Boating Business

Canadian Dealers Struggle to Meet Demand Ahead of Luxury Tax

empty boat dealership, bass boat

Empty boat dealer showrooms were common during the pandemic. Will this be the scene again in Canada?

Faced with a looming September 1 luxury tax that will add an additional 10% to the price of a new boat and supply chain issues, Canadian dealers are struggling to meet demand and fear the two could contribute to a 70% drop in business by year’s end.

At Lake Country Boats, in Orillia, Ontario, owner Jason Crate has one boat on-hand for sale. “It’s been a couple of years now where 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,” Crate told Orillia Matters.

Long-Term Impact

Crate said larger boats, which generally require a six to 12-month delivery window, have extended for up to 24 months.

Crate's Lake Country Boats, Travelift

In an unfortunate twist of fate, Lake Country Boats took delivery of a new Travelift last year so it could accommodate larger yachts.

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

He continued, “That may change; the supply chain may get better, but all of our suppliers are telling us that’s not likely to happen,” he said. “It’s a difficult thing to have that demand and not be able to meet it.”

Adding Insult to Injury

Adding to the supply issues, is Canada’s plan to tax vessels longer than C$250,000. Originally slated for January of this year, the action caused dealers and customers to cancel orders for larger, more expensive models, which Crate said has caused “irreparable damage.”

“We missed a window. We did what we thought was prudent: we cancelled those orders because we didn’t want to get hung with inventory that we couldn’t sell,” Crate said. “We can’t go back to our manufacturers 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.”

Cruisers Yachts, Cruisers Yachts Rogue

Lake Country Boats took delivery of this yacht from Cruisers Inc. last summer. If someone orders this boat after September 1, the buyer will be subject to a 10% luxury tax.

Uninformed Government

Adam Chambers, a local member of the Canadian House of Commons, believes taxing the boat industry is unwise as Canada moves out of the pandemic.

“[Boat dealers will] tell you pretty quickly that they’ve all seen cancelled orders, and that means salespeople that are affected; that’s mechanics that are affected, that some marinas’ abilities to hire, retain or keep talent [is affected]. I think that demonstrates a lack of understanding of the industry by the government.”

Chambers said an economic impact study of the tax was never conducted prior to its passing. While he doesn’t expect the measure to be repealed, he thinks there’s still time for better understanding.

Adam Chambers, House of Commons

House of Commons member Adam Chambers said the government didn’t do enough due diligence.

“I would appreciate them doing an economic impact assessment so that they fully understand some of the negative effects and what’s already happening in the industry right now that these folks have to deal with,” he said.

Chambers continued, “I think it’s actually quite negligent for the government to bring in a tax like this without fully understanding the impact that it will have on communities, such as ours, but really across most rural parts of Canada, where tourism is a significant driver of the economy.”

For Crate, who typically sells 130 to 150 boats annually, he sees the supply chain and tax issues impacting his business by as much as 65% to 70% by the end of 2022.