Advertising spending on cars increases only sluggishly
Advertising spending by automakers is expected to rise by 0.8 percent in 2019 (compared to 1.5 percent in 2018). This is according to Zenith’s first Automotive Advertising Expenditure Forecasts, which was released on Monday.
Automakers expect 2019 to be a difficult year as they face ongoing tensions in trade relations, particularly between the US and China, as well as the possible introduction of automotive import tariffs in the US. The latter is causing manufacturers' sourcing costs for raw materials and parts to rise, making cross-border sales more difficult. Zenith forecasts growth of 2.0 percent in 2020, when the Summer Olympics in Tokyo and UEFA Euro 2020 will provide valuable advertising space for car advertising.
Overall, the automotive advertising sector is falling short of expectations in the advertising market, which is recording growth of 4 percent. New technologies and constantly changing customer needs are a major challenge for the way sales are conducted in the automotive industry. Biofuels, innovative communication technologies, as well as new ownership models and the use of new digital channels - to actively reach buyers online - will be key to faster brand growth in the coming years.
Zenith has conducted its first exclusive survey of automotive advertising in 14 key markets worldwide*, based on the quarterly Advertising Expenditure Forecasts, which have now been published for 31 years. According to the calculations, advertising spend in the automotive sector in these markets amounted to $35.5 billion in 2018.
The U.S. is by far the largest automotive market in this report, with advertising spending of USD 18 billion in 2018. This surpasses China, the next largest market at USD 6.3 billion, by almost three times. U.S. ad spending by auto brands has been in decline for some time since 2012, with an overall decrease of 12 percent between 2012 and 2018. In China, however, auto ad spending has increased 47 percent over the same period. The fastest growing market is India. There, auto advertising costs are expected to increase by an average of 12.8 percent by 2020.
More than 50 percent of all automotive advertising spend goes to television - 54.9 percent in 2018, well above the 32.9 percent global average across all categories. Television remains the best channel for delivering emotional brand exposure and sustaining it over time. Nevertheless, the continued linear decline in ratings in most developed markets has driven up prices for the remaining viewers. This is currently driving brands to spend a greater proportion of their spend on online video and other internet formats. The TV share of automotive advertising spend, which was around 54.9 percent in 2018, is expected to fall to 54.4 percent in 2019 and then to 53.1 percent in 2020.
Car brands have steadily shifted more budget toward Internet advertising. This includes advertising on all online video services that broadcast TV-like content over the Internet. Overall, brands are lagging the market in terms of internet advertising: in fact, compared to the global average of 40.6 percent, they spent only 20.9 percent of their budgets on online advertising in 2018. The fact that vehicle sales are made almost exclusively offline makes it difficult for automotive brands to optimize their online sales efforts, unlike brands in most other categories. Today's consumers now do their research into car brands online, so it is still important that car brands maintain a strong online presence to reach customers at this key stage in the path to purchase. Zenith predicts that the digital share of automotive advertising spend will increase to 24.4 percent by 2020.
Apart from print media, which continues to struggle with the steady decline in circulation figures, the rest of the traditional media of advertising in the automotive sector is holding up pretty well. Radio, cinema and out-of-home advertising are expected to either maintain or narrowly increase their share of automotive advertising between 2018 and 2020. Radio, which many consumers listen to in their cars, works particularly well for car brands, accounting for 7.2 percent of automotive ad spend compared to 6.0 percent ad spend globally across all categories.
Automotive brands are facing the same pressures for change that are currently driving all industries to change the way they communicate with consumers and leverage their paid advertising. But they also face unique challenges. The rapid increase in consumer demand for SUV models has led to much greater competition among vendors. This means advertisers must tailor their ads more efficiently to potential SUV buyers and more rigorously assess the return on their advertising, both by channel and by model. Meanwhile, government intervention and consumer demand are forcing brands to invest in green technologies and communicate their innovative values to customers demanding change. Using data cues such as interest in environmental issues and rapid adoption of new technologies can provide information in a more effective way to target potential environmentally conscious buyers.
