By Valeria Khalina, U.S. Commercial Service  

The Russian market for pleasure boats began its growth in 2000 as local incomes climbed to new heights.

According to industry sources, the average annual market growth for the entire pleasure boats sector is estimated at 30%. This impressive growth has led to many foreign entrants and has led to a high-level of competition among manufacturers and distributors. The majority of the growth in this sector is likely attributed to the sales of inflatable boats and medium class motor boats and yachts. While the market for luxury yachts has shown overall growth, it is a niche oriented sector given that the percentage of Russians who can afford to buy expensive pleasure boats is limited.

Market demand

The Russian market for pleasure boats is rapidly developing and creating opportunities for foreign suppliers. Although the Russian market for pleasure boats started to develop in 2000, the Russian yachting boom started in approximately 2004 as a “fashion” trend. Once income levels rose enough and individuals were able to purchase a dream house and an expensive car, the yacht became the next indication of one’s prosperity.

Today, the Russian market offers consumers a great deal of selection when it comes to the pleasure boat market. During the last several years, demand has been primarily focused on premium class pleasure boats with a length exceeding 35 meters. Market leaders report considerable growth in luxury boats with the market for luxury motorboats and yachts growing considerably in the past three years. In 2005, the share of Russian buyers for all luxury yachts was 6%, today it is estimated at 25%. According to Azimut executives, an Italian manufacturer of yachts, Russia is the company’s second largest market after Middle Eastern countries. Also, the Burger Boat Company has built two identical 45 meter yachts for a Russian customer and The Rodriquez group has sold several exclusive yachts to Russian V.l.Ps.

Given continuing development of the middle class in Russia, there is also demand for less expensive economy– class boats. The market for inflatable boats is also growing and although Russian models are cheaper, companies such as Zodiac and Quicksilver hold about 10% of the local market share. The market volume for inflatable boats is estimated at around 50 000 boats per year.

Market data

According to official Russian customs statistics for the period January-September 2008, the total number of imported pleasure boats (HS Code 8903: Yachts & Other Vessels for Pleasure or Sports; Rowing Boats and Canoes) amounted to 136,264 units (USD 189 million). Approximately, 93% or 127 502 units (USD 12 million) were inflatable boats with imports coming mostly from China; 110 units (USD 2.2 million) were sailboats with most imports from the United Kingdom; 1 925 units (USD 116 million) were motorboats with most imports from the United States; and 6 727 (USD 59 million) were rowing boats, canoes and sculls with most imports from Canada and the United States.

U.S. pleasure boat exports to Russia are growing every year. In 2008, total U.S. exports to Russia in this segment exceeded USD 65 million, approximately a 66% increase over 2007. The total number of boats imported from the United States was 3 675 units in 2008. By value, U.S. exporters hold the most market share.

There are no reliable statistics on the number of pleasure boats currently in use in Russia. Some sources say that there are about 3 million pleasure boats; however the majority of those boats were built during the Soviet era.

Most yacht distributors and showrooms are concentrated in Moscow and St. Petersburg. However, expansion of the distribution network into the regions is beginning. For example, sales are increasing in the Volga region and Siberia, as well as in Sochi, a major Black Sea resort area, where the winter Olympic games 2014 will take place and where luxury yacht clubs will be built.

While the market for new yachts is more developed in Russia, several companies marketing second-hand products have appeared in the last few years to meet the needs of middle class consumers.

Most yacht owners (especially those with premium class yachts) prefer to keep their boats abroad, so manufacturers may find themselves exporting not into Russia directly, but to Finland, Turkey, Greece, Montenegro, etc. Therefore, it is hard to identify how many luxury yachts have been purchased by Russians.

In 2009, the Russian market for pleasure boats is expected to slow down. Until the current global economic crisis, Russia had a nine-year run of continuous rapid economic expansion (approximately 7% annually). With over 140 million consumers, a growing middle class and almost unlimited infrastructure needs, Russia remains one of the most promising U.S. export markets. Prior to the economic slowdown, U.S. firms consistently reported that their Russian operations outperformed those in most other countries where they conduct business. They continue to view Russia’s long-term prospects as positive.

As a consequence of the global economic downturn and falling commodity prices, early 2009 forecasts were for little or no GDP growth. The Russian government anticipates a budget deficit of at least 5% of GDP for 2009, reversing a trend of surpluses. Inflation was 13.3% in 2008 and is expected to rise in 2009 as a result of the depreciation of the rouble, which lost one-third of its value in late 2008 and early 2009.

Key suppliers

During the past several years, many foreign producers entered the market. There are more than 100 foreign yachts and boats manufacturers supplying products to the Russian market. Among them are Bavaria (Germany), Fairline (UK), Princess Yachts International (UK), Dominator (Italy), Benetti (Italy), Beneteau (France), Riva (Italy), Ferretti (Italy), Windy Marine (Norway), Bandido (Germany), Rizzardi (Italy), Harbercraft (Canada), Nordic Ocean Craft (Norway), Viksund (Norway), Sunseeker (UK), Seabob (Germany), ISA (Italy), Avon (Italy), and many others.

