Capricorn State of the Nation 2022

Capricorn

of the Nation

Message from our Group CEO

Welcome to Capricorn’s third State of the Nation report. This year’s report provides valuable insights once again into both the health of our industry and how Members are feeling about their businesses.

The good news? Despite a couple of years of Covid chaos, the mood remains generally positive. Making our customers happy, solving their vehicle’s problems, and the variety of work continue to drive this positive sentiment.

That’s not to say our industry is without its challenges. Finding good staff, maintaining a work‑life balance and finding time for a break remain difficult. Parts shortages and the rising costs of parts are particular challenges in 2022. We dive into all of these in this year’s report.

We also found Members are investing more in training and keeping themselves and their employees up to speed with new technology in vehicles. Perhaps we shouldn’t be surprised that Members who took part in State of the Nation, and who read the report, are more likely to make the changes needed to improve their business. That’s you!

This year, we hope you’ll not just read this report and act on the information and recommendations within, but share it with your friends in the industry, whether they’re Members or not. After all, we’re stronger together.

David Fraser Capricorn Group Chief Executive Officer

“ Making our customers happy , solving their vehicle’s problems, and the variety of work continue to drive this positive sentiment.”

How to use this report

How does your workshop compare to other workshops of a similar size? How do you measure success and job satisfaction? Are other workshop owners facing the same challenges?

State of the Nation is your opportunity to find out.

More than 1,900 Members across Australia and New Zealand responded to our 2022 survey, ensuring this third State of the Nation report provides a very credible and useful snapshot of the industry, across all workshop types, throughout both countries.

This year, we’ve included more smaller-volume workshops in the data (those spending less than $1,500 a month with Capricorn), meaning the report captures more information and is more relevant to workshops of all sizes.

We’ve also added some new questions to the survey to make sure we’re collecting data on the emerging challenges facing our industry. So, this report is filled with statistics, graphs, charts, information and advice, to not only show you how your business measures up, but to help you meet your challenges and identify opportunities to grow.

State of the Nation 2022 is one more way Capricorn is delivering on our promise 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.

Consider the recommendations on pages 16 (easy wins) and 36 (recommendations) to help improve your business.

5 Key Takeaways for Auto Repair Shop Owners

The shortage of qualified technicians continues but Members are taking on more apprentices and there’s a great opportunity to create a more diverse industry to attract new talent.

Both pay rates and labour charge-out rates are up as Members grapple with the skills shortage. But many are still missing opportunities when it comes to calculating margins and mark-ups.

Supply chain issues continue to cause some shortages in spare parts and Members should plan ahead so they’re always prepared.

While Members are generally both happy and optimistic, many still struggle to take a break and maintain their work-life balance. It’s an area that needs real attention.

Members have made a lot of improvements in the past couple of years but there are still plenty of easy wins open to boost profitability and efficiency in most workshops.

Our Industry

Who we are

Of those who responded to this year’s survey, 89% ran independent workshops, 64% ran mechanical workshops and almost three-quarters were the sole decisionmakers in their businesses.

The average respondent was male and aged 46. Most respondents were from Australia, with 23% from New Zealand.

We had more commercial truck Members reply this year (up five percentage points on last year, to 10%). Most Members who took part operated mechanical workshops (Figure 1.3). Members had an average of 4.4 staff, ranging from the 22% who had one team member to the 24% who had six or more. The average number of hoists was 2.9. For indicative turnovers by staff numbers, see Figure 1.4.

How are we keeping our hoists busy? More than three-quarters of us rely on word-of-mouth marketing. Just over half of us are using social media channels to find work and communicate with customers. Only one in 10 is advertising in the local newspaper these days (Figure 1.7).

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 22 years in the industry and running their own workshop for 14 years.

14% of vehicles serviced are 2019 models or newer, 18% are 2016-18 and 21% are 2011-15.

On average, workshops see 28.6 vehicles a week. Australian workshops average 27.3 vehicles and NZ workshops 33.

“We’re now seeing a younger generation of Members coming through. They’re millennials. They’ve grown up in a digital world. They’re going to think differently, act differently. It’s very exciting. ” David Fraser, Capricorn Group CEO

age

Our Industry

Success and Happiness

For the first time, this year we asked how happy you are in your career.

