There is something of a comeback underway for the automotive ad category, according to radio executives who say the impact of the now-ended United Auto Workers strikes against General Motors, Ford, and Stellantis has been minimal – just as the car industry picks up the pace of its recovery following three years of supply chain issues during the pandemic.
J.D. Power and GlobalData estimate 1.2 million new vehicles were sold during October, which is a 6.6% increase from a year ago, even with one fewer selling day. Based on that pace, it now projects 15.5 million new vehicles will be sold this year.
“October results indicate a relatively robust performance,” said Thomas King, President of the data and analytics division at J.D. Power. “The UAW work stoppage, which commenced in September, has had a limited effect on October’s industry sales,” he said.
There are signs that the automotive category, once one of radio’s biggest, may be returning to pre-pandemic norms. “Automotive has made a surge,” Saga Communications CEO Chris Forgy told investors last month, saying the segment was his company’s second-biggest advertising category during the third quarter.
Cumulus Media CEO Mary Berner said auto was also a top-performing local ad category during third quarter, climbing 10% year-to-year, despite the labor action.
“Thus far, the strikes have mostly negative impacted markets in which factories have been shut down, where both dealers and effective marketers have pulled back spending to avoid alienating local listeners and striking auto workers,” Berner said. She told analysts last month that while they are paying close attention to any negative effects from the strike, Berner says automotive represents a “high margin recovery opportunity” in the long term, given that Q3 spending was still only at 60% of 2019 levels.
Entravision has also made strides recovering auto dollars. CFO Chris Young said automotive returned to its place as the largest ad category for their company, with a third quarter gain of 14% in auto revenue versus a year earlier. That was mainly propelled by regional dealer associations and local dealers – the so-called tier two and tier three.
“Even with the strike, what we've noticed is foreign auto manufacturers are stepping in to take market share,” Young said. “With the weakness on the U.S. auto side with the strike, they're looking to capitalize on a unique situation. That's really what drove auto in the quarter,” he told analysts last week.
Beasley Media Group CFO Mary Tedesco said they had a more modest 1.6% growth rate year-to-year during the third quarter, but told investors the automotive category accounted for nearly nine percent of the company’s total revenue. She said there has been a “spike” in national auto manufacturer spending – the so called “tier one” part of the market – making the category the fourth largest for Beasley during Q3. That was despite what she says has been a slowing of domestic manufacturer dollars.
“This has been partly driven by the current auto strike,” Tedesco said. “We expect continued improvement once the auto strike is resolved.”
Dealer Incentives Keep Climbing
J.D. Power President Thomas King said as inventory and sales volumes improve, the average new-vehicle retail transaction price is declining modestly, trending down $451—or one percent—from October 2022, to $45,651.
Cox Automotive Chief Economist Jonathan Smoke said that the sales pace “faded” at the end of October just as the UAW strikes were ending. “The strikes also changed the expanding incentives trends we had seen earlier in the year,” he said.
Cox Automotive says the average incentive spend from manufacturers declined 1.4% to $2,322, according to Motor Intelligence data. That was the first month with a decline in a year, but even so, incentives were up 118% year over year. Meanwhile, J.D. Power says its numbers show the average incentive spend per vehicle grew 92.2% last month from October 2022 and is currently on track to reach $1,774.
The numbers may be slightly different, but dealer incentive spending has often been a precursor to higher levels of advertising since they suggest dealers will also need to spend more on advertising to motivate sales.