AUTO WORKSHOPS: IMPACTED YET OPTIMISTIC

COVID-19 industry study finds auto service and repair workshops are more optimistic of a bounce back than any other sector

In recent weeks the Australian Automotive Aftermarket Association (AAAA) has conducted a COVID-19 Impact Survey of almost 300 auto service and repair workshops.
While the survey results have unsurprisingly revealed an industry under intense stress with 83 percent of respondents having seen revenues drop significantly, they have also highlighted remarkable resilience.
Indeed, the results of the study – commissioned by the AAAA and conducted by ACA Research – show the auto repair and service industry as a whole is actually highly optimistic about the future; even more so than many other small and medium business sectors, with only 10 percent expecting COVID-19 to have a long-term impact.
Looking across industries, the best comparison points can be made with the retail and hospitality sectors, which are also highly dependent on consumer activity.
“With more than 80 percent of our workshops experiencing a downturn in revenue, this sees us in line with the hard-hit hospitality and retail sectors,” AAAA Director of Government Relations, Lesley Yates, said.
“While the reduction in turnover numbers is very concerning of course, what is encouraging is the optimism being reported by our respondents. It has been quite heartening to read that 64 percent of automotive workshops reported that while they are being significantly impacted in the short term, they believe they ‘will get through it.’”
This optimism is being driven by a number of key factors. These factors, as listed below, are driving how independent repairers are coping and tell the story of an industry responding at pace to an extreme change in operating environment:

  1. Workshops have been able to reduce their cost base (negotiating supplier terms, rent relief). Automotive workshops had the highest level of rent negotiations than any other industry sector (52 percent).
  2. They have introduced temporary staffing cuts. They are more likely to reduce hours than cut staff, with few of those making cuts laying off more than one employee.
  3. They have quickly introduced new services and ways of operating to maintain some level of activity throughout the shutdown, such as non-contact pick-up and drop-off, increased sanitising of vehicle interiors, and complimentary services for essential workers (such as healthcare staff).
  4. They have made use of government support programs such as JobKeeper, with a number also taking the opportunity to invest in new equipment to prepare their businesses for the future by making use of the instant asset write-off.

“Despite being hit hard, particularly early as consumers were unsure about whether they could go to their local auto workshop, most respondents see this unprecedented situation as a short-term impact. They share a level of confidence about the ongoing viability of their businesses and they are more optimistic of a bounce back than any other sector,” Lesley said.
“There is a shared understanding that there will be a bounce when restrictions are lifted. Consumers will need to attend to overdue services, or they may need an urgent repair to a vehicle that has been idle for several weeks. People want to stay mobile and auto workshops are the ultimate enabler for this.”
The study has also unveiled that most in the industry believe we’ve already hit the hardest point of the COVID-19 impacts on daily people movement, and that we should see some level of improvement in consumer activity over the coming month. This is a similar experience to what is being reported in the retail sector, which is also expecting swift improvement as the economy re-opens.
“We have compared the auto service and repair results with data from our weekly SME survey across key industry sectors including hospitality, retail, services, production, health and education, construction, and distribution,” ACA Research Director, Ben Selwyn, said.
“While we know that auto service and repair is generally comparable with retail and hospitality in terms of the revenue impact, it’s promising that they have been able to maintain activity in their workshops, and a level of optimism about the future.
“We do however see some variation between the different states and territories, with Victorian workshops the most significantly impacted off the back of particularly cautious consumer behaviour.
“Almost two thirds (61 percent) of them experienced a 30 percent or more decline in revenue, against 41 percent of workshops in Queensland. We should note though that while Queensland has been relatively less affected, more than three quarters (77 percent) of their workshops still saw revenue fall during the pandemic, highlighting the impact that COVID-19 has had across the country.
“Anecdotally, we had also heard that the impact in regional and rural areas was more limited, with some regions applying less restrictions than in the metro centres. This has now been confirmed by the research, with more than half (56 percent) of the metro workshops in the survey experiencing a 30 percent or more revenue reduction, against 40 percent of those in regional areas.”

