AUTOMOTIVE advertising expenditure is forecast to have shrunk by 21 per cent during 2020 across 10 key markets, according to Zenith’s just-published Automotive Advertising Expenditure Forecasts.

This is a two-and-a-half times bigger downturn in spending than the decline in ad revenue as a whole in these markets.

The markets included in the survey are Australia, Canada, Germany, India, Italy, Russia, Spain, Switzerland, the UK and US, which collectively account for 57 per cent of all global ad spend.

However, the report said that as sales recover from the pandemic, growth in automotive ad spend is poised to outperform growth in spending in the total advertising market in both 2021 (10.5 per cent growth) and 2022 (11.4 per cent growth).

It said delayed purchase decisions and persistent reluctance to use shared and public transport are expected to lead to the first growth in passenger car sales in the surveyed markets since 2017, fuelling sustained growth in automotive advertising in 2022.

The report said the spread of the coronavirus and its effect on the global economy have left consumers uncertain about their financial futures and unwilling to commit to large purchases.

It also cited car manufacturer disruption to their supply chains due to shut-down plants in different countries at different times.

“Faced with pressure on both supply and demand, car brands cut their ad budgets very sharply when the severity of the crisis became clear. The months of April and May had the greatest decline in most markets.

“Year-on-year declines have since eased and Zenith expects them to moderate progressively over the rest of the year.”

However, despite the speed of recovery in spending in 2021 and 2022, the growth will not be enough to get the actual spending past the level of spending in 2019 and automotive advertising is forecast to be 2.8 per cent lower in 2022 than it was in 2019 although automotive advertising has “the potential to outperform the market beyond 2022”.

The report said that while the auto brands spend more on digital advertising and is the most important single channel for car-makers, automotive advertisers spend less in digital than the market as a whole.

Automotive brands spent 42 per cent of their budgets in digital channels in 2019, while the average brand spent 49 per cent digitally. Automotive brands are also less prominent in magazines and out-of-home.

Television is the second-biggest channel for auto advertisers, which spend substantially more of their budgets in television (32 per cent) than the average brand (27 per cent).

“Television is still a key platform for their mass-audience brand-building though premium digital environments are starting to take over this role for some audiences,” the report said.

“Auto advertisers also spend more in cinema, which is good at brand-building among young, relatively well-off audiences. Radio is a particularly relevant medium given that a large proportion of radio listening takes place in the car.”

The report said that automotive brands spend substantially more on newspaper advertising (11 per cent) than the average non-auto brand (seven per cent) but the data tends to be skewed by Germany and India where newspapers still have a high reach among well-educated, wealthy readers.

“Auto brands make use of their (newspapers) ability to convey more detailed information such as brand values, specifications and accessories,” the report said.

Meanwhile Zenith predicted that digital advertising will be the only channel in which auto brands spend more in 2022 than in 2019.

“Brands will focus more on premium digital video to compensate for declining prime-time TV ratings and make better use of their customer data to target digital ads more effectively.

“Even before the pandemic, digital channels were becoming more important in the path to purchase and the pandemic has only accelerated that trend.”

Zenith expects this to continue over the next few years. Auto brands are forecast to spend nine per cent more in digital channels in 2022 than they did in 2019.

“Newspapers and magazines have been losing market share for years as their readers migrate online and are forecast to recover barely any of the ad revenues they lost in 2020 by 2022.

“Newspaper ad spend will be 27 per cent lower in 2022 than in 2019, and magazine ad spend will be 28 per cent lower.

“Out-of-home and cinema, by contrast, are forecast to recover strongly in 2021 and 2022 from their very steep losses in 2020 which were caused by social distancing restrictions.

“Still, out-of-home auto ad spend is forecast to decline by a net 10 per cent between 2019 and 2022, while cinema ad spend is forecast to decline by 16 per cent.

“Television and radio will remain important media for automotive advertising, with relatively restrained declines of six per cent and seven per cent respectively between 2019 and 2022.”

The report added that Australia and Canada are the most advanced markets for automotive digital advertising, each devoting more than 70 per cent of total spend to digital channels.

“Even here there is potential for more growth – digital’s share of spend is forecast to rise in Australia from 75 per cent in 2019 to 79 per cent in 2022, and in Canada from 72 per cent to 75 per cent.

“In other markets the potential for growth is even higher, especially in the markets that are currently lagging behind. Zenith forecasts the digital market share of auto advertising to rise in India from 15 per cent in 2019 to 23 per cent in 2022, in Switzerland from 27 per cent to 33 per cent and in the US from 31 per cent to 38 per cent.”

Jonathan Barnard, Zenith’s head of forecasting, said the coronavirus recession had been particularly tough for auto brands making it especially important for them to adapt to consumers’ changing behaviours and needs.

“Brands that have got closer to their customers online, by investing in first-party data and personalised communication, will be well-positioned to benefit from resurgent demand during the upturn,” he said.

By John Mellor