Auto Sales Driving US Economy Now, and Brands Still Rely Heavily on TV Ads

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It’s a good thing for the economy that American consumers are still looking for new automobiles and that the industry has made an unprecedented number of worthy models available to them to buy.

A very good thing, actually: The continuation in August of the U.S. auto industry’s three-year-long recovery ensured that overall American retail sales that month increased by the most in six months, a 0.9-percent gain, slightly more than forecast. The rising price of gasoline contributed as well to the slightly-higher-than-forecast total.

And actually, it’s only lately that auto executives themselves have come to believe that their sales recovery — which has amounted to about 10 percent to 11 percent year on year for the last couple of years and looks to do so again this year — is sustainable to some degree on top of whatever else is happening in the economy.

Such is the power of so-called “pent-up demand” that has seen the age of the U.S. “fleet” top an average of ten years, meaning that so many Americans are stepping into an actual need for a new vehicles these days that this powerful feeder of consumer motivation so far has overpowered many other forces arrayed in the opposite direction, including still-higher gasoline prices, persistent U.S. joblessness, moribund consumer confidence, and anxiety in advance of the November elections.[more]

During the second quarter, Kantar Media said, automotive ad spending in the US rose by nearly 8 percent in the 2nd quarter, paced by Honda and Toyota as they come back from their supply problems last year. Kantar’s press release observed:

The largest percentage drop among the Top Ten marketers came from General Motors which slashed its expenditures 30.1 percent, to $291.9 million. GM’s annual rate of measured ad spending is now at its lowest level in over a decade. By contrast, Toyota Motor spent $285.0 million in the second quarter, an increase of 22.7 percent compared to the year ago period when operations were severely curtailed by the Japanese earthquake and tsunami.

Auto execs also believe the underlying economy remains troubled but isn’t yet troublesome. “Economic fundamentals remain modest but stable,” Jenny Lin, a senior U.S. economist at Ford, said during a conference call last week. She also noted that the housing sector shows signs of revival. Meanwhile, auto companies have been doing everything they can to continue to juice demand the old-fashioned way: marketing, and in particular, more TV advertising.

“Moving tin” from dealer lots to consumer driveways has helped local TV, with auto marketers’ ad spending and incentives lifting broadcast and cable/satellite/telco local TV ad sales, defying any (illogical) notions that “TV is dead” in a great rush to the web and mobile.

“Auto spending was one of the few strong categories in the second quarter,” Steve Lanzano, president and CEO of the TVB, told brandchannel. “It really is a very simple formula,” said the head of the not-for-profit trade association of the commercial-broadcast TV industry. There is a marketing allocation per car. The more cars that are sold, the more advertising to TV.” So for the spot TV market, he added, it’s “been a terrific year for local broadcasters regarding automotive.”

NCC Media‘s Andrew Capone, SVP of marketing and business development for the cable operator-backed ad sales consortium, also commented to brandchannel on the year-end projections for local, regional and national cable ad sales: “We will see overall automotive advertising … increase by around 25 percent over last year.” However, Capone warned that political advertisements have been eating up a lot of the spot inventory for the fourth quarter. And overall, he expects TV ad spending by auto companies to “increase at a gentler pace” in 2013.

Indeed, Citi’s automotive research head Itay Michaeli struck a cautionary note this week at the TVB’s conference in New York, warning that “Complacency is the biggest risk today to this industry. Our message is that the (auto) recovery should not be taken for granted. It’s not a matter of when. It’s a matter of if.”

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