Supply chain issues, luxury tax sinks local boat dealers

“It’s a tough thing to have that demand and not be able to meet it,” says Jason Crate, noting that boaters wait 12 to 24 months for their orders to be fulfilled.

Faced with supply chain issues and an incoming luxury tax, local boat dealers are struggling to supply enough boats to meet consumer demand.

Jason Crate, co-owner of Crate’s Lake Country Boats, said the past two years have seen increased consumer demand for products, like boats, that have enabled people to access recreation throughout the pandemic. .

“When COVID arrived and people’s travel was curtailed, they started looking for recreation close to home, things to do,” Crate said. “It’s not just boats – it’s RVs, paddleboards and everything in between.”

However, Crate said his company’s ability to meet demand has been affected by worsening supply chain issues that began during the pandemic.

“It’s been a few years now that we’ve seen unprecedented demand coupled with serious supply chain issues,” he said. “We don’t have the boats to meet consumer demand.”

In a typical year, Crate said his company might sell 130 to 150 boats, but he estimates sales will drop 65 to 70 percent by the end of 2022 due to material shortages.

“Anything petroleum-based – fiberglass, resins, foam, padding – anything that goes into making a boat, these raw materials are in short supply around the world, which has really hampered boat manufacturing. “, he explained. “And then of course individual components like engines, outboard motors, I think, have been the hardest hit (by) a shortage of microchips.”

An order on a large boat could have taken six to 12 months in the past, Crate said, but customers can now expect to wait 12 to 24 months for their orders to be fulfilled.

“It has gradually worsened over the past 18 to 24 months; it gets worse all the time,” Crate said. “If we ordered a boat from you right now, at the end of May 2022, I couldn’t get you one for next summer.”

“That may change; the supply chain can improve, but all of our suppliers tell us that’s probably not going to happen,” he said. “It’s hard to have that request and not be able to meet it.”

At this time, Crate’s Lake Country Boats only has one boat available for sale.

Crate also pointed out that an incoming luxury tax was an additional hurdle for boat dealers. The federal tax, which is expected to be implemented in September 2022, proposes taxing 10% of a boat’s value once it exceeds a $250,000 threshold.

The tax was originally slated to roll out in January, and Crate said he, along with many boat dealers, has canceled orders for boats over $250,000 out of concern that customers may not be willing to pay the tax.

Buyers have also canceled orders on boats over $250,000, he said.

“We think the luxury tax is going to destroy our business,” Crate said. “All of these orders that we had with our suppliers for stock, we canceled them because we couldn’t get them built and delivered to us until January 1, 2022.”

“We missed a window. We did what we thought was prudent: We canceled those orders because we didn’t want to end up with inventory that we couldn’t sell,” Crate said.

“Even though the tax has not come into effect for several months now, it has already done irreparable damage. We can’t go back to our builders in April or May and say we need boats for the summer. They can’t even deliver them for next summer, let alone this summer.

Crate said “if things continue the way they are, it will have an effect on staffing,” but he remains committed to keeping all of his staff on the job.

“Everyone’s jobs here, we’re going to protect them as much as possible,” he said. “We are proud of our involvement in the community and we want to keep people working.”

Crate pointed to the potential downstream effects of supply chain issues and the luxury tax that could impact the economy.

“Each new boat we sell every year is like its own micro-economy,” he explained. “It’s not just about the sale and the commission earned by the seller. It’s the trucker driving the transport truck to bring it here. It is the retailers who prepare it. It is the mechanics who prepare it for delivery and repair it in case of breakage. It’s also the kids on the gas dock at the marina.

Allan Lafontaine, executive director of the Orillia District Chamber of Commerce, says boating is an integral part of Ontario’s tourism industry and the luxury tax could hurt the economy by discouraging people from spend money.

“We have two lakes here in Orillia, and we have a significant amount of tourism that surrounds the marinas,” Lafontaine said. “Even recreational fishing is a huge industry in Canada, and Ontario probably gets the lion’s share of it. We have 250,000 water bodies in Ontario.

“When we talk about taxing the rich, I think everyone should pay their fair share,” he said. “However, these people are also pumping money into (the economy). We’re going to miss some things.”

Source link

About Bob C. Zoller

Check Also

Supply chain issues causing major delays for machine shops

If you need repairs on your car, be prepared to pay more and wait longer. …