Despite supply chain shortages leaving many dealer lots lighter on inventory, auto dealers increased overall ad spending by 9.7% during the first half of the year. Franchised dealerships spent a total of $4.09 billion, according to the National Automobile Dealers Association. That compares to $3.73 billion during the first half of last year when the pandemic forced many dealerships to close their doors. Despite the increase, the 2021 mid-year total lags 2019 when NADA says $4.47 billion was spent by local dealers during the first six months of the year.
“Retail demand and sales were quite robust during the first six months of 2021, and vehicle sales in March and April saw two of the top 10 sales rates so far this century,” said Patrick Manzi, Chief Economist at NADA. “But manufacturers were not able to maintain production volumes at full capacity because of the semiconductor microchip shortage. The result: dealer inventories declined each month since the start of the year, leading to record-low levels of vehicle inventory on the ground by the end of June.”
Despite the challenges, NADA’s midyear report says the nation’s car and light truck dealers sold 8.3 million vehicles during the first half with sales topping $600 billion.
The impact of the car shortage and the lack of promotional buyer incentive packages offered by manufacturers can be seen in the amount of money spent on advertising on a per-unit-sold basis. NADA reports for every car or truck sold during the first half of the year, dealerships spent an average of $541. That was smallest amount in at least a decade.
“With tight supplies of vehicles and high demand from consumers, manufacturers pulled back on incentive spending, and average incentive spending per unit fell each month through June,” said Manzi. “The cuts to incentive spending and strong demand from consumers pushed average transaction prices over $40,000 for the first time ever.”
The auto ad category has been a mixed bag at radio’s biggest companies in recent months. Urban One said auto ad sales were up double-digits year-over-year at the African American media specialist during the third quarter. “Even though the economy has got its challenges with supply chains and auto, there still is a decent recovery trajectory happening,” CEO Alfred Liggins told investors.
At Beasley Media Group where automotive is the company’s fourth-biggest ad category, CFO Marie Tedesco said they also saw an improving picture in the third quarter. “Notably, despite continued labor, chips and supply chain issues, which held back spending, the auto category showed year-over-year increases in most of our markets,” she told analysts earlier this month. “We expect auto to continue to strengthen towards the end of the year and to have significant growth in 2022, as inventories become more available and automakers again promote new models and compete aggressively for electric car sales,” said Tedesco.
But other radio groups are feeling more of an impact. Automotive remains the top ad category at Audacy where the segment’s revenue was down about 40% during the third quarter. CEO David Field said auto’s decline accounted for a third of the gap between their third quarter revenue this year and that of 2019 before the pandemic. “As auto and other businesses return to normal, we expect to see their spending revert to 2019 levels,” Field predicted earlier this month.
In a similar vein, Townsquare Media CEO Bill Wilson said their auto ad revenue was down “well over 30%” during the third quarter compared to 2019 levels. But he, too, is hoping the new year brings a turnaround. “As the chip inventory comes back, we'll get that benefit of auto dollars coming back from an advertising standpoint,” he predicted. But Wilson also cautioned investors that may not happen until late 2022 with the auto category unlikely to return to normal until 2023.