The auto sector of the county has been witnessing slowdown in sales. Experts predict the reason to be high inflation and fuel costs, which has curtailed the purchasing power. From the auto maker’s point of view, bottleneck such as raw material and labour cost, land cost, and bureaucratic hurdles are also adding to their woes.
So should the media industry be worried about depleting ad spends from the sector?
Experts say a firm no. In spite of the current conditions, media spends in auto sector witnessed a growth of nine per cent in 2012 as compared to 2011.
It is expected that as market conditions are eased, i.e. inflation comes down, the demand is bound to pick up. Yaresh Kothari, an Auto Analyst, in an earlier interaction had said, “The health of the sector is very good. The drop in sales and volume is temporary and the media spends would not be compromised; in fact, they are likely to increase. More product launches are expected in the next quarter and to increase visibility, marketers would rely heavily on advertising.”
Srinivasan Krishna, an Auto Analyst said, “Media spends will sustain the way it has. You can assume them to increase. I would even go to an extent to say that media spends in auto sector is immune to slowdown unless something major happens. As more and more players get into hatchbacks, sedans and SUV categories, clutter is inevitable. Who would not like to get their move noticed? As far as the number game and contemporary slowdown is concerned, it is temporary. Auto sales depend upon various factors and factors might change in the future.”
Of late excise duty was hiked on SUVs. Diesel vehicles were the most affected. Auto makers very openly expressed their disappointment. Automobile sector is dependent on various other sectors. If steel price, iron price, raw material price and labour costs rise, automatically it affects auto prices, which in turn also affects the consumption.
Coupled with this, inflation curtails spends of people, and they spend money on other commodities. “Such factors add to the woes of automakers. As sales plummet, inventories get augmented and automakers would like to sell the inventories first. So in some cases they slow the production in spite of high labour cost and regulations, therefore losing a lot of money. Sales pressure is high in these cases, and therefore they would like to break the clutter. Hence, spread on advertising would enhance,” said Nitish Sharma, and Independent Aviation and Auto Analyst.
Market experts also say that auto being a resurgent sector will need advertising in order to communicate. Even in the worst crisis, advertisements are the only way to communicate the message across the spectrum.
But increasingly, it is also said that RoI would be a key factor. So in a way, media spends would not be curtailed, but auto makers would be relying on better platforms. As a result, media spends on certain platforms could go down. Therefore, television, print, OOH, and digital platforms would need to gear up if they want to grab the ad share of auto makers.