AUTOMOTIVE skilled workers need to see the value of their work and charge more, according to Capricorn Automotive in its latest State of the Nation report to its 21,000 Australian and New Zealand members.

The report, regarded as the organisation’s most substantial research document in its 40-year history, aims to provide insights to create stronger businesses for its members. Its findings were compiled prior to the full effects of COVID-19.

It said that many members “struggle to maintain a good work-life balance, and to take a break or holiday” with about one-third also worried about changing technology, have financial concerns or are worried about finding good staff.

“The challenges aren’t necessarily consistent across the industry,” the report said.

“Two in five Australian members are concerned about their ability to access technical information, while two-thirds of New Zealand members face a major challenge finding staff.

“Capped-price servicing and longer dealership warranties are troubling members, with a third of independent workshops and 42 per cent of chain, group and franchise workshops expressing concern.”

In the report, Capricorn Group chief executive David Fraser said extended warranties have seen the average age of a car visiting an independent workshop leap from three years to between five and six years.

“Sixty per cent of all cars under four years have a service agreement,” he said.

“This means the OEM dealers have five to six years to build a relationship with a customer, or to create programs or campaigns that block out the non-dealer workshop.”

One of the two key takeouts was that changing technology was seen as one of the biggest hurdles for the future and that 41 per cent of the 1500 members surveyed said lower margins were one of the biggest challenges facing the industry.

Lower margins, the Capricorn report said, were the result of factors including rents having increased, spare parts becoming more expensive, higher wages bills, increasing insurance premiums, and price comparison websites putting downward pressure on prices charged by members.

“Consumers are demanding more and more services at a lower cost,” Capricorn Automotive CEO Brad Gannon said in the report.

“And it’s members who are being squeezed. It’s time for that to change. It’s time for members to improve their profitability. It’s time we charge more.

“You work hard, you have specialist skills and knowledge. Know your value. Charge more because you’re worth it. By not adjusting charges to accommodate the increased costs they incur and the complexity of running their business and servicing and repairing the modern-day vehicle, workshops risk their ability to remain competitive in the long-term.

“Reduced profit margins reduce a member’s capacity to invest in what’s required to grow and maintain their business.

“They also make it harder to increase wages, attract the right talent, and retain the skilled workers who are the backbone of any workshop.”

Mr Gannon said “there’s a misconception we need to charge less to attract customers.”

“The reality is you can lower your prices to attract price-sensitive customers, but the moment a competitor charges even less, you won’t see those customers again,” he said.

“No one wins in a race to the bottom. It’s time to change the conversation you have with your customers.

“It should be about value. Talk about the years of expertise and knowledge you’ve built up. Have confidence in explaining why it is you charge what you charge.

“Trust and believe in yourself. It’s time to give yourself permission to charge more.”

Half of the members who responded to the report said changing technology was the main challenge facing the industry and almost one-third said it’s one of the biggest challenges they face in their own business.

“Yet, we mostly have a positive outlook,” the report said.

“Seven in 10 of us are confident we are capable of dealing with changing technology and about half of us say the industry is ready to embrace whatever advances are around the corner.

“Four in five of us are using scan tools, with mechanical workshops, mobile mechanics and auto electricians the most likely to embrace them.

“But the survey found mobile mechanics and auto electricians are lagging behind and are the most likely to have to turn away customers because they don’t have the knowledge needed to do the job.

“A quarter of us say access to technical information and diagnostics is a problem and more than three-quarters of members surveyed resort to searching for information online.

“If members fail to keep up with technology, they will eventually go out of business,” warned Capricorn chairman Mark Cooper.

“Keeping up with technology is critical for our members’ future success.

“Investing in the right software is vital as it allows members to access the correct information quickly. This leads to improved workshop efficiency and increased profitability.

“Customer satisfaction will also improve when their vehicle is repaired efficiently, in a single visit.”

The Capricorn report also said members should look at tiered rates on servicing and parts, similar to that used by insurance companies and internet providers to give customers a choice of different levels of charges for services and parts.

The report said this model gives customers the opportunity to pay less if they want to and provides clarity about what they’re paying for.

It also: “Allows you to optimise the services you’re providing, so you’re not over-servicing; and allows you to legitimately charge for costs you will incur, like diagnostics and data subscriptions.”

The report said members should “stop giving away diagnostics for free.”

“This is a service we can and should be charging customers for, but only a third of members are doing it.”

Members should also estimate service times more accurately.

“How much efficiency, productivity and revenue are lost by incorrectly estimating how long a job will take?” the report said.

“More than 60 per cent of members say it is hard to accurately estimate service times yet only 38 per cent of members are using software-based ‘time guides’.

“While over a third use software to help estimate a job, three quarters of members don’t rely on the software only. They use it as an input and also overlay their experience before making the final call – that is, quoting or invoicing the customer.”

Capricorn said many members had also a relaxed approach to adding a mark-up on parts, yet this was an important part of revenue streams with businesses, on average, applying 31 per cent mark-up to their parts.

For the future, the report said members are generally confident but more than a third are concerned about the ability to attract young people to the industry and only around half would recommend an automotive industry career to them.

They said that finding good staff was a major challenge, with one in 10 members finding it difficult to keep staff long-term and, in the case of tyre and suspension workshops, the ratio is two in 10.

Two-thirds of workshops either employ or have previously employed an apprentice, with most members reporting that this was to train the next generation and pass on their skills.

“Panel and paint businesses are significantly more likely to have had an apprentice and of those who haven’t, most say it is because their business is too small,” Capricorn said.

By Neil Dowling