There’s good news for radio companies struggling from the dramatic loss of automotive ad dollars: local ad spend in the category will increase from 2022 this year yet still trail pre-pandemic 2019 spending. For 2023, BIA is forecasting total automotive local ad spend will grow 4.9% over 2022 levels. The caveat is that the media financial advisory firm expects most of that increase to occur in the latter half of the year.
Here’s how BIA breaks out the numbers for what was once radio’s biggest ad category: In pre-pandemic 2019, automotive local ad spend was forecast at $16.9 billion. In 2023, it is projected to come in at $12.2 billion. While that’s up compared to 2022 levels, it’s still nearly 28% below pre-pandemic levels.
A bounce back to 2019 levels isn’t in the cards for the foreseeable future, BIA says. Its forecast through 2027 shows automotive ad spending growing at a compound annual growth rate (CAGR) of 3.7% between 2022 and 2027. That means the growth will average 3.7% per year over the period, although some years will be higher or lower than others. “Even by 2027, the end of our forecast period, we are forecasting total automotive local ad spend to still be down from pre-pandemic levels,” BIA says.
The backdrop is auto inventory that’s finally getting back to normal, and dealerships finally having cars to sell. “Now that the supply problem is abating, demand is becoming a problem for very real reasons,” BIA says in its freshly issued Automotive Vertical Local Ad Report. “Interest rates are quite high, making financing a large purchase more expensive. Also, costs for necessities like food and housing are all up, while the media keeps talking about a possible recession. All of this is most likely combining to make many consumers wave off the purchase of a new vehicle a little longer.”
Nine of the 17 media channels in BIA’s forecast are on track to grow in 2023, including TV Digital, OTT, and Radio Digital. Over-the-air TV is expected to remain essentially flat from 2022 levels, while over-the-air radio is expected to be down 2.1%.
The news isn’t all bad, however. BIA’s Automotive vertical is made up of eight sub-verticals and some of these sub-verticals are bouncing back faster, such as Tires, Auto Parts & Accessories Stores; Auto Repair; and Tier 3 – Used Car Dealers. “None of these auto sub-verticals felt the pinch of the supply chain issues like Tier 1 and 2 or new car dealers so their local ad spend is continuing to show growth,” BIA says.
What’s it all mean for local sellers? Since the growth BIA is forecasting is primarily coming from digital media channels, it urges local sales teams to prioritize media with the most aggressive growth – TV digital, radio digital, and OTT (over-the-top TV). The report also offers these tips for local sellers: digital advertising is going to mobile search and video so help dealerships build a strategic plan to convert buyers who shop on mobile.
Watch a one-minute video summarizing BIA’s top automotive findings HERE.