2021 Capricorn State Of The Nation
A report on the industry, by the industry, for your workshop
The State of the Nation 2021 is a resource that will guide us towards a more successful future. It’s another way we are all stronger together.
A Message from our Group CEO
Welcome to Capricorn’s State of the Nation 2021 report. This is our second annual look under the bonnet of our industry to better understand the issues, trends and challenges affecting you, your business, and our industry.
Our 2020 report provided a valuable snapshot of our industry in the days immediately preceding COVID-19. This year’s report, by comparison, is an opportunity to assess just how well we have coped with the pandemic so far.
So, what’s the verdict?
Generally, it’s very positive. On average, profits are up – thanks in part to the public’s increased reliance on cars and a car parc that’s grown by several hundred thousand vehicles. We’re still feeling confident about the future of both our businesses and the industry, and we’re making good progress in several of the areas highlighted in last year’s report (see page 16).
That said, there are several places many Members are leaving money on the table. And we still face some big challenges –including changing technology, managing to take time off and shortages in skilled labour and spare parts. It’s also high time we had a conversation about how we secure a pipeline of talent for the industry’s future.
On a personal note, I was delighted to see almost 70% of Members felt Capricorn had supported them well throughout COVID-19. We really are stronger together.
I hope you will find State of the Nation 2021 as fascinating, insightful and useful as I do.
David Fraser
Capricorn Group Chief Executive Officer
How to use this Report
More than 2,000 Members across Australia and New Zealand responded to our 2021 survey, ensuring this second State of the Nation report provides an incredibly useful snapshot of the industry, across all workshop types, throughout both countries.
This report sets the benchmark against which you can compare yourself.
If you’ve ever wondered how your turnover compares to workshops of a similar size, or whether other businesses are struggling with the same challenges you are, Capricorn’s State of the Nation is your opportunity to find out.
It’s filled with data, graphs, charts, information and advice, to not only show you how your business measures up, but to help you meet challenges and identify opportunities to grow.
State of the Nation 2021 is just another way Capricorn is delivering on our promise to you: that we’re stronger together.
• Look for the bullet points on each page for a snapshot of the information
• Check the graphs and charts for a breakdown of the data, to see how you compare
• Take action on the summary of recommendations on pages 22 and 38 to help improve your business.
5 Key Takeaways
for Auto Repair Shop Owners
1. As an industry we’ve come through COVID-19 quite strongly so far, but the pandemic is likely to continue to affect the spare parts supply chain for some time
2. There’s a big shortage of qualified technicians, but we have an opportunity today to start building the talent pipeline of tomorrow
3. While we might not be servicing many electric vehicles yet, EVs are part of the changing technology landscape and we should be getting ready
4. We’ve made a lot of improvements to boost profitability and efficiency in the past year, but there’s much more we can do
5. Achieving a healthy worklife balance is still a major issue for many Members — and the situation is getting worse.
Who We Are
The first bit of good news is that, overall, we have mostly been busier and more profitable than last year.
On average, Australian Members had an annual turnover increase of around A$100,000 on pre-pandemic levels, to about A$988,000 a year. New Zealand Members reported slightly lower average turnover than last year, down about NZ$50,000 to NZ$950,000 a year. As you’d expect, a wide variety of business sizes are represented in this result.
(See Figure 1.4 for more detail.)
Across Australia and New Zealand, the average number of employees is 4.5 and the average number of hoists is 3.2 – up from 2.9 in 2020. Australian workshops see an average of 30.8 vehicles a week, eclipsed by New
Zealand (where mandatory warrant inspections may boost the numbers) on 41.8 vehicles per week.
Of those who responded, 88% ran independent workshops, 72% ran mechanical workshops and 70% were the sole decisionmakers in their businesses. The average respondent was male, aged 49 and speaks English as the primary language at home. Threequarters of respondents were Australian and a quarter were from New Zealand.
You’ll find much more detail for all this data in the graphs and charts shown. How do you compare?
• Members have been working an average of 24 years in the industry and running their own workshop for 17 years
• 16% of workshops employ one person, while a quarter employ more than six people
• On average, workshops receive 34 vehicles a week , up 4% on 2020. Australian workshops average 31 vehicles and NZ workshops 42
• The first bit of good news is that, overall, we have mostly been busier.
