Auto dealers may be poised to spend more on advertising this year if the trendlines for car sales are any indication. The National Automobile Dealers Association (NADA) says first quarter was “extremely strong” for automotive sales, led by the second-best March of all time. Based on first quarter sales figures, NADA says dealers are pacing to sell 16.8 million units this year. And if the March sales numbers hold, sales could be as much as 17.75 million units. When the dust settles, NADA Chief Economist Patrick Manzi thinks the final tally will be around 16.3 million.
Federal stimulus dollars have helped, and Manzi says some demand could be pent up from last year when closed manufacturing facilities and chip shortages meant it was hard to get some vehicle models. That remains a factor in 2021, too as some plants have had to slow production because they have not been able to get the parts needed. Even with shortages of chips and the resin used in many auto parts, NADA forecasts North American vehicle production is expected to total 15.8 million units in 2021.
“We expect that production shortages will continue to impact new-vehicle sales for at least the second quarter and likely spill over into the third quarter,” said Manzi. “The longer these production disruptions linger, the longer it will take for automakers to rebuild inventories to levels necessary to meet demand.” If sales remain strong in April without a significant boost of inventory, a decline in sales by late in the second quarter is expected, due to low inventory levels warned the trade group.
Yet with demand strong, car dealers have been offering fewer incentives to lure buyers. That is a factor that could mean less marketing. NADA says the average incentive spending per unit totaled $3,452, a decrease of $963 compared to March 2020 and $336 versus March 2019.
NADA sees a variety of factors across the economy working in car dealers’ favor, including economic growth, declining unemployment, and rising vaccination levels. There are also more people returning to the office while a pent-up demand for travel – some of it by car – will work in automakers’ favor.
“The economy continues to show strong signs of recovery from the coronavirus pandemic,” said Manzi. “The widespread dissemination of the COVID-19 vaccine and the stellar new light-vehicle sales in March are reasons to be optimistic for the remainder of 2021.”
Broadcasters targeting Black drivers have the best odds to see more ad dollars, at least from General Motors. The automaker says it has doubled ad spending on Black-owned media to two percent in 2021. It aims to double that to four percent by 2022 and eight percent by 2025. Among the broadcasters GM said it is buying are Urban One and American Urban Radio Networks.
Some radio groups have said in recent months that while auto dealer spending has not recovered from the hit taken during the pandemic, auto service and parts have been healthier segments in terms of advertising.
In the week of March 29-April 4, Media Monitors said AutoZone ran 19,063 ads on radio stations it tracks, NAPA aired 17,545 spots, and O’Rielly Auto Parts ran 15,983 radio ads.