Zenith: Auto adspend to fall more than twice as fast as the market

Romanita Oprea Creativity, Digital & Media, Marketing
  • Automotive advertising will shrink 21% in 2020, compared to 9% for the ad market as a whole
  • In most countries, automotive advertising will recover rapidly in 2021, with the worst-hit markets seeing the biggest recovery
  • Auto brands spend more on television than average: it’s still key for mass-audience brand-building
  • Digital advertising is the only channel forecast to grow between 2019 and 2022
  • Romania follows the global trend: 15% decrease in average budgets compared to last year

Automotive advertising expenditure is forecast to shrink by 21.0% in 2020 across 10 key markets, according to Zenith’s Automotive Advertising Expenditure Forecasts, published today*. That’s two-and-a-half times faster than the decline of the ad market as a whole in these markets.

The spread of the novel coronavirus and its effect on the global economy have left consumers uncertain about their financial futures and unwilling to commit to large purchases. Car manufacturers have also suffered from disruption to their supply chains, as lockdowns shut down manufacturing in different countries at different times. Faced with pressure on both supply and demand, car brands cut their ad budgets very sharply when the severity of the crisis became clear. The months of April and May had the greatest decline in most markets. Year-on-year declines have since eased, and Zenith expects them to moderate progressively over the rest of the year.

The overall situation is also reflected in Romania – the media budgets for the automotive sector are also influenced by the health crisis. After a promising start to the year, during the state of emergency, most customers in the segment have significantly reduced their budgets so that forecasts for this year show a 15% decrease from the previous year.

However, automotive adspend is poised to outperform the market in both 2021 and 2022, with 10.5% growth in 2021 and 11.4% growth in 2022. Initially, the large decline in 2020 will make the comparison easier in 2021, but delayed purchase decisions, and persistent reluctance to use shared and public transport are expected to lead to the first growth in passenger car sales since 2017, fuelling sustained growth in automotive advertising in 2022.

Automotive adspend will remain behind its 2019 level in 2022

Despite the speed of recovery in 2021 and 2022, automotive advertising is forecast to be 2.8% lower in 2022 than it was in 2019. It will have recovered less lost ground than the market as a whole, which is forecast to be just 0.6% below its 2019 level in 2022, giving automotive advertising the potential to outperform the market beyond 2022.

Auto brands lag behind the market in digital

Digital advertising is the most important single channel for auto brands, but automotive advertising is less digital than the market as a whole: automotive brands spent 42% of their budgets in digital channels in 2019, while the average brand spent 49% digitally. Automotive brands are also less prominent in magazines and out-of-home.

Television is the second-biggest channel for auto advertisers, which spend substantially more of their budgets in television (32%) than the average brand (27%). Television is still a key platform for their mass-audience brand-building, though premium digital environments are starting to take over this role for some audiences. In Romania, television remains the main communication channel for automotive players, but with a market share lower than the total market and down from previous years (57% vs. 66% total market). Auto advertisers also spend more in cinema, which is good at brand-building among young, relatively well-off audiences, and radio, a particularly relevant medium given that a large proportion of radio listening takes place in the car.

Automotive brands spend substantially more on newspaper advertising (11%) than the average brand (7%). That’s primarily due to two markets, Germany and India, where newspapers still have high reach among well-educated, wealthy readers. Auto brands make use of their ability to convey more detailed information such as brand values, specifications and accessories.

But digital advertising is the only channel forecast to grow

Romania also followed the general trend of the market, where more digital channels were used in the automotive segment than in 2019. Thus, 35% of all media budgets are consumed online (versus 21% total market); both local and international platforms have seen increases in budgets.

Zenith predicts that digital will be the only channel in which auto brands spend more in 2022 than in 2019. Brands will focus more on premium digital video to compensate for declining prime-time TV ratings, and make better use of their customer data to target digital ads more effectively. Even before the pandemic, digital channels were becoming more important in the path to purchase, and the pandemic has only accelerated that trend. Zenith expects this to continue over the next few years. Auto brands are forecast to spend 9% more in digital channels in 2022 than they did in 2019.

Newspapers and magazines have been losing market share for years as their readers migrate online, and are forecast to recover barely any of the ad revenues they lost in 2020 by 2022. Newspaper adspend will be 27% lower in 2022 than in 2019, and magazine adspend will 28% lower. Out-of-home and cinema, by contrast, are forecast to recover strongly in 2021 and 2022 from even steeper losses in 2020, which were caused by social distancing restrictions. Still, out-of-home auto adspend is forecast to decline by a net 10% between 2019 and 2022, while cinema adspend is forecast to decline by 16%.

Television and radio will remain important media for automotive advertising, with relatively restrained declines of 6% and 7% respectively between 2019 and 2022.

Australia and Canada are pioneering digital-led auto marketing

Australia and Canada are the most advanced markets for automotive digital advertising, each devoting more than 70% of total spend to digital channels. Even here there is potential for more growth – digital’s share of spend is forecast to rise in Australia from 75% in 2019 to 79% in 2022, and in Canada from 72% to 75%.

In other markets the potential for growth is even higher, especially in the markets that are currently lagging behind. Zenith forecasts the digital market share of auto advertising to rise in India from 15% in 2019 to 23% in 2022, in Switzerland from 27% to 33% and in the US from 31% to 38%.

“The coronavirus recession has been particularly tough for auto brands, making it especially important for them to adapt to consumers’ changing behaviours and needs,” said Jonathan Barnard, Zenith’s Head of Forecasting. “Brands that have got closer to their customers online, by investing in first-party data and personalised communication, will be well-positioned to benefit from resurgent demand during the upturn.” *The markets included in this survey are Australia, Canada, Germany, India, Italy, Russia, Spain, Switzerland, the UK and US, which collectively account for 57% of all global adspend.