Auto: Strong sales are driving up ad $

MediaLife On pace for best year since 2007 with 14 million vehicles sold By Bill Cromwell October 24, 2012 Olympic and political advertising certainly deserve much of the credit for the advertising gains being seen in 2012. But the biggest sign of a sustainable recovery, not dependent on the two-year election and Games cycle, is the strength of the auto category. After a solid 2010 and disappointing 2011, 2012 is on pace to be the best year for auto sales since 2007, and perhaps the best advertising year as well. Forecasters are predicting that 14 million cars will be sold this year, up 29 percent over 2009, when the auto industry was battered by the recession, bankruptcy and bailouts. There’s a huge market for auto sales, which is leading to strong advertising in the category by manufacturers and dealers fighting for market share. Add to that the big gains from the Japanese manufacturers, who pulled back on advertising last year following the earthquake and tsunami that led to severe inventory shortages, and auto advertising should remain strong for the remainder of the year and beyond. “The automotive category is coming back very strong on both the foreign and domestic front, with tier I, tier II and now tier III local dealer advertisers spending heavily [on spot television],” notes a recent forecast from the British agency ZenithOptimedia. “There is a strong appetite among consumers for new vehicles, with many holding off coming out of the recession, and automakers are offering deals and incentives to entice these consumers.” During second quarter spot TV spending by automotive was up 25.6 percent over the same time in 2011, according to the TVB, to $648.8 million. That was the biggest gain for any non-political category among the top 25, with the Honda, General Motors, Toyota, Hyundai and Ford dealer associations all up at least 9 percent. “Local dealer advertising was the No. 1 [spot TV] spender in 2007 for many markets; this category coming back is making a strong impact on local inventory in markets,” says ZenithOptimedia’s report. The appetite for new cars is being fueled by the recession. In 2008 and 2009, many people held off on buying new cars when their vehicles were six or seven years old. That’s led to a larger than usual number of 9- or 10-year-old cars on the roads. Now that the credit crunch has eased a bit, and it’s easier for people to get approved for long-term deals, dealerships are seeing much more traffic and thus laying out incentives to try to woo consumers, incentives that they’re advertising heavily on television and online.