Capricorn’s annual snapshot of the automotive aftermarket has found confidence has increased in the industry but several key problems, like getting skilled workers, remain for collision businesses.
The State of the Nation 2024 survey found that confidence in the industry was at a four year high, the highest level since it began recording the responses of members in 2020.
Cost of living pressures and revealing figures of succession planning were some of the other highlights from the comprehensive report.
The survey garnered answers from more than 1500 member businesses across the aftermarket sector including seven per cent of these from the collision and paint and panel industry.
The key issues
Like last year’s special report, it found skills shortage topped the problems faced by automotive businesses at 54 per cent of answers but this year’s result was equalled by the issue of managing to achieve a work life balance.
There was a slight improvement in the skills crisis in automotive according to the survey with 39 per cent saying they are still struggling to get skilled staff after 2023’s high of 43 per cent.
But paint and panel remains the worst affected aftermarket field with 73 per cent responding they have a resourcing issue of some kind.
Collision repair businesses are also looking to apprentices to solve some of the pressures with 82 per cent employing young trade interns and more than half saying they will continue to do so.
The State of the Nation also noted that it had “consistently found that automotive apprenticeships are seen as less attractive than apprenticeships in other industries.”
The report also included a breakout on the Australian Collision Industry Alliance, the key industry not-for profit association specifically tasked with addressing this uptake in recruits in the hard-hit collision sector.
Confidence grows
Despite these factors the confidence gauge that Capricorn has evaluated for the first time shows a gradually increasing confidence in the industry with most businesses showing high to very high levels of confidence in their own business.
The Capricorn Confidence Index combines the responses to three questions, confidence in the automotive industry, confidence in their own business’ future and plans for business growth, to calculate a single score out of 100 points. This score reflects the overall business outlook of respondents, and with four years of data and insight, offers Capricorn and the automotive industry a stable and reliable metric.
Capricorn CEO designate Brad Gannon highlighted the resilience of the aftermarket industry despite ongoing challenges.
“The Capricorn Confidence Index is a barometer for the health of the automotive aftermarket industry, and we believe it’s the most accurate measure of business owners’ confidence in the future of the automotive aftermarket,” Gannon says.
“Business and industry confidence is often used as an indicator of the overall condition of an industry and is a helpful tool in anticipating and preparing for future challenges.”
Looking Forward
In 2024, the Capricorn Confidence Index for Australia is 71.3 points, so while the industry is facing significant change and current economic conditions may be challenging, the majority of business owners are confident in the future of their industry and their business.
Over the past four years, the Index in Australia has improved by three points from 68.3. This reflects growing optimism amongst Capricorn Members regarding their current position and economic outlook.
“At Capricorn, we take great pride in working in an industry that is prepared to tackle the future, whatever it may be, with enthusiasm and optimism,” Gannon says.
Capricorn as a reflection of this confidence now in its 50th year since a group of service station owners got together in 1974, can now boast more than 30,000 members.
Overall high levels of confidence in their own businesses was at 65 per cent up from 56 per cent and for collision repair businesses that responded this was only slightly lower at 63 per cent.
In paint and panel businesses high confidence in the wider industry was at 39 per cent( compared to a sector wide response of 48 per cent) but a further 36 per cent were moderately confident.
It also noted that 71 per cent of businesses intended to grow with the highest percentage targeting increasing efficiency (67 per cent) increasing profit margins (56 per cent) and hiring more staff (45 per cent).
Price pressures
Other issues outlined in the report include a new rise in price-sensitive customers or other cost of living pressures at 45 per cent of respondents with 40 per cent listing the rise in the cost of parts as a big problem.
Technical issues rated lower as the biggest problem among responders with 26 per cent listing the access to diagnostics and the information, while only 17 per cent listed EV’s as a major problem.
15 per cent listed insurance companies determining prices as a major challenge for their business.
Capricorn Member Director for Victoria and Tasmania Mark Cooper says in the report the inconsistent flow of repairs this can result in, demands businesses plan and reassess resources.
“The cost of living crisis has really started to bite. Demand for our services has started to drop off as customers delay their vehicle servicing to save a few pennies.
As we all know, while this might reduce workshop bookings initially, after a while the tow trucks will start appearing and our workshops will fill up with major repairs. Either way, we get the work—it just isn’t consistent. That makes managing our businesses and achieving the desired profitability a little harder.
“If you’re feeling the economic squeeze, now is a good time to revisit your labour rates, charge for time spent on diagnostics and end time discounting. Make use of the technical data and support available and other industry sources to help you with those tricky diagnostic problems and turn diagnostics and fault-finding into a profit stream, not an expense.”
Succession Planning
The State of the nation report has also highlighted another issue the aftermarket industry is faced with and that is the ageing nature of its business owners.
Almost a quarter of business owners responded they were planning to retire in the next five years with a further 22 per cent planning to do so within the next decade.
Of those who have a retirement plan in place, a quarter are planning to transfer ownership while 41 per cent will put the business up for sale. As many as 22 per cent responded to the survey that they would close the business down.
Young pipeline
But in signs the industry is also changing, apprenticeship uptake is still strong with 65 per cent employing newcomers down slightly from 73 per cent.
Women in automotive have also substantially increased with 16 per cent of businesses employing women, who now make up one if five workers in the aftermarket according to the report.
This is not just front of house and administration roles either, as now 36 per cent of female workers are listed as ‘on the tools’ up from 19 per cent in 2021.