Figure 1.4
Figure 1.5
“Members still have great optimism within the industry, even after COVID-19. With this optimism they are looking to grow within the next 12 months, which is a fantastic indicator of the state of the industry.”
The Impact of COVID-19
Despite the global pandemic, we remain overwhelmingly positive and have confidence in the future of our businesses and the industry.
Fifty-five per cent of Members said there’d been a minimal impact on their business from COVID-19 and more than two-thirds reported no ongoing issues created by the pandemic, despite a worldwide shortage of some spare parts.
Not only have we weathered the storm of COVID-19 well, the pandemic appears to have generated some helpful tailwinds, with vehicle sales and usage up.
“What we saw through the pandemic period was that the car basically became a lifeboat for people, because of the need for social distancing and travellers shying away from using public transport and ride-sharing,” Capricorn
Group CEO David Fraser said. “Also, while the borders are closed, people have been spending their holidays domestically and using their vehicles.”
Half of all Members were extremely or very confident in the future of their business (an increase on last year) while two in five were moderately confident.
We also still really love what we do, with making customers happy and the fun of problemsolving and fixing things the two biggest positives of working in the industry.
Being profitable or not having financial stress was the top marker of success for Members.
Extent of concern about potential future impacts of COVID-19
• One in four Members are not at all concerned about the future impacts of COVID-19 and just one in 10 said the impacts of COVID-19 were a challenge to running a business
• NSW Members are the most optimistic, with 36% not at all concerned about the future impacts of COVID-19 compared to 14% of NZ Members
• 46% of Members were not concerned at all about the effect of COVID19-related government schemes (like JobKeeper) ending.
Figure
What we’re already doing better
Last year we identified some key “easy wins” to help our Members build stronger businesses. It’s pleasing to see that real progress has been made in some of these areas.
Charging for diagnostics
Scan tools and diagnostic software can be among the biggest investments we make in our businesses every year. It’s important to consider factoring these costs into your charging structure, and it’s significant to see more of you (37%) now always charge customers for using scan tools and diagnostic software, including the time taken to diagnose problems.
Tracking efficiency
Two in five of us are now using software to measure and track efficiency. This is a nine percentage point increase on 2020. More of us are now using software to estimate service times.
Part mark-ups
Mark-ups on parts have increased from an average of 31% to 36%, across business types. By business type, tyres and suspension have the highest mark-up at 41%, while panel and paint shops have the lowest at 19%.
Staff pay rates
The past year has seen pay rates for staff increase, including a $6 an hour average pay rise for early career mechanical technicians in Australia (Figure 3.3). We’ll look more closely at labour issues in the next section.
Future planning
Significantly more of us have put a succession plan in place. (See page 33 for more.)
For more Easy Wins in 2021, turn to page 22.
• Members with one to two employees have really embraced charging for diagnostics, with 38% always charging (up from 28% in 2020)
• Australian Members are more than twice as likely as NZ Members to be using software to measure efficiency (48% versus 20%)
• Since 2020, NZ Members have doubled their training investment for themselves to eight hours a month and for their staff to 14 hours a month.
“Given the need to reinvest in diagnostic equipment every 16 months or so, all Members should be considering the costs of charging for diagnostics when determining their charges. The message here is if you’re not, you’re at risk of not covering your costs.”
David Fraser, Capricorn Group CEO
Mark-up on Parts What percentage mark-up do you use?
Read more about easy wins on diagnostics and part mark-ups on CapHub!
Figure 3.2
Figure 3.3
Figure 4.2 Biggest challenges facing the automotive industry
Labour
Finding good people is a problem.
A lack of qualified staff is the top challenge for our industry overall, while 43% of us also named it a top five challenge for our own business. The problem is particularly acute for panel and paint, tyre and suspension and for larger/chain workshops.
While pay rates are up (Figure 3.3), there’s an acknowledgement that creating a positive workplace culture can be as important to attracting and retaining good staff as financial incentives (Figure 4.3).
Perhaps our greatest opportunity is in encouraging a new generation of talent.