While optimism and preparing for a future recovery are top-of-mind for most, like other sectors, those businesses who were struggling before COVID-19 are feeling the pressure more than others.
“Despite the optimism, we need to be mindful that 12 percent of workshops are very concerned about surviving post COVID-19 – if we translate that across our industry we will need to be providing some significant levels of support and attention to about 2,750 workshops nation-wide,” Lesley said.
Government financial support packages have been a critical part of many businesses being able to keep their doors open, workers in jobs and bills being paid throughout the automotive aftermarket supply chain. The nation-wide survey also collected data on satisfaction with government response to COVID-19.
“It was interesting to see that 85 percent of our survey respondents were either ‘somewhat’ or ‘extremely satisfied’ with the government business response,” Lesley said.
“The study has reported the highest level of confidence in the government of any comparable industry and 36 percent of workshops said they were extremely satisfied, which is also higher than every other small business sector.
“Similarly, we asked workshops about their level of satisfaction with the government stimulus packages and their levels of support are, once again, the highest of all SMEs and higher than the construction industry with good take up of both the JobKeeper (52 percent) and the Apprentice wage support (78 percent).”
There have been however perceived challenges with how the government stimulus packages have been rolled out.
Stress has been added to workshops and other businesses who have indicated uncertainty about JobKeeper eligibility and the requirement to take the risk of paying staff before being reimbursed.
Further, in a setting of heavily reduced small business cashflow, some workshops have been frustrated at the lag in payments for the Apprentices wage subsidy with some schemes being more efficient than others in approving applications and providing payment.
“Interestingly, and perhaps as a demonstration of the optimism present in auto workshops, we have seen 25 percent of businesses taking advantage of the Instant asset write-off and accelerated depreciation deductions,” Lesley said.

“Clearly some businesses are in a positive financial position and can invest in tools and equipment during these hard times. These workshops are going to be able to gear-up quickly and meet the market in what is likely to be an increase in consumer activity during the recovery period.”
Workshops have also been busy introducing new services, and many have reduced operating hours rather than closing. The AAAA has also been pleased to hear of workshops sharing staff between other stores within the same group to help each other cope on the busy days and to keep their valued workers in jobs.
“Workshops are certainly looking after their people by doing whatever they can do to keep their staff – that’s the message that we have received and that is great to hear,” Lesley said.
“We have a significant labour shortage in this industry, and we cannot afford to lose our trained mechanics or any of our apprentices.
“The intelligence that we have is that independent repairers are doing everything they can to keep their staff: using JobKeeper, rotating staff, sharing apprentices and as a last resort, reducing the opening hours.”
As the only national professional association for the auto aftermarket, including auto workshops, the AAAA has been working hard to support the industry throughout the COVID-19 crisis.
“The AAAA has been working around the clock to support our members with everything from webinars and fact sheets to facilitating one-to-one legal and government assistance advice,” AAAA Chief Executive Officer, Stuart Charity, said.
“The survey results show that these services have been well used and appreciated by the industry with a very high reported level of engagement and satisfaction with what we have been doing to help.
“We plan to continue to adapt to what the sector needs on a week by week basis to keep providing the most needed support – we are going to be here for our members and just like them, we are optimistic that we will bounce back from this crisis.”
To learn more about the Study results, please visit https://bit.ly/36G9mJr

ACA Research is the AAAA’s partner in the Aftermarket Dashboard which is delivered direct to members’ inboxes each quarter. To view the latest Dashboard, please login to the AAAA Members Area. If you are not sure of your login details, please email admin@aaaa.com.au and they will be provided to you. Once logged in click on ‘Market Intelligence’ and then ‘Industry Snapshots.’

For more from the AAAA, including access to a range of COVID-19 resources, please visit www.aaaa.com.au