The good news is we seem to be a pretty contented bunch. Almost two-thirds of respondents said they were very or extremely happy with their automotive industry career (Figure 2.2). This ratio held true no matter a business’s turnover (Figure 2.3), but there does seem to be a strong link between having lots of work, enjoying being a business owner, and happiness.

For the third year in a row, Members said making customers happy was the best thing about working in automotive. Almost a third said they enjoyed the fun of problem solving and fixing things (Figure 2.1).

But there also seems to be a general pride in the work we do, with six in 10 Members saying that being successful means doing high-quality work. It beat out financial considerations as the top answer to the question “what does success look like?”

Perceptions of success are deeply personal, so this is a fascinating insight into how we feel about ourselves, our jobs, our businesses and our industry (Figure 2.4). That finding ways to gain the trust of customers, and subsequently earning their referrals, is a strong driver of success suggests Members are aware of the value of a good reputation to their business (Figure 2.5).

The top reason Members gave for being happy was “I love what I do” (36% of the total and 53% of those who were very or extremely happy).

More than half of mobile mechanics said they love what they do (for most other business types it was nearer one-third).

Members who felt the least successful placed greater emphasis on financial stresses (68%) and paying themselves wages (41%).

CapHub Resources

“(I love) giving good service and receiving good feedback from customers, solving tricky issues that no-one else can, and giving high-quality workmanship at a reasonable cost .” Capricorn Member feedback, State of the Nation 2022 survey

Challenges

Taking time off

Finding time to take a break and maintaining work life balance again topped the list of challenges to running a business — although things seem to be getting better (Figure 3.1).

“As difficult as it is to maintain that work life balance, it’s really important that Members do,” Capricorn Group CEO David Fraser said. “It’s just not healthy to not have that balance.”

Parts shortages and rising costs

A parts shortage has been impacting the industry globally and that’s reflected in this year’s report. Difficulty getting parts was up three percentage points on 2021, to 39%.

Commercial truck and panel and paint businesses have been most likely to experience major delays in procuring parts and equipment. Few business types have been free from supply chain issues at some level.

“The emergence of inflation and related price and cost pressures, the geopolitical unrest and ongoing pandemic are all contributing to these inflationary pressures,” David said.

Finding good staff

Almost two in five Members said finding good staff was a challenge (see our Skills Shortage section).

Keep up to date with technology

Despite several excellent resources being available, three quarters of Members still google to find technical information. Almost one in five Members said access to technical information and diagnostics, changing technology and staying up to-date are major challenges.

46% of Members had trouble finding time to take a holiday, compared to 54% in 2021.

Just 28% of Members said changing technology was a challenge for the industry (down from 49% in 2020) as Australia’s Right to Repair laws come into effect.

Insurance companies determining prices is a major challenge for panel and paint shops (65%).

3.2 Biggest

3.1

Having a good work-life balance

technology

time to take a break

holiday

good

Shortage of parts

different

in parts prices

Figure 3.3 Industry concerns

Easy Wins

Stop googling for quick fixes

Don’t know how to repair something?

Three quarters of Members are turning to the internet to search for information on how to repair, install or replace.

• In Australia, new Right to Repair Laws that came into force on 1 July give you access to significant amounts of information and data. Make use of it.

• Capricorn Service Data, powered by Auto Data, is free to all Members and has service information on more than 34,000 different vehicles.

CapHub Resources

CLICK HERE to read more about Capricorn Service Data on CapHub!

Reassess your margin on parts

How are you calculating your margin on parts?

Don’t simply put a set percentage mark up on all parts sales. Be thoughtful in the way you calculate what you charge.

• If you saved money on the purchase of the part but only charge your usual percentage margin, you’re passing the saving on to the customer. Could those funds be invested into your business instead?

• Don’t just match the retail price for a part, understand your break-even point and the margin you need to make.

Charge for diagnostics

Almost half of all workshops are still only charging for diagnostics sometimes. More than one in 10 never charge. You’re throwing away money.

• Diagnostic equipment is expensive and charging for it helps cover the cost of the equipment, the all-important updates, and the time taken to do the diagnosis.

• It’s time to recognise the specialist knowledge, skills and years of training and experience that go into diagnostics. Doctors don’t diagnose for free, nor should you!