Spare parts
A new challenge for the industry emerged this year, with a global semiconductor shortage affecting everything from vehicle manufacturing to the availability of spare parts. Thirty-six per cent of us said the parts shortage was a top five challenge for the industry.
Fitting customer-supplied parts was a key issue identified last year. This year more of us are not offering a warranty on supplied parts and are charging more to fit them. Fewer than one in 10 of us ask customers to sign a waiver.
Taking time off Finding
• 53% of us are very or extremely concerned about the skills shortage
• 28% of us are very or extremely concerned about parts shortages (and 33% are moderately concerned)
•
• Nine in 10 Members say it’s important to recognise and reward staff and three-quarters say they’re actively thinking about ways to create a positive
Biggest challenges to running an auto business
“Attracting and retaining skilled labour is not all about pay. It’s also about the culture of the workplace. Do staff feel part of the team? Are they learning and developing in terms of what they want to do? And, ultimately, are they enjoying themselves in the job they’re doing?”
Find out how to charge customers who supply their own parts
More Easy Wins
Consider your costs when reviewing your charge-out rate for labour
54% of us are not basing our labour rates on the internal costs and requirements of our businesses.
Here are some considerations you should think about for your labour costs:
• Your ability to pay staff, generate profits, and invest more in your equipment and people is dependent on first receiving sufficient revenue. Consider the need to cover anticipated pay increases, needs for further investment and your reasonable return when determining your charge-out rates
• Make sure you are covering all of your costs and ensuring a fair return for your business with each job. Different jobs may require different considerations when setting your charge-out rates.
Massage
your margins on parts
If you’re putting a set percentage mark-up on all sales of parts, then the reality is you’re at risk of not covering your costs.
• If you saved money on the purchase of the part but only charge a set percentage markup, you are reducing your return. This means you could be losing out in the long run by not covering all of your costs
• Consider the retail price and the cost of the part when setting margins on parts, along with your handling costs and time spent finding and obtaining the part.
Consider passing on diagnostic costs
While there’s been an increase in this area in the past year, 54% of us are still only charging sometimes and one in 10 of us never charge.
• Charging for diagnostics helps cover the cost of buying and updating scan and diagnostic tools. The cost of these tools should be covered by the charges for the work the tools allow you to do
• When considering charges, don’t forget to factor in the time it takes to do the diagnostics.
Training
for a great workplace culture
While the way to a technician’s heart seems to be through their stomach (Figure 4.3), paying for staff training and development is a close second.
• Paying for staff training is a huge win-win because it’s both an investment in your business and in your people
• Happy staff are more likely to stick around, and they’re likely to be more productive, too.
Take advantage of apprenticeship incentives
There’s a lot of government money on the table to help workshops support apprentices, and too many of us aren’t taking advantage of the opportunity.
• Find out what incentives are available in your state or country and find out whether you qualify (13% of us don’t even apply)
• We’ll talk more about apprenticeships in the next section.
“If you were ever considering bringing on an apprentice, now’s the best time to do it, because you’re getting all this help and support from government. Training associations are geared up for it; they’re ready. We have registered training schemes which will work with workshop owners to help them place apprentices into their business.”
Apprenticeships
While the number of apprentices has increased significantly in the past year, the ability to attract young people to the industry is a growing concern .
While the top reason given for taking on an apprentice is training the next generation, there’s no escaping the reality that although business activity is up, staff are hard to find in the current labour market.
Almost half of us said we took on an apprentice because we couldn’t find qualified staff and almost two-thirds of us said it was because we needed someone to help with the workload. (Figure 5.2.)
Government incentives have helped boost the number of apprenticeships, with one in five of us crediting rebates and other incentives as a reason for taking on a trainee. While a clear majority of us are aware of the incentives available, not all Members are taking advantage of those incentives yet. (Figure 5.5.)
There’s also a wider problem: less than half of us are convinced young people will find the automotive industry an attractive place to make a career. (Figure 5.4.)
Attracting young people to the industry is the third biggest challenge we face as an industry. It’s a particular concern for those with more than five staff and for chains.
