Auto industry slams apprenticeship incentive cuts

Several Australian automotive industry bodies have criticised the federal government’s decision to halve apprenticeship incentives from January 2026, warning that the cut will worsen the automotive sector’s chronic skills shortage and ultimately cost consumers through higher repair bills and longer wait times.

The government plans to cut the Priority Hiring Incentive from $5000 to $2500 from January 1, 2026, with the Australian Apprentice Training Support Payment also halved from $5000 to $2500.

A smaller reduction of $1000 was flagged during Parliamentary Estimates hearings in early October, which drew fire from MTA Queensland at the time.

The key apprenticeship program incentive for clean energy trades remains unchanged for now, which includes electric vehicle qualifications necessary for work on models with hybrid, plug-in hybrid, battery electric and hydrogen fuel cell drive systems where voltages are in the hundreds rather than tens.

Australia’s Priority Hiring Incentive is a payment for employers of apprentices training towards an occupation and qualification at certificate level III or above on the Australian Apprenticeships Priority List.

Hundreds of apprenticeship training courses are listed, including automotive-related certificates for technicians in electrical, EV, diesel, motorcycle and mechanical fields, as well as panel beating, painting, trimming and body building.

Victorian Automotive Chamber of Commerce (VACC) chief executive Mr Peter Jones said the timing of the cuts was particularly troubling given the automotive industry is competing with other sectors experiencing similar skill shortages.

“At a time when our industry faces one of the most acute skills shortages in recent history, reducing support for employers who are willing to invest in training the next generation is counter-productive,” Mr Jones said.

“These incentives help offset the substantial costs employers bear when taking on apprentices. Halving this support will make many businesses think twice about whether they can afford to train new entrants to the industry.”

Mr Jones, who is also interim executive director of the Motor Trades Association of Australia (MTAA), said continuation of the Key Apprenticeship Program incentive for clean energy trades could be a double-edged sword as it risked creating an unintended imbalance.

“We support the transition to cleaner vehicles, but the reality is that electric vehicle uptake in Australia remains modest,” he said, potentially underestimating the market penetration of hybrids running the kinds of voltages that require specific training and equipment.

“The vast majority of vehicles on our roads today – and for years to come – require traditional automotive skills.

“By maintaining incentives for clean energy apprenticeships whilst reducing support for conventional automotive trades, we risk creating a skills gap that will directly impact everyday motorists through increased wait times and higher costs for vehicle servicing and repairs.”

MTA NSW chief executive Mr Stavros Yallouridis said the timing was particularly troubling given automotive technicians have appeared on national, state and territory skills shortage lists for over a decade.

“While we appreciate the government’s commitment to supporting the electric vehicle transition, we’re deeply concerned about reducing support for the rest of the automotive sector,” Mr Yallouridis said.

“This $2500 reduction will act as a handbrake on small businesses looking to take on apprentices in a tight economic environment. For many of our members, that difference is decisive in whether they can afford to invest in training the next generation.”

Echoing Mr Jones, Mr Yallouridis said that while electric vehicle uptake is growing, the vast majority of Australia’s 22 million vehicles, travelling more than 260 billion kilometres annually, still require traditional automotive skills.

“Without adequate apprentice numbers, we cannot maintain the productivity growth our sector and the broader economy desperately need,” he said.

“Fewer apprentices means reduced productivity, longer wait times for consumers, and higher costs for vehicle servicing and repairs. Every freight truck, regional service van, and family car depends on this workforce.”

MTA Queensland chief executive Mr Rod Camm said the cut could not come at a worse time.

“Our members are telling us it’s impossible to recruit technicians and it is harder than ever to attract and retain apprentices,” Mr Camm said. “With rising business costs, ongoing compliance challenges and a tightening labour market, this is not the time to reduce the assistance available.”

The Australian automotive industry is facing a shortage of more than 38,000 workers, with the gap expected to grow as electrified vehicles demand new skill sets. Almost half of automotive businesses (48 per cent) are actively seeking staff, while 38 per cent are struggling to find skilled workers.

Before the deeper cuts were announced, Mr Camm said a $1000 reduction per apprentice would have a cumulative effect on smaller businesses.

“Every dollar counts for small and medium businesses,” he said. “Cutting employer incentives by $1000 may not sound like much, but it adds up quickly across the sector.”

MTA Queensland has also raised concerns that even the $5000 payment was insufficient to cover the full cost of supervising and training apprentices, and is urging the government to reinstate the Parts Interpreting apprenticeship on the national priority list.

Mr Jones said many employers had been blindsided by the decision and were now questioning their capacity to take on new apprentices in 2026.

“Businesses have made commitments to training based on the existing incentive structure, and this abrupt change affects their ability to plan and budget effectively,” he said.

“The real concern is the knock-on effect for 2025 school leavers who will now face fewer employment opportunities in the automotive sector at a time when we should be expanding pathways into the industry.”

MTA NSW is calling on the federal government to reconsider the reduction and ensure the broader automotive sector receives equitable support alongside clean energy trades.

“We need a balanced approach that recognises both today’s automotive industry and the transition ahead,” Mr Yallouridis said.

“Our members are committed to training Australia’s future workforce, but they need consistent policy settings and adequate support to make that possible.”

“If we’re serious about addressing skills shortages across the automotive sector, we must back the businesses that provide these training opportunities,” Mr Camm said.

“Reducing incentives sends the wrong message. It risks slowing the progress we’ve made in attracting people into trades – and that’s something Australia simply can’t afford.”