Rising costs have overtaken staffing shortages as the biggest challenge facing Australian automotive workshops, according to Capricorn’s 2026 State of the Nation report.
The annual industry snapshot found 49 per cent of businesses nominated price-sensitive customers and cost pressures as a major issue, while 45 per cent reported difficulty finding good staff.
Despite the pressures, the report paints a broadly resilient picture of the automotive aftermarket, with 72 per cent of workshops planning to grow their businesses or improve profitability during the next 12 months.
Capricorn Group CEO Brad Gannon said workshops were increasingly concentrating on efficiency and protecting margins as operating conditions became more challenging.
“The 2026 State of the Nation report shows workshops are still pushing ahead, but they’re doing it under even more pressure than we’ve seen in recent years,” Gannon said.
“We’re seeing businesses increase their focus on improving efficiency, protecting profitability and making sure their operations are as strong as possible.”
Customer retention is also becoming increasingly important, with 71 per cent of businesses identifying it as a driver of success.
While rising costs have moved to the top of the list of concerns, skills shortages continue to have a significant operational impact.
Capricorn found understaffing was contributing to reduced workshop capacity, longer turnaround times and additional pressure on existing employees. Almost a quarter of businesses reported turning away work because they were understaffed, while 21 per cent said shortages were increasing workloads for other staff.
“Workforce shortages continue to be one of the biggest constraints on workshops,” Gannon said.
“It impacts everything from productivity to customer service, and it’s placing real pressure on business owners and their teams.”
Capricorn said findings from the research were helping inform its discussions with government and industry stakeholders, particularly around workforce participation, apprenticeship pathways and access to skilled migrant workers for small businesses.
Industry confidence has also moderated slightly. The Capricorn Confidence Index fell from 72.5 in 2025 to 70.5 in 2026, although Gannon described the movement as caution rather than pessimism.
“The industry hasn’t lost confidence, it’s just becoming more realistic about the market conditions,” he said.
“Long-term confidence remains stable, but businesses are taking a more measured approach in the short term.”
The seventh annual State of the Nation report is based on responses from 989 Australian automotive businesses and 159 apprentices, providing a snapshot of the sector’s challenges, performance and outlook.