Supply chain issues, local boat dealers cutting luxury tax

0

“It’s difficult 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 completed

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

Jason Crate, co-owner of Crate’s Lake Country Boats, said recent years have led to increased consumer demand for products like boats that have given people access to recreation during the pandemic.

“As COVID emerged and people’s travel options were restricted, they were looking for recreation close to home and activities,” Crate said. “It’s not just boats — it’s RVs and paddleboards and everything else.”

But Crate said his company’s ability to keep up with demand has been hampered by the worsening supply chain issues that began with the pandemic.

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

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

“Anything that’s petroleum based — fiberglass, resins, foams, upholstery — anything that goes into making a boat, those raw materials are scarce around the world, that’s really hampered making boats,” he explained. “And then of course individual components such as engines, outboard motors are, in my opinion, most affected (by) a lack of microchips.”

An order on a large boat might 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 completed.

“In the last 18 to 24 months it has gotten progressively worse; it’s getting worse and worse,” Crate said. “If we had ordered a boat for you now, at the end of May 2022, I wouldn’t be able to get you one for next summer.”

“That can change; The supply chain could improve, but all of our suppliers tell us that’s not likely to happen,” he said. “It’s difficult to have that demand and not be able to meet it.”

At the moment, Crate’s Lake Country Boats only has one boat for sale.

Crate also pointed to an incoming luxury tax as an additional hurdle for boat dealers. The federal tax, scheduled to go into effect in September 2022, would tax 10 percent of a boat’s value once it crosses a $250,000 threshold.

The tax was originally slated to go into effect in January, and Crate said he along with many boat dealers has canceled orders for boats over $250,000 over fears customers may not be willing to pay the tax.

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

“We believe the luxury tax will destroy our business,” Crate said. “We canceled all orders that we had in stock with our suppliers because we were unable to build and ship them to us before January 1, 2022.”

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

“Even if the tax hasn’t taken effect for a few months, it has already caused irreparable damage. We cannot 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 as they are, it will have an impact on staffing,” but he remains determined to keep all of his employees on the job.

“We will protect everyone’s jobs here to the best of our ability,” he said. “We take pride in our community involvement and want people to keep working.”

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

“Every new boat that 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 is the truck driver who drives the transporter to bring it here. It’s the detailers that finish it off. It’s the mechanics who prepare it for delivery and fix it if something breaks. It’s also the kids at the gas dock over by 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 says the luxury tax could hurt the economy by discouraging people from spending.

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

“When we talk about taxing the rich, I think everyone should pay their fair share,” he said. “However, these people are also putting money into (the economy). We will be missing some things.”

Share.

Comments are closed.