Reassess your charge-out rate for labour

Qualified technicians are getting harder to find, so labour costs have gone up. Consider whether that’s a cost you can afford to absorb or whether you need to pass it on to your customers.

• Labour charge out rates of Members who participated in the survey are up by an average of $5 an hour on last year, suggesting many Members are choosing to pass on costs, rather than absorb them.

• Calculate your charge-out rate based on your costs plus the profit margin you want to make, rather than what other workshops nearby are charging.

CapHub Resources

CLICK HERE to read more about how to set labour rates on CapHub!

Rethink hiring an apprentice

If you’re thinking about taking on an apprentice (especially if you’re worried about the time and expense), take advantage of the government funds available to help auto businesses.

• Find out what incentives are available in your state or country and find out whether you qualify.

• Help expand opportunities for women in our industry by taking on a female apprentice.

CapHub Resources

CLICK HERE to read more about apprenticeship incentives on CapHub!

Industry

Challenges –A year of progress

Last year we focused on three major challenges facing the industry: Covid, electric vehicles, and apprentices. A year later, here’s the progress we’ve made:

Covid

The pandemic continued to cause problems this year, with 18% of Members saying it was a challenge. The impacts were biggest for Commercial Truck (32%) and Panel and Paint businesses (29%).

Seven in 10 Members are concerned, on some level, about the potential future impacts of Covid (Figure 4.1). Covid has also exacerbated problems with parts’ supply shortages (see Spare Parts section).

Electric vehicles

EVs and hybrids are still a small proportion of the total number of the car parc, but that proportion is increasing. Last year it was 2.5 vehicles serviced a month; this year it’s four.

While 22% of Members told us EVs were one of the biggest challenges facing the industry, 71% said they were interested in servicing them and 18% say their workshop is or soon will be ready to service them.

CapHub Resources

CLICK HERE to read more about why not being interested in EVs isn’t an option on CapHub!

A third of Australian Members are not concerned at all about the impacts of Covid, compared to 16% of New Zealand Members.

Older Members and those who run smaller workshops with lower turnover are less likely to be interested in servicing electric vehicles and hybrids.

The top reason given for taking on an apprentice is to train the next generation (66%). The second reason (59%) was needing help with workloads.

Apprentices

Almost two in five Members currently employ an apprentice and more than a third said they were very or extremely likely to take on one in the future.

The lack of qualified tradespeople is driving Members to take on apprentices, with more than half (52%) saying it’s why they chose to employ one this year. But apprentices are proving almost as hard to find as technicians.

“Whether it’s Covid, electric vehicles, diagnosing more complex vehicles — whatever it is — the industry finds a way to adapt to it, to evolve with it, to meet that new reality. The industry has shown itself to be a great group of problem solvers

Bradley Gannon, Capricorn CEO of Automotive

“The lack of qualified tradespeople is driving Members to take on apprentices, with more than half (52%) saying it’s why they chose to employ one this year.”

Our Industry

Challenges –

Skills shortage

Impact on business

A lack of qualified staff is the top challenge facing the industry, and finding good staff remains a top three challenge for Members in running their businesses. Fifty-six per cent of Members were very or extremely concerned about the problem. The larger the workshop, the greater the problem.

A third of Members were struggling to find skilled staff, a quarter were currently looking for staff and 15% had unfilled positions. That’s causing backlogs of work, longer working hours, a reduction in work-life balance, an increase in stress, and longer turnaround times.

Creating opportunities

As we identified last year, we’re not attracting or employing enough apprentices. We’re also not employing enough women (or providing enough opportunities for them). Just 6% of workshops have a female mechanic and just 12% employ a female apprentice (Figure 5.3). Our industry cannot afford to ignore 50% of the labour market.

56% of NZ and 49% of Australian Members said finding qualified staff was a challenge for the industry.

34% of Members said having loyal staff was a marker of success.

57% of Members would recommend a career in auto to a young person, up from 52% in 2020.

Pay rates and upskilling

Labour rates we’ve seen this year (Figure 5.5) and wages are up 6.8% across the board. The highest pay increases are 11% for Australian auto‑electricians and 12% for NZ panel beaters and spray painters.

