Sales drop prompts some carmakers to prune ad expenses

Sluggish sales over the past few months have led some carmakers to cut back on ad spending, while market leaders are maintaining their ad budgets.

While market leaders Maruti Suzuki, Tata Motors and Hyundai have so far maintained their advertising spends and are likely to keep it at par with their 2023 spends, Mahindra & Mahindra, MG Motors and Skoda have curtailed their ad spends, according to latest industry estimates.

Mahindra and Mahindra, for instance, is pegged to spend Rs 310 crore this year on advertising, compared to Rs 890 crore a year ago. The company is believed to have spent about Rs 200 crore till August this year. MG Motors is expected to spend Rs 110 crore this year, over 60 percent less than Rs 290 crore it spent last year, and Kia India’s ad spends may come down to Rs 170 crore, nearly Rs 100 crore less than the previous year, according to industry projections based on advertisers’ current spends.

e4m sought to get in touch with the carmakers to understand their side of the story. The copy will be updated as and when they respond.

Anil Solanki, Senior Director, Media Lead, dentsuX, says, “The auto sector is experiencing a challenging phase with piled-up inventories, driving most brands to underspend compared to last year. Maruti Suzuki continues to maintain its spend levels, while the rest are tightening their budgets in response to market pressures.”

“However, brands like Volkswagen, Renault, Nissan, and Toyota are showing resilience with new launches which have increased their ad expenditure. In the festive season and last two months of the year, we might see an upward spending trend owing to year end discounts and bounties,” Solanki adds.

Most of the auto ad spends are happening around the launch of new cars, industry experts told e4m. Over 30 new cars have been launched over the last two months. A dozen models are set to be launched in the next couple of weeks.

Notably, India's total passenger vehicle (PV) sales witnessed a decline of 4.53 percent year-on-year and 3.46 percent month-on-month, as per the August 2024 data compiled by the Federation of Automobile Dealers Associations (FADA). The dip in car sales has led to high inventory levels across the personal vehicle segment with stock days range between 70-75 days i.e. 7.8 lakh vehicles valued at ₹77,800 crore.

As per latest reports, wholesale dispatches of passenger vehicles in September marginally dipped to 355,000-360,000 as against 364,198 units last year.

Though the festival season, which pushes up sales, began in September with Ganesh Chaturthi and Onam, the Shraddh (inauspicious period of two weeks) also started on Sep 17, which affected retail demand.

Car majors Maruti (-3.8%), Tata Motors (-8%) and Hyundai (-5.8%) reported further dip in domestic sales in September year-on-year as the conversion of inquiries into bookings is taking longer than anticipated across regions. Electric car and SUV sales have been the lowest in September. Companies said they were recalibrating their dispatches (wholesales) keeping in mind retail demand.

However, brands like Kia (17%). M&M (23%) Toyota (14%) registered an uptick in sales in September, Y-o-Y.

Festive to lift the mood

As auto companies prepare to announce their figures on October 1 and 2, analysts forecast mixed volumes, with the festive season expected to boost wholesale numbers. Some observers also noted an improving sentiment in rural areas, bolstered by monsoon rains that have been six percent above normal.

“As the festive season approaches, automotive firms hope that their intensified marketing efforts will stimulate demand and counteract the recent sales decline. Within a limited budget, automakers are leveraging a mix of promotional offers, enhanced digital campaigns, and strategic partnerships to rejuvenate sales figures,” a senior auto industry leader says.

Another leader said, “Overall, sentiment in the automotive space remains favourable, driven by a sustained recovery among first-time buyers, especially in rural areas.”

This strategic move reflects their confidence in the market's potential for recovery.

Market Size

The auto sector is the third largest advertiser in the country after FMCG and Ecommerce. The segment accounted for about Rs 4,900 crore of AdEx in 2023, out of overall Rs 1 lakh crore expenditure, says Pitch Madison Annual Report 2024.

More than half of it, that is around Rs 3,000 crores, comes from carmakers only. Maruti alone spent nearly Rs 1,400 crores in media and marketing activities in 2023, sector experts say.

India’s passenger vehicle market, valued at Rs 4.5 lakh crore, is currently driven by EV cars where Tata Motors controls more than 65% of the market. Overall, Maruti Suzuki leads the sector with over 50 percent market share.

The digital media dominates the auto sector’s total advertising expenditure, constituting around 35% of the share, which is more than one-third. This is followed by print (33%) and television (27%), auto industry experts shared.

This means a slashed ad budget would affect the digital and print media the most although TV would be also affected badly, industry observers noted.