact.

 

Just for discussion sake, I can agree that inflation and global economy issues didn’t affect their buyers which is obviously represented by significantly higher revenues, despite far less (increase) in units. The obvious conclusion is that they were able to charge more per unit than the previous year.

However, that’s the (lack of) top line effect of inflation.

Given that their operating margins were up just 3%, if they were inflation proof on the supply/production side, then in theory their operating margins should’ve been up 17%, in line with their revenues.  Said another way, it could be argued that those numbers reflect a 14% increase in its expenses associated with each unit produced…inflation….it just so happens that their buyers can afford that absorption, but I don’t we can conclude inflation didnt affect their financials substantially.  

 

[Jody_Seal]

Here are some hard facts.

The materials that are utilized to build boat hulls are based on petroleum, Petroleum prices are sky high. Transportation costs of these raw materials are sky high.

Engine package's are near double of what they were in 2020.( same as petroleum prices.)   

these manufacturer's now have a lot of mouths to feed just to keep up with the technology. the amount of personnel that is currently being utilized to get a boat out the manufacturers back door is grossly bloated. As is the facility's that are producing them. in with the bloat the boats are really not structurally designed well as compared to 5 years ago. the Leggo style of boat building vs a monolithic style leaves a lot to be desired in linear strength and durability...I digress....

Sadly for us the sub 21' ski boat market, the manufacturers have figured out and rightly so that the big weight component boat has far more advantages of profitability then that of the mid mount ski boat. Why take up the manufacturing floor space for a far lower profit margin product?

Crazy laws for manufacturing as well as epa compliant regulations have increased and continue to impact end user prices. increased taxes and the increased taxation of raw materials have impacted also. Crazy unrealistic laws have been put in place to start to limit production of the internal combustion platforms that have come into motion for the real near future.

I see tough time's for the inboard industry as we know it. like it or not elections have consequences. this subject matter is a testament to that. not going down that road but it must emphasized and made clear and this year is another election year. in this election year the cost to borrow money is astronomical. speculation of what the next 4 years will bring has deep impact on how boat manufacturers will proceed. we have one inboard based company on the verge of chapter 11 protection (just one's opinion). manufacturers are going to get it while they can, however don't be suprised about hearing more industry lay offs.

my thoughts are if you want to continue skiing at a reasonably economical level, stop with the ideology of new boat technology being needed to increase your buoy count and concentrate on keeping the current ski tractor in top condition. it wont be long before the top tier affluent in the sport will start second guessing the idea of a $200,000.00 ski tractor...

 

 

 

 

 

 

 

 

Blame the covid all you want I have other knowledge

[Hallpass]

49 minutes ago, buechsr said:

Just for discussion sake, I can agree that inflation and global economy issues didn’t affect their buyers which is obviously represented by significantly higher revenues, despite far less (increase) in units. The obvious conclusion is that they were able to charge more per unit than the previous year.

However, that’s the (lack of) top line effect of inflation.

Given that their operating margins were up just 3%, if they were inflation proof on the supply/production side, then in theory their operating margins should’ve been up 17%, in line with their revenues.  Said another way, it could be argued that those numbers reflect a 14% increase in its expenses associated with each unit produced…inflation….it just so happens that their buyers can afford that absorption, but I don’t we can conclude inflation didnt affect their financials substantially.  

 

Read through quickly, and as I said, not a financial guy.

Actual Net Profit rose 34% exceeding the 17 percent revenue growth

As a percentage, net operating profit rose 3%  from 24.1 percent to 27.1 percent.  

I could well be missing your point.

 

[RAWSki]

The average price of a new car is now $47k.  That seems crazy to me but there is a tremendous amount of technology and safety to factor in.  And there are 15 MIllion Cars sold every year..     So an average price of a ski or surf boat at $150k when only made in total quanties of 10,000 annually actually seems like a bargain.      

[chrislandy]

@Horton @buechsr

My point was, that we are in a silo'd market whether its skis / foils / surf boards / boats etc... 

When compared to other boats, they are overpriced for what you get. Even taking the base model of what I linked to, you get a 7ft longer boat than a GS25, a boat you can put a tender on the back off to pickup, surf and foil all day behind (seen it done) and with 14000lb dry weight kicks a massive wake. Then you can cook diner, eat, entertain, shower, sh*t, then sleep aboard.

Another example is wake foil kit, LF / HL etc you won't find "decent" kit below $2k, come out of the silo and look at surf/wing foils and they are literally half the price - pretty much the same foil shapes, board sizes, leg lengths etc... aimed at a different market. 

Because it's a silo'd market, we only see what is presented to us and for competitions, what is allowed to tow us so the prices can be set by market demand. If dealers and lenders are going to offer 30yr loans on surf boats, and regulations don't curtail their use, they will keep going up as that is the expected trajectory.

 

I also think, the another of the biggest drivers in boat costs is the 2-3yr old boat market. If the manufacturers slashed the prices, they screw the last few years buyers who will most likely be this or next years customers and sink the market completely for years to come with thousands of boats in massive negative equity, unable to refinance, unable to sell on. As I see it, the only way they could realistically reduce the boat prices is to maintain the boat price and let inflation catch up, that way the boat depreciate correctly and customers aren't left holding tens of thousands of  debt on an asset worth nothing.#

An example of this is going on right now with Tesla slashing their retail prices, which may get them a few sales now, but has sunk the used market completely.

[buechsr]

15 hours ago, Hallpass said:

Read through quickly, and as I said, not a financial guy.

Actual Net Profit rose 34% exceeding the 17 percent revenue growth

As a percentage, net operating profit rose 3%  from 24.1 percent to 27.1 percent.  