Investing in current employees by providing training can help with staff retention rates and simultaneously improve productivity. It is pleasing to see so many Members invested in more training this year (Figure 5.4).

CapHub Resources

CLICK HERE to read more about retaining staff long term on CapHub!

“If we want to attract the best talent, and keep them, then it’s all about making sure you know what your values are and then living by them , expecting those who work for you to share them. A great culture upholds those values.”

David Fraser, Capricorn Group CEO

In with the new, in with opportunity

We are fishing in a very small barrel. That’s the truth of it.

It’s not just the auto industry that’s struggling to find skilled labour. It’s a problem we’re seeing across all sectors of the Australia and New Zealand economies. Unemployment is low.

Competition for labour is high. There just aren’t enough people out there to fill the jobs we have available — and certainly not enough qualified and experienced individuals.

Unfortunately, there’s no quick fix to this problem. Last year, we focused on the importance of attracting more apprentices to the industry — and it’s good to see more Members have embraced that and are taking on the job of training the next generation.

But the competition for apprentices, that pool of young people usually aged between 15 and 20, is extremely high. Other industries want those potential apprentices too, and sadly the auto industry hasn’t been good at selling ourselves as an attractive option, so we miss out.

What can we do about it? Here are a few ideas.

Talk up our industry at every opportunity

We need to talk up our industry instead of talking it down. When Members are asked about the positives of working in auto, their enthusiasm bubbles over. We love what we do. Yet only 57% of us would recommend a career in auto to a young person. As an industry, it’s time we positively promoted auto careers.

Provide more opportunities for women

While the prevalence of women in retail-based roles and apprenticeship positions has increased this past year, the overall number of women in the industry is still low. This is a great opportunity for us.

Women are 50% of the wider population and the workforce. Women, especially female apprentices, are an almost untapped opportunity for us to explore. If we are serious about closing the skills gap, we need to communicate that and break down stereotypes about auto as “a man’s industry”.

This is a key step in building a sustainable industry long into the future – so it was great to see that three of our five Rising Star apprentice finalists this year were women.

Create a more welcoming and diverse industry

Creating a more welcoming and diverse industry will not only attract new people to the industry but help retain the people we currently have. This is about the kind of culture we want in our businesses and our industry.

There’s plenty of research to show that having a diverse workplace is strongly linked to improvements in business performance, effectiveness, profitability and revenue generation.

Creating a more welcoming industry starts at the workshop level. It’s about creating not just opportunities but a workplace culture that is welcoming to all. That’s up to all of us, and the work can’t start soon enough — because the auto industry doesn’t just need more fish, we need a much bigger barrel.

David Fraser Capricorn Group CEO

“There’s plenty of research to show that having a diverse workplace is strongly linked to improvements in business performance, effectiveness, profitability and revenue generation.”

Our Industry

“Members are running a knowledge and skills-based business and they need to think of themselves as a knowledge worker. They need to be proud of that and unashamedly charge well for their time, in the same way an accountant, lawyer or engineer does.” Bradley Gannon, Capricorn CEO of Automotive

Challenges –Charging for labour and parts

There are two big areas where Members may be leaving money on the table.

Margins on parts

There are similar problems between the two areas. But starting with margins on parts, 45% of workshops applying a set percentage mark-up to the cost of parts (Figure 6.4).

“There’s a difference between mark up and margin,” Capricorn Group CEO David Fraser said. “If you saved money on the cost of the part and you’re applying a set mark-up you’re losing gross dollar margin.

“Consider the nature of the job and your costs in determining the appropriate mark up.”

Labour rates

A business’s charge-out rate for labour has a huge impact on its performance and profitability.

But how is that labour rate being set? Half of Members said they were using their “best judgement”, which is like plucking a number from the air.

Workshop Whisperer Rachael Evans said Members should calculate their break-even point, work out how much profit they want to make, and then reverse engineer their charge-out rate.

“It’s not about looking at what the three closest workshops to you are charging and not wanting to charge more than them, because you don’t know what their costs of doing business are — and likely neither do they. So, why would you copy what they’re doing?” she said.

88% of Members estimate service times based on experience. Just 37% said they used softwarebased time guides. 42% of Members now always charge for diagnostics, up from 33% in 2020 and 37% in 2021. The mark-up on parts has fallen four percentage points in the past year, to an average of 32%.