• Panel and paint workshops particularly struggle to attract young people (59%) followed by tyre and suspension workshops (43%). For mechanical workshops it’s 37%
• Two-thirds of us have never approached an institution (like a TAFE) in search of an apprentice, but three out of five of us have been approached by someone seeking an apprenticeship
• 8% of workshops have one or two women apprentices; most have none.
David Fraser, Capricorn Group CEO
Reasons for not applying for incentive
Believed the business was/is not eligible
Didn’t know where to start
The process was/seems too difficult
This year we asked Members what advice they’d give to their younger selves.
We received a range of answers, which broadly fell into the categories below.
There’s lots of great advice to share with any young apprentice today.
Advice to younger self
Work hard/do your best
Improve general skills
Value and stand up for yourself
More business skills/training
Manage finances/credit terms
Be optimistic/confident/patient
Invest in equipment, premises & staff
Treat customers well/be a good person
Have a work-life balance
The Case for Taking on Apprentices
Russell Becker NSW/ACT Director
Like many people who work in our industry — probably including yourself — I got my start as an apprentice.
I did my mechanical apprenticeship with Prospect County Council (now Sydney Electricity) in the early ‘80s, initially learning my way around plant machinery and equipment. I have fond memories of that time. I still see the friends I made back then.
But when I look back on it now, I can also see what an incredible educational opportunity it was for me. It didn’t just teach me about mechanics; it also taught me how to learn and how to problem-solve.
It provided a solid foundation for a long career in the automotive industry, including the past couple of decades running my own workshop.
Over the years I’ve probably employed eight apprentices. Despite State of the Nation finding the top reason for workshops taking on an apprentice is “to train the next generation”, I’m very clear about the fact employing an apprentice is a business decision, not altruism. If it’s economical and profitable to employ an apprentice for the work opportunities I have available, then I’ll do it. In that sense, it’s no different to employing an already qualified technician: it’s a matter of working out the resources your business needs.
Like most of us, I imagine, given the choice between employing a qualified technician with 10 years’ experience or an apprentice, I’d employ the technician. But this report also shows that’s where we’re all hitting trouble: skilled technicians are thin on the ground. We’re all fishing in a very small pool of talent.
We need to grow the size of the pool. And we need to grow the talent. While it’s a medium- to long-term investment, apprenticeships are the best way we can achieve that.
Every Member running a business needs to accept they have a level of responsibility to help find and train the talent of the future, and to find a way to do so that is sustainable and profitable for their business.
We have to live up to the answer we give to surveys like State of the Nation and actually “train the next generation” — because ultimately it will benefit us all. That’s not altruism; that’s an investment.
“Every Member running a business needs to accept they have a level of responsibility to help find and train the talent of the future.”
Figure 5.5
Figure 5.6
“The reality is while EV numbers are low at the moment, they will increase. Being in a position to service, repair and maintain hybrid and electric vehicles is logical over time.”
Bradley Gannon, Capricorn CEO of Automotive
Technology
Technology
Changing technology is among the top five challenges we face running our businesses.
Keeping up with technology is expensive and time-consuming, but continuing to invest in tools and training is vital to the longevity of our businesses. As is ensuring good access to technical information and diagnostics, which is also a problem for many.
More than a quarter of us had updated our diagnostics in the previous six months (Figure 6.1). Almost a quarter of Members hadn’t updated their diagnostics tools in more than three years, so perhaps it’s no surprise that when we send a vehicle to a dealer, it’s likely because we don’t have the necessary software updates or diagnostics tools. (Figure 6.2.)
Electric Vehicles
While very few of us are servicing EVs regularly (Figure 6.3), there’s an acknowledgement they’re a challenge on the horizon – with a quarter of us now naming the switch to electric a top five challenge for the industry.
NZ Members are more concerned than Australian Members (30% compared to 23%).
Capricorn CEO of Automotive
Bradley Gannon said as EVs reach price parity and become more popular, “forward-looking workshops should have a plan in place to have the right skills, equipment and tools to service those vehicles”.
• Members older than 55 are the most worried about changing technology (40%, compared to 27% of those aged 35 to 54 and 18% for ages 18 to 34)
• Overall, just 3% of vehicles are sent to dealers because Members can’t service them and threequarters of us never send a vehicle to a dealer
• Members with mechanical workshops (28%) and mobile mechanics (26%) are the most likely to consider EVs a challenge, as are those with only one to two staff (30%).
