Auto sector hits top gear, spends big on TV
After last year's dismal performance, auto majors ride into profits on the back of a favourable monsoon and slew of launches. And television is their medium of choice
GroupM recently revised their estimated ad spends on TV from 12 to 14.8 per cent this year. Similarly, the Pitch-Madison Media Advertising Outlook 2014 estimated TV ad spends to grow by 15 per cent this year, an increase of six per cent over last year’s prediction. Much of this growth will be driven by the automotive sector, which has had a slew of launches and there's more to come.
On cruise mode
The persistent poor performance of the auto sector last year had impacted their ad spends with several companies spending conservatively on TV. The forecast for this had been subdued too. However, the turnaround in the performance of the sector in the first quarter of the financial year (Q1FY2015), has given much hope. The Sharekhan Q1FY2015 Earnings Review Sector Update Report reported a volume growth across all segments in the auto sector, except for the commercial vehicle segment.
Among the top performers in the automobile companies, Tata Motors saw the highest growth with profits tripling due to its Jaguar Land Rover business. Eicher Motors recorded a 70 per cent rise in profits this quarter mainly on the back of the motorcycle division, i.e. Royal Enfield, while Mahindra & Mahindra saw a strong profit growth in the passenger vehicle segment. Market leader, Maruti Suzuki, too reported a growth in profits to 12.6 per cent year on year. The two-wheeler industry saw profits increase by double-digits, with companies such as Hero MotoCorp and TVS Motors growing by 10 and 22 per cent respectively during the quarter.
Another major factor that has contributed to the revival in the sector is the improved outlook on the monsoons, that has increased spending on automobiles in the rural markets. Mahindra & Mahindra expects to see higher sales in its tractor division with a higher crop output expected in the coming year.
The GroupM report too says that since traditionally two-wheelers have done really well in small towns and rural India, it expects to see the competitive intensity grow through new launches by existing players and as a result, higher ad spends on TV.
To continue the upswing, auto majors are expected to launch more products to boost their sales volume. For instance, Bajaj Auto is working on the launch of six new products in the motorcycle segment. Maruti Suzuki too plans to launch a number of utility and multi-passenger vehicles in the next quarter.
Why choose TV?
Television being a key part in the marketing strategy of automobile companies, it is likely that spends on the medium will go up to promote the new launches. Speaking on the reach and penetration that television as a medium offers, Nikhil Madhok, SVP Marketing & Programming Strategy, Star India said, “Television is a growing market in this country and Ad spends on the medium will continue to rise. I do expect the increase to be in double digits. There is also a huge potential to better the reach and penetration of the medium before we reach 100 per cent saturation.”
In an earlier interview to exchange4media, Ashish Sehgal, Chief Sales Officer, ZEEL had said that he sees auto sector spending majorly on advertising on TV right now. “The auto companies are increasing their ad spends because of rising number of launches by Maruti, Mahindra, Tata, Hero, Yamaha and Honda. They are looking at the medium the way an FMCG major would do, and are buying daily spots across networks.”
According to Raj Nayak, CEO, Colors, “We see the auto sector spending heavily on television this year. We had a major auto company willing to come on board as the title sponsor for one of our big shows, but we had already sold the sponsorship rights to another company.” But since there are limited channels to advertise on, and the sector is flush with funds, Nayak says he expects more such players to come forwards this quarter.
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