After a good run for a few months automobile sales have yet again seen a dip in their sales. According to data released by the Society of Indian Automobile Manufacturers (SIAM), domestic car sales had dropped by 2.55 per cent in October. Prior to this the sector saw a 1.03 per cent decline in September. This comes as a disappointment for car manufacturers who were hoping for a growth in car sales on the back of the festive season.
Festive season slump
Domestic car sales in October this year stood at 1,59,036 units as compared to 1,63,199 units in the same month during the previous year according to SIAM data. While car sales in September 2014 was 1,54,882 units as compared to 1,56,494 units in September 2013.
Car makers such Honda, Tata Motors and Mahindra & Mahindra saw their sales drop. Honda Cars India saw a decline of 8.45 per cent in sales of passenger cars as it sold 10,186 units in October this year against 11,127 units during the same month last year. Tata Motors’ sales dropped down by 12.33 per cent as it managed to sell 9,594 units as compared with 10,944 units in October 2013. Mahindra & Mahindra declined by 13.64 per cent as it sold 19,029 units as against 22,035 units during the same month last year.
However, there were few such as Maruti Suzuki India and Hyundai Motor India who saw a growth in sales during the month. While Maruti Suzuki increased sales by 1.95 per cent in its passenger cars, rival Hyundai saw it sales grow by 5.34 per cent as compared to the same month last year.
Earlier during the year between May to August 2014 automobile sales had seen an upward trend. In August 2014 car sales increased by 15.16 per cent which had prompted a revival in the auto sector after almost two years of slump. SIAM in August had forecast a growth of 5-10 per cent in passenger vehicles and cars for the current financial year.
On the hopes of a good festive season auto manufacturers also increased ad spends. According to a media report automobile companies were expected to spend as much as Rs.400-450 crore during the festive months of September and October. However, with the slowdown in growth in the auto sector are their ad spends expected to be affected and if so which media is expected to take the hardest hit?
Will ad spends reduce of auto players?
According to many media planners who we spoke to believed that there will not be any reduction in ad spends from auto players and in fact it might push them to increase ad spends in order to push for sales. According to Atul Sharma, GM, Starcom MediaVest there might be a slight dip in the ad spends of auto manufacturers but it is never dictated by the overall (market) performance. “It is mostly dictated by launches. So if there is going to be launches then they are not going to reduce (their ad spends). If there are no launches then they will definitely reduce. Nobody wants to do regular buys till there are new launches in the market,” he said.
Similarly, Harish Shriyan, COO, OMD said, “Just because their (auto manufacturers) market share has gone down does not mean that they will cut down their (ad) budgets in the future. They will be looking at the whole year perspective (instead of month on month perspective).”
While another media planner Dinesh Vyas on the other hand said that there will not be any dip in the spending and on the contrary ad spends might increase slightly. He said that those whose sales are dipping will want to invest more as they would have a lot of stock which they want to clear. “So they will certainly keep on spending. Of course Diwali wasn’t so great in terms of sales but they will still keep pushing I think for the new year. I don’t think there is going to be any dip in the auto spends. In fact they will certainly continue the current trend and may in fact show a slight increase, may be not on the lines of Diwali but at least from its regular yearly spends trend”. He further said that an auto player has been spending an X amount on its ad spends they will be spending X amount plus 15% more during the December-January cycle.
One of the main reasons for the continued ad spends from this sector media planners say is that they have fixed marketing budgets allocated. Also they say that auto sector has no seasonality and hence has to push for sales to grow. Depending on the scenarios in the market they decide on which type of advertising to push. For instance during the festive periods where people want to buy new things the push for product ads, while during the lull periods they look towards brand ads to grow the brand name.
Commenting on the same P.M. Balakrishna, COO, Allied Media said, “I don’t think it will affect their ad spends if not anything I would probably think there would be an increased effort to boost up sales. The decision would be to push for sales and they can’t really afford not to increase (ad) spends. So if not only I think it would motivate them to get more ad spends.”
The big ‘if’ of ad spends
Though TV may give reach and is good at brand building, it is however not as effective as print in terms localised targeting and pushing customers to the showrooms.
“Television will take a higher hit because print is something that they (auto manufacturers) cannot move away from because it is dealer led. It helps in supporting their distributors and you cannot take this media away from them,” Sharma says.
Similarly, Vyas says that television will face the cuts in spends first due to the reaction time being more. “Television is something that they will cut first because the lag effect is much more as compared to print because print is much more topical medium. If you want responses and you release an ad today. Next morning when you see an ad which says Rs.5 lakh discount on a particular luxury car, immediately the response will happen because people will start calling those dealers and say that they are interested in the offer or inquire about it. The (ad spends) cut will happen in the mediums which are primarily not topical be it television, outdoor. But they will certainly not cut radio, print and digital,” he explained.
“When things get tougher the market generally responds with lot more tactical offers and discounts and push advertising which primarily becomes more print led and digital led. Normally in that situation television is sort of not used. Television is lot more a brand building tool and a brand reach medium, print is largely used as a tactical medium. At such times print get used more,” said Balakrishna.
Despite the fall in the sales of automobile manufacturers there definitely seem to be no worry about ad spends decreasing from this sector. On the contrary, we might even see an increase in ad spends during the next two months.