Auto sector to rev up ad spends next quarter?
Auto manufacturers are confident of the sector's recovery in the coming months on the back of vaccine rollouts and reducing coronavirus cases
With the second wave of coronavirus, sales of major automobile manufacturers in the country have also taken a hit. There was a marked difference in domestic sales in May 2021 compared to the month before due to lockdown restrictions in several states.
Maruti Suzuki India posted total sales of 46,555 units in May 2021 compared to 1,59 691 units in April 2021, a decline of 70.85%. Similarly, Toyota Kirloskar Motor sold a total of 707 units in May 2021 as compared to 9622 units in April 2021, posting a decline of 92%.
Furthermore, Mahindra & Mahindra's overall auto sales (passenger vehicles+ commercial vehicles+ exports) for May this year dipped by 52% with 17,447 vehicles sold compared to 36,437 in April.
On the two-wheeler front, TVS Motor Company registered sales of 1,66,889 units in May against 2,38,983 units in April with a drop of 30%.
The slowdown in sales has also translated into a falloff in advertising spending. As per the TAM adex data, average ad volumes per day on TV and Radio dropped by 58% and 76%, respectively, in April- May, whereas Print saw a 66% decline in average ad space per publication per day over Jan-Mar'21. Meanwhile, average ad insertions per day on Digital seen a minor decrease among all mediums (22% compared to Jan-Mar'21).
While April 2020 was a washout due to the first Covid-19 lockdown, April 2021 saw a 50% drop in spends for the auto category compared to the year before.
In 2020, auto was the second-highest category after FMCG, contributing 9% to the overall adex pie across TV, Print, Radio, and Radio. According to the Pitch Madison Advertising Report 2021, the sector contributed Rs 3,243 crore in advertising revenue in 2020. However, the sector spends were lower by 29% as compared to 2020.
Shashank Srivastava, the Executive Director (Marketing & Sales) of Maruti Suzuki, commented: "The Q1 has been already affected and will be reduced substantially in terms of ad spends. However, during the year, we will be spending more than the last year." In 2020, the company was among the top ten big spenders on advertising, shelling out around Rs 500-600 crore last year.
Srivastava said that in April, the company saw reasonably good bookings and retail in the first fortnight but as the second wave surged in the country, the state government restricted the movement of people and imposed lockdown and around 25 states were under lockdown by the end of April.
"The second fortnight of April was not so good. We have 3140 showrooms across the country out of which 2600 were closed. It was a big hit because these showrooms account for almost 90% of the total retail. Retail was affected and so the bookings came down. The Covid spread was larger this time both in terms of the number of cases and geography, as the rural areas were also affected," he noted.
Though Srivastava is optimistic that from June onwards, retail may be on the mend once the unlock comes into effect.
On the condition of anonymity, a senior executive of the leading auto company said, "Since many suppliers are in containment zones, availability of auto components is limited due to which OEMs are unable to manufacture vehicles as per their original plan. Sales have dropped for the entire industry when factories are not operating, and dealerships are closed."
But unlike last lockdown, the supply chain for the manufactures was not affected this time around. The industry leaders believe that supply was better than last year, but it gets more impacted on the demand side.
"Around 70% of our showrooms were shut down for over a month. Therefore, the business has been impacted. Around 60-70% of sales were down in these last two months, which impacted ad spending. Things are slowly easing down; we are hopeful that the sector will see good recovery in the coming months. We have some new launches planned, which will kick off when the situation improves and will spend on advertising accordingly," said a marketing head of a two-wheeler manufacturer.
The automobile industry is going through a challenging phase due to limited production as inventories need to be cleared up first, resulting in a slowdown in the tyre industry in India as well.
Chu Tsang Chih (Kurachi), Director, Maxxis India, said, "As unlock begins, the auto sector hopes to bounce back soon. We are certain that once the complete unlock happens, personal mobility would become the preferred mode for most commuters, which will certainly be a boom for the tyre market. Also, with the pick-up in the vaccination drive, we are quite optimistic and hopeful for sustainable growth."
The brand will continue to focus heavily on digital and social media platforms and assess the customer engagement offered by various platforms as the situations evolve.
"Moreover, we are investing in digital marketing to reach out to our customers. We are strengthening our existing dealer base and regularly reviewing our dealer acquisition strategy taking into consideration the current situation," shared Chih.
Last year, the auto category spent the most on Print followed by TV and Radio. On TV, the category spent Rs 1268 crore; on radio, Rs 117 crore; and on OOH, Rs 94 crore.
A senior media planner said, "April '21 compared to April '19 volume on TV for auto has declined by about 50%, whereas April 2020 was at zero due to lockdown. The impact on sales of auto companies has impacted the ad spends in two months. The category has cut down its budget on ad spends and has kept new campaigns on hold. But now the positive cases are declining, and we expect that in June or July, we will see some new launches from the sector and spends coming back to mediums."
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