CapHub Resources

CLICK HERE to read more about how to set labour rates on CapHub!

“We have a wonderful returning happy customer base and many new customers weekly. We have a great experienced mechanic who has no job comebacks. We have good cash flow and know how to manage our finances for a long, successful future.”

Member

CapHub

Our Future

Members have spent the past year working on plans to grow their businesses.

Almost three-quarters now have a growth plan in place, with 40% planning to increase the capacity of their workshop (Figure 7.1).

More than half of Members are extremely or very confident about the future of their businesses, while 44% are confident in the future of the industry as a whole (Figure 7.4,).

The biggest question mark Members have about the future is the transition to EVs, with a third saying it made them either not at all confident or only slightly confident about the future. That’s up seven percentage points on last year.

Retirement planning and succession planning appear to have stalled, with 45% of over 55s having either no plan or saying it’s too early to plan. Fewer Members now plan to put their businesses up for sale when they retire (Figure 7.2).

Capricorn CEO of Automotive Bradley Gannon said that means many Members will fail to realise the value of the asset they’ve built.

A third of Members use software to measure efficiency, while half measure efficiency based on their ability to pay their account.

54% of Members were very or extremely confident about the future because “there will always be a market” for mechanical repairs.

Almost one in five Members’ businesses are, or soon will be, ready to service electric vehicles.

“Having a succession plan is also your opportunity to achieve work-life balance in the years before your retirement,” he said. “It means there’s not only someone there to take over from you one day but, equally, someone who can step in while you get away from the business for a while.”

Figure

Plans to

“Having a succession plan is your opportunity to achieve work-life balance in the years before your retirement.”

Bradley Gannon, Capricorn

of Automotive

Recommendations

Make use of quality data sources.

Stop googling for information about repairs. Use reputable resources, like Capricorn Service Data.

Get ready for EVs.

Whether you like them or not, they’re the future. We’re going to see more of them on our roads and you need to be ready for them.

Take on an apprentice.

They’re our pipeline of future talent and the long term solution to the skills shortage. Provide opportunities for female apprentices.

Charge customers fairly.

Charge for diagnostics. Mark up parts thoughtfully. Consider increasing your labour charge-out rate, if necessary to meet rising costs.

Plan for spare parts shortages.

While global supply chains are causing problems getting parts, Capricorn Members should feel confident that our Preferred Suppliers are doing everything they possibly can to supply Members with the parts they need.

Invest in training.

Training improves your productivity and your competitiveness. It’s also an investment in staff that helps with retention.

Invest in technology.

Don’t fall behind your competitors or risk turning away business because you don’t have the tools or training you need. Recoup tech costs by charging for diagnostics.

Create an excellent workplace culture.

Make your workshop the kind of place people want to be. Embrace the benefits of a more diverse workforce.

Take a break. You need to rest.

Structure your business so you can get away. Pay yourself with time off like you’d pay your bills – on time, in full, and non-negotiable.

Plan for the future.

Whether it’s growing your business or handing over to the next generation, have a plan in place for the future. It’s never too early to have a succession plan in place.

Methodology

Between 23 May and 17 June 2022, Capricorn Members across Australia and New Zealand were invited to take part in an online survey.

1913 Members completed the survey, including 1480 in Australia and 433 in New Zealand.

The results were collated and analysed by market research consultants at Klein and interpreted by the team at Capricorn to produce this report.

About Capricorn About State of the Nation

Capricorn is a member-based organisation supporting businesses in the automotive industry. We have more than 25,000 Members and 2,000 committed Preferred Suppliers across Australia and New Zealand.

We offer our Members a broad range of services, including equipment finance, travel services and business protection. Being an organisation based on cooperative principles means our Members are our owners, too.

Capricorn was established in 1974 by a small group of Western Australian service station owners to increase their buying power and level the playing field with the big multinational oil companies.

Capricorn is committed to keeping a finger on the pulse of what’s happening within the automotive industry in Australia and New Zealand.

State of the Nation is a research project designed to gain an in-depth understanding of what’s happening in our industry and what’s important to Capricorn Members. The 2022 research is the third 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.