I could well be missing your point.

 

I was merely saying Ferrari has very inelastic demand as its units increased marginally, revenue substantially, which means per unit pricing went up substantially.  But I’m also saying it would seem their net operating profit seems to demonstrate they saw significant increase in cost of goods sold or their net operating profit would have gone up much more.  “Actual net profit” in your last may be explained by other accounting factors.  Perhaps even value of their F1 team now that signed LH.  

Embarrassingly, I actually have a degree in finance, but have forgotten most everything related to accounting, and don;t work in finance at all.  So I could be way off too!  

Malibu’s quarterly earning call is next week. It’ll be interesting for sure.

3 hours ago, chrislandy said:

@Horton @buechsr

My point was, that we are in a silo'd market whether its skis / foils / surf boards / boats etc... 

When compared to other boats, they are overpriced for what you get. Even taking the base model of what I linked to, you get a 7ft longer boat than a GS25, a boat you can put a tender on the back off to pickup, surf and foil all day behind (seen it done) and with 14000lb dry weight kicks a massive wake. Then you can cook diner, eat, entertain, shower, sh*t, then sleep aboard.

Another example is wake foil kit, LF / HL etc you won't find "decent" kit below $2k, come out of the silo and look at surf/wing foils and they are literally half the price - pretty much the same foil shapes, board sizes, leg lengths etc... aimed at a different market. 

Because it's a silo'd market, we only see what is presented to us and for competitions, what is allowed to tow us so the prices can be set by market demand. If dealers and lenders are going to offer 30yr loans on surf boats, and regulations don't curtail their use, they will keep going up as that is the expected trajectory.

 

I also think, the another of the biggest drivers in boat costs is the 2-3yr old boat market. If the manufacturers slashed the prices, they screw the last few years buyers who will most likely be this or next years customers and sink the market completely for years to come with thousands of boats in massive negative equity, unable to refinance, unable to sell on. As I see it, the only way they could realistically reduce the boat prices is to maintain the boat price and let inflation catch up, that way the boat depreciate correctly and customers aren't left holding tens of thousands of  debt on an asset worth nothing.#

An example of this is going on right now with Tesla slashing their retail prices, which may get them a few sales now, but has sunk the used market completely.

As Jody correctly said, it costs way more to build these boats than one would think so I don;t know they’re “overpriced for what you get”.  It might be fair to say that they feel like their pricing is not justified in light of other types of boats and their pricing, But I’ll standby what I said before that nothing sells for as bloated prices as the large center console market in America. It is out of control. In any event. 

They can’t slash prices.  I just looked and in Malibu’s last quarterly report, net income margin was less than 5%.  About 11% EBIDTA margin.  While it is of course not exact, if Malibu dropped prices 5%, it literally generates no profit.  That is not going to be happening.  As it relates to the expense of building boats in this market, inboard pricing is actually quite reasonable IMO.  Tesla can cut prices and still make a profit. They’ve demonstrated that. The big three can’t do that, IMO.  All they can do is scale back production to let market demand catch up to what they can provide for a price people are willing to pay

[Golfguy]

All of the above statistics are great information and made a case of some sort. Great research was done by all, and of course by individuals that are already skiers. I just wonder if the purpose of all of this wasn't to investigate whether the price of boat was discouraging new participation? I postulate that it is. So what can be done? Saying that a new person to the sport can buy a used boat is true, but in the long run if new boas aren't sold, then soon there will be far fewer used boat. Problem not solved. It would be interesting to see just how many of the people in this forum bought a new boat this or last year. 

 

Maybe the 2009 SN 196 was the epitome of the slalom tug?

[jhughes]

This sport has to be one of the oddest as far as inconsistencies and oxymorons with financial perspectives among participants. I'm saying this half-joking but it's always seemed odd to me.

[buechsr]

42 minutes ago, Golfguy said:

All of the above statistics are great information and made a case of some sort. Great research was done by all, and of course by individuals that are already skiers. I just wonder if the purpose of all of this wasn't to investigate whether the price of boat was discouraging new participation? I postulate that it is. So what can be done? Saying that a new person to the sport can buy a used boat is true, but in the long run if new boas aren't sold, then soon there will be far fewer used boat. Problem not solved. It would be interesting to see just how many of the people in this forum bought a new boat this or last year. 

 

Maybe the 2009 SN 196 was the epitome of the slalom tug?

Maybe.  I sold my ZO ‘08 this year.  Replaced with a USED 6 figure SN.  Yes, it stung.  2 kids set PBs first set though, so I’ll take it?  

[Hallpass]

@buechsr I don't follow F1, but Ferrari mentioned financial down year for F1 due to poor results?

 

[Hucklefin]

Lewis Hamilton WDC #9 after Adrian Newey joins Ferrari, heard it here first.

[Horton]

I stopped watching last year when they made it so I had to pay for some expensive ESPN package. 

[DW]

@Hucklefin - CL championship #1 if/when AN joins Ferrari, I fixed it for you:-)  If you wanted to get on Horton’s good side you would have substituted Alonso and AM for LH & Ferrari.

Edited April 25 by DW

[Wiltok]

https://www.marketwatch.com/story/marinemax-shares-slide-after-company-cuts-2024-adjusted-eps-target-0b321acb?mod=newsviewer_click

Hopefully not behind a paywall. 

[Hucklefin]

23 hours ago, Horton said:

I stopped watching last year when they made it so I had to pay for some expensive ESPN package. 

F1TV is like $80 for the year.

[chaloux]

16 minutes ago, Hucklefin said:

F1TV is like $80 for the year.

And you can share your account, at least so far. I split with my bro in law and dad. There's also the high seas