Inventory is finally getting back to normal, and dealerships finally have cars to sell. Does that mean automotive ad spending is bouncing back? Not so fast.
Now that the supply problem is abating, demand is becoming a problem for very real reasons. Interest rates are quite high, making financing a large purchase more expensive. Also, costs for necessities like food (don’t get me started on the price of eggs) and housing are all up, while the media keeps talking about a possible recession (check out BIA’s Nicole Ovadia’s quicktake on the economy for more on that). All of this is most likely combining to make many consumers wave off the purchase of a new vehicle a little longer.
For 2023, BIA is forecasting total Automotive local ad spend to grow 4.9% over 2022 levels; however, we see most of that increase happening in the latter half of the year. In pre-pandemic 2019, Automotive local ad spend was forecast at $16.9 billion. In 2023, it is forecast at $12.2 billion, which is up compared to 2022 levels, but is still nearly 28% below 2019 pre-pandemic levels.
Nine of the seventeen media channels in our forecast are forecast to grow in 2023 (including TV Digital, OTT, and Radio Digital). Over-the-air TV is expected to remain essentially flat from 2022 levels, while over-the-air radio is expected to be down 2.1%.
So when does BIA think the Automotive vertical’s local ad spending will bounce back? Not for the foreseeable future, unfortunately. Our forecast extends through 2027, and we show Automotive ad spending growing at a compound annual growth rate (CAGR) of 3.7% between 2022 and 2027. CAGR means that the growth will average 3.7% per year over the period, although some years will be higher or lower than others. Even by 2027, the end of our forecast period, we are forecasting total Automotive local ad spend to still be down from pre-pandemic levels.
But the news isn’t all bad. BIA’s Automotive vertical is made up of eight sub-verticals and some of these sub-verticals are bouncing back faster like Tires, Auto Parts & Accessories Stores; Auto Repair; and Tier 3 – Used Car Dealers. None of these auto sub-verticals felt the pinch of the supply chain issues like Tier 1 and 2 or New Car Dealers so their local ad spend is continuing to show growth.
What does all this mean for local sellers? The growth we’re forecasting is primarily coming from digital media channels, so prioritize media with the most aggressive growth – TV Digital, Radio Digital, and OTT (over-the-top TV). Digital advertising is going to Mobile and more importantly Search and Video. Help dealerships build a strategic plan to convert buyers who shop on mobile.
There’s a lot to say about Automotive advertising. We’ve summarized our top findings in the following one-minute video.
To get our full analysis, insights and recommendations, BIA’s Automotive Vertical Local Ad Report is available for purchase in our online store here. Use promo code autovideo to take $50 off the purchase price.
Our ADVantage clients can download the report right now in BIA ADVantage. Just look under Reports & Webinars.