U.S. producers represented in Russia include: Bayliner, Carver, Marquis, Monterey, Brunswick, Crownline, Starcraft Marine, Sugar Sand, Stingray, Seaswirl, Rinker, Chaparral, Silverton, Cobalt Yachts and Boats, Tiara, Grand Banks, Maxum, Trophy, Malibu, Searay, Boston Whaler, Master Craft, Baja, etc.

Those producers have been in the market for some time, maintain a good reputation and have established dealers thoughout the country. Newcomers to the market include several Scandinavian vendors including Mondomarine (Italy), Sanlorenzo (Italy), Nahema (France), Rodriquez Group (Italy) and Burger Boat Company (USA). Luxury yachts made in Italy and France are very popular among Russian consumers.

At this time, Russian manufacturers do not appear to hold a viable position in this segment. There are approximately 12 main local shipyards, located throughout Russia; however, their products are generally not competitive with those of foreign producers. The main Russian manufacturer is the Moscow Shipyard. Together with Timmerman Yachts – a Holland producer– they are manufacturing premium class yachts in Russia. Other Russian manufacturers are: Laky Veil (Leningrad region), Samson (Moscow), Speed Hunter (Moscow), Velvette (Kazan), Faserind (Kazan), Fram (Volgograd), Gladius (Saint Petersburg), Edelwies (Engels), Flagship (Kazan), and Russian Motor Yachts (Rostov).

Market entry

There are two basic ways to enter the Russian pleasure boat market:

• Via a distributor – a foreign manufacturer may find a reliable Russian distributor to represent the company in the Russian market. The distributor may not be in a position to purchase the product and maintain an inventory but, rather, they will provide the expertise and the market knowledge to promote the product to their clients.

• By appointing a sales representative – a sales representative could be a viable alternative and may work to market, promote, search and communicate with prospective clients.

Market issues and obstacles

Companies entering the market should be prepared to compete with foreign manufacturers, who have a strong presence in the Russian market. There are also a limited number of Russian distributors and a narrow circle of potential buyers, who can afford to buy a motorboat or yacht.

Further, Russia is a geographically vast market, stretching over 11 time zones and encompassing over 17 million square miles. Seriously undeveloped infrastructure causes logistical challenges. Incomplete transition from central planning has led to an insufficiently integrated economy and discrepancies in wealth distribution (geographically and demographically). Conduct of business may be also impeded by: inadequate IPR protection, pervasive corruption (147 of 180 on Transparency International’s Corruption Perceptions Index), inadequate corporate governance, developing legal system and lack of transparency. The other major problem is that English is not widely spoken in Russia, so foreign manufacturers might also find it difficult to communicate with prospective partners.

Imports tariffs continue to present challenges to importers. Russian customs are reluctant to consider exporters’ invoices as the basis for import duties and sometimes use arbitrary references such as Eurotex and the NADA Marine Guide as sources for retail prices for tariff calculations. Before March 2008, customs had a rule of reducing the retail price by 20% to account for a possible difference between the invoiced price and the one in NADA Guide. However, since March 2008, Eurotex and NADA prices, without any reductions, became the only reference for Russian customs to calculate import tariffs on boats. To avoid this, customs has asked importers to provide the Shippers Export Declaration, which according to U.S. law (Customs Bureau Regulations) is a confidential document not to be shared with foreign governments.

Although more and more yachts are being purchased in Russia, the development of the appropriate infrastructure is lacking. Russia lacks yacht clubs (there are about 30 in Moscow and the Moscow region, 10 in St. Petersburg; a few are scattered in other Russian cities such as Nizhniy Novgorod, Voronezh, etc.), marinas, gas stations, service centers and spare parts and equipment suppliers.

Trade events

Moscow international boat show

Moscow, Royal Yacht Club (www.royalyachtclub.ru)

September 3-6, 2009

Organizer: ITE Group

Web-site: http://www.mibs-expo.ru

Baltic Boat Show

St. Petersburg, Lenexpo

November 26-29, 2009

Organizer: Lenexpo

Web-site: http://www.boatshow.lenexpo.ru

Moscow Boat Show

Moscow, Crocus Expo

February TBD, 2010

Organizer: Crocus Expo IEC and the National Marine Industry Association

For more information, please contact:

Valeria Khalina, Commercial Specialist

U.S. Commercial Service,

Embassy of the United States of America, Moscow

Tel.: 7 495 728 52 45

Fax: 7 495 728 55 85

E-mail: valeria.khalina@dmail.doc.gov

Web-site: http://www.buyusa.gov