Australian automotive businesses are likely to be feeling the effects of mounting cost pressures, with new IAG research showing SMEs are delaying maintenance and investment as they attempt to maintain financial stability.
The inaugural IAG Resilient Futures Report, incorporating the IAG Risk Index, examined how Australian consumers and small businesses are responding to financial, operational and other risks.
While the report does not separate automotive businesses from other SMEs, several findings have direct implications for workshops, repairers and other automotive businesses that rely heavily on equipment, technology and skilled employees.
The research found 49 per cent of SMEs were operating with lower margins, while 43 per cent had delayed or reduced payments to themselves. Another 41 per cent had reduced their use of external advisers or professional services, 41 per cent had delayed maintenance or asset upgrades and the same proportion had postponed investment in technology or systems.
For automotive businesses, delaying equipment upgrades or investment in new technology could become increasingly significant as vehicles incorporate more sophisticated electronics, advanced driver assistance systems and electrified powertrains.
The report also identified significant operational risks. Nearly two-thirds of SMEs had experienced a significant disruption or unexpected event during the previous 12 months. A revenue or demand decline affected 23 per cent, 19 per cent had difficulty meeting operating costs, 18 per cent lost customers or contracts and 14 per cent experienced the loss of key staff.
Business preparedness was another concern. The report found 70 per cent of SMEs did not regularly maintain premises, equipment or vehicles to reduce disruption, while 67 per cent did not regularly review and update their business insurance.
Three-quarters lacked documented business continuity or emergency plans, while the same proportion did not have backup suppliers, partners or alternative supply chain arrangements.
These findings could be particularly relevant to automotive repair businesses, where interruptions to parts supply, equipment failures or the loss of skilled technicians can directly affect productivity and revenue.
Financial pressures appear to be contributing to the preparedness gap, with 42 per cent of SMEs identifying cost or affordability as a barrier to taking protective action.
Despite the challenges, SMEs remained comparatively positive. The report’s inaugural Risk Index gave small businesses a score of 68 out of 100, compared with 60 for consumers, suggesting businesses retain confidence in their ability to navigate an increasingly complex operating environment.