Figure 6.1
Reasons for Turning Away Customers
Figure 6.4
“It’s great to see Members looking ahead and thinking long-term as part of running their business, including all the value that’s tied up in the business they’ve built. That’s absolutely the right mindset.”
Bradley Gannon, Capricorn CEO of Automotive
Our Future
Whether it’s for growing our business or for retirement, it seems we’ve all had one eye on the future this year.
Seven in 10 of us have a plan in place to grow our businesses, with improved efficiency and increased profit margins the top areas where we’re looking for growth opportunities. (Figure 7.2.)
Playing into that is a general optimism, with half of us extremely or very confident about the future of our businesses (an increase on last year), with continuing business growth, loyal customers and longevity the main reasons for that confidence. We’re generally feeling successful (Figure 7.1) despite many of us harbouring concerns about our ability to retire comfortably. (Figure 7.4.)
It’s great to see a significant rise in the number of Members with a succession (or retirement transition) plan in place – up from 38% last year to 43% today.
The increase in planning is most evident when you look at what we plan to do with our businesses when we retire (Figure 7.5), with many of us planning to sell or transfer the business, and a significant drop in the number of Members who say they haven’t thought about it. Fewer of us also plan to close our business down, which is great to see.
• Improving efficiency is a growth target mainly among already larger businesses (5+ staff), while smaller businesses are more likely to have plans to win more customers
• Businesses with one to two staff are less likely to have plans for growth
• Just 28% of Members aged 18 to 34 have no transition plan in place for retirement (down from 39% in 2020). That’s better than both the 35-to54 and 55+ age groups (35% and 30% respectively).
How Members are planning to grow
Figure 7.2
Recommendations
• Make time to take a break. We said it last year and we’ll say it again: you need to rest. Pay yourself with time off like you’d pay your bills – on time, in full, and non-negotiable
• Plan to ride out the spare parts shortage. While Covid-19 might have affected global supply chains, Capricorn Members should feel confident in our Preferred Suppliers and their vast network
• Prepare for electric vehicles. EVs might seem like a far-off fantasy but they’re the future. As they come down in price and increase in popularity, you’re going to see more of them. Have a plan in place
• Take on an apprentice. Apprentices are our pipeline of future talent and the longterm solution to the skills shortage that’s causing so many headaches right now
• Create a good workplace culture. If you want to keep your best people long-term, reward them properly and create a positive culture
• Don’t be afraid to charge customers fairly for the work you do. Charge for diagnostics, mark up parts thoughtfully, increase your labour charge-out rate and estimate your service times accurately. Consider using software to improve efficiency
• Invest in tech and training. Don’t fall behind your competitors or risk turning away business because you don’t have the tools or training you need. Buy scan tools and recoup the costs by charging customers for diagnostic tests. Use training opportunities to reward staff
• Get on top of your future plans. Whether you’re planning for growth or planning for retirement, spend time working on your plans for the future. Most importantly, have a succession plan in place just in case the unforeseen happens.
Methodology
Between 27 April and 14 May 2021, Capricorn Members across Australia and New Zealand were invited to take part in an online survey.
2,075 Members completed the survey, including 1,551 in Australia and 524 in New Zealand.
The results were collated and analysed by market research consultants at TKP and interpreted by the team at Capricorn to produce this report.
2,075
About State of the Nation
Capricorn is committed to keeping a finger on the pulse of what’s happening within the automotive industry in Australia and New Zealand.
Throughout this report, we reference the State of the Nation 2020 report. For more information on the methodology of the 2020 report, visit capricorn.coop/SoN
State of the Nation is an annual research project designed to gain an in-depth understanding of what’s happening in our industry and what’s important to Capricorn Members. The 2021 research is the second State of the Nation report.
The goal of the research is to arm Capricorn with insights that can be used to create valuable, interesting and thought-provoking content for Members. It will also help Capricorn discover new ways we can help Members’ businesses grow and succeed.
Finally, the aim of this document is not to constitute legal, financial or other independent professional advice. Please consult your professional adviser before relying on any information contained herein.
CAPRICORN