Boating industry all at sea

In April, Japanese outboard motor manufacturer Suzuki slashed the prices of a range of its products.

The price cut, up to about $2000 on its 40 to 90 horsepower motors, was designed to help the company, which is one of the biggest suppliers of outboards in Australia, handle competition from its rivals.

“What we have been trying to do and we are doing now is adjusting some prices in compliance with fluctuation of the exchange rate,” the executive vice-president of Suzuki Motor Corp, Toshihiro Suzuki, says. “The exchange rate moves so quickly, so extremely. What we can do is try to adjust such extreme moves.”

At a time when the dollar is strong and consumer demand weak, it is not surprising that importers are cutting prices to compete.

But Suzuki, like many importers, is waging a war against a multi-headed hydra of challenges from individual imports, such as the internet and so-called grey imports.

The dollar is the biggest headache. The importation of new outboard motors is not controlled in the same way as cars, which have to be brought in through authorised dealers, and there are no limits on the number any individual can import. This means a rise in the dollar turns many people into instant importers, the chief executive of The Haines Group, the country’s only licensed importer of Suzuki outboard motors, John Haines, says.

“If you get a spike in the dollar, all of a sudden people will bring in three boats thinking they can sell two and end up with a boat for nothing,” he says.

Queensland’s boating industry, the country’s largest by registration of leisure craft – and the state that produces up to 85 per cent of all recreational boats made in Australia – is battling a decline in exports and ever-growing level of imports. The industry shed more than one-third of its full-time equivalent positions and annual revenue per business fell by an estimated 29 per cent last year, the 2011 annual report for the industry association, Marine Queensland, shows.

The Haines Group started in 1958 as a specialist boat builder but has diversified into making caravans and is looking to diversify further into mining industry projects. “Diversification in the current climate is absolutely necessary,” Haines says. “We won’t stop building boats but we know where our bread is buttered.”

Like many products, imports – particularly of the more expensive fibreglass-hulled boats, typically used for cruising, sports activities such as wake boarding and skiing – are eating into the market share of locally made products. The chief executive of Marine Queensland, Don Jones, says authorised and grey imports made up 60 per cent of all new registrations of these vessels last year.

Haines says the situation is better than it was 18 months ago when the market was flooded with repossessed product from the United States. A pick-up in the US economy has led to a drop in these imports, although it has hardly killed it.

Lance Southwell is the owner of Port O Call Boating in Warana on Queensland’s Sunshine Coast. He deals in outboard motors and parts and is increasingly buying products over the internet. “I ordered some parts from the US last week for a Mercury outboard motor,” Southwell says. “Mercury [in Australia] wanted to charge me $580. I bought it for $360 plus about $70 for shipping from America. It also means I will get it a month earlier than Mercury in Australia can supply it.”

Last year, Southwell bought a Suzuki motor from a grey importer who brought in a container load of engines from the US.

“I can’t buy that Suzuki motor from Japan but I can buy it from America,” he says. “It’s not because the guy in Australia is charging too much. The Americans are buying in such large qualities that the Japanese sell to them for much cheaper. Their market is much bigger.”

In August, Southwell is going on a buying trip to Taiwan, China and the US.

In the face of such competition, Haines says his company is seeking to educate customers about the need for ongoing services.

“The internet certainly has massively changed the dynamic of all purchasing in this country,” Haines says. “Does it cause issues? Yes, I think it does. However, what we try to offer is . . . people still want to be serviced. No matter – even though these engines are very advanced, you need advanced tools and diagnostic equipment to service these motors.”

Marine Queensland has a similar message.

“With the advent of the new Australian consumer laws, private importers need to be aware that they, too, now have onerous obligations with the importation of these products through unauthorised channels,” Jones says.

“In some cases they can be deemed to be the manufacturer and as a result carry obligations to carry spare parts, administer recall notices, etc. These obligations carry over to subsequent owners of the vessel.

“The ‘apparent bargain’ may in fact have some serious obligations that go with it, which at first glance may not be obvious.”

But in outboard motors, as with so many other products, price is a strong factor that can override the potential longer-term cost concerns.

“If I need a part for my outboard motor and don’t want to pay full retail price, what will I do?” Southwell says.

“I’ll go to the internet, punch in Mercury . . . and up come 10 sites. Nine of those sites will
be from America. And they’ll be the cheapest ones.”

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