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Why the Auto Industry is Cutting Down on TV Ad Spend, and Why it Matters

Why the Auto Industry is Cutting Down on TV Ad Spend, and Why it Matters

The auto industry is in decline by nearly all accounts.

“The US economy has been doing well, and shoppers have kept up their retail demand,” writes Jim Edwards for Business Insider. “But the same can’t be said for automobiles.” As the budgets of car manufacturers get slashed, TV advertising in the industry has gone with them.

CNBC went into detail, writing that car sales are expected to drop in 2019 “as rising interest rates weigh on sales and translate into higher monthly car payments for consumers.

Recent stock market turmoil and uncertainty over the health of the U.S. economy could also add to consumer caution in the short term.” Outside the US, the EuroZone recently trimmed economic growth forecasts, specifically citing weakness in the auto industry as one of the two major contributing factors.

The Economist attributes falling car sales to the tariff war, a rapidly changing industry (with electric cars and ride-sharing apps on the rise) and a decrease in consumer interest.

Regardless of the reason, car sales look likely to fall around the world, and major car manufacturers are looking to cut costs across the board. Ford is in the middle of a global effort to cut costs by $14 billion a year, and Jaguar is working on its own plan to cut $3.2 billion in annual costs.

It’s not shocking to see TV advertising, with its high price tag, be part of these cutbacks. Data from MediaRadar’s television industry tracking and our newest Annual TV Trend Report shows the extent to which auto ad spend has changed on television .

How Lowered Auto Ad Spend is Affecting Television — For Now

The auto industry has long been a major buyer of national TV ad space. In the past year, however, automakers have been consistently pulling dollars from TV advertising.

The chart below from MediaRadar data depicts how every quarter (except for Q2 2017) has seen a negative Year-over-Year change in automotive ad spend on TV.

Spending by auto companies on national TV has seen a YoY decline in eight of the nine last quarters. The largest negative shift was in the first quarter of this year — a 21 percent decline from the Q1 2018.

According to MediaRadar data, the auto industry’s cuts to TV ad spend are most apparent in the advertising stats for recent Super Bowls. The auto industry was the top spending category for 2018 Super Bowl ads, but a near $50 million decrease among the category for the 2019 Super Bowl lowered its ranking to fourth.

A Huge Silver Lining for TV: Decreasing Auto Ad Spend Really Isn’t Personal

Here’s the upshot for TV ad sellers: automotive’s dramatic decrease in TV ad spend isn’t the result of shifting those dollars to other mediums.

MediaRadar research shows that car companies are not allocating their collective ad budgets from TV into newer formats, like YouTube or Snapchat. Instead, the above outlined economic trends within the auto industry are causing lowered ad investment across the board.

Look at it this way: in 2017, TV accounted for 85 percent of ad spend in the auto industry. In 2018, TV ad spend in the industry stood at 84 percent of total advertising efforts. Even though car makers are spending less on TV advertising, the medium isn’t losing its huge percent dominance to anyone else.

It seems to be a matter of TV ad sellers having to wait out the drop in ad spend; the auto industry always ebbs and flows. In the meantime, the auto industry still remains one of the largest buyers of TV ads despite the cutbacks. In the last year (Q2 2018 to Q1 2019), auto was the fifth largest category buying national TV advertising, collectively spending over $6 billion.

A pick up in TV ad spend from Auto will depend on the auto industry finding a way to make revenue flow more freely, appealing to a new generation of car buyers.

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