In-depth: Auto sales falling but adex may not be affected in short term, feel experts

Falling auto sales may put the growth of India's overall advertising expenditure (adex) in the slow lane in the long term, experts have warned. The category, which is the second-largest contributor to India's total adex, may hamper the country's long-term advertising spend growth projections if auto sales don't see a major uptick in the coming months, the experts say.

India's top car manufacturer Maruti Suzuki had recently said traffic congestion on roads and high fuel prices were leading to falling car sales.

“Auto adex may not grow at the previous rate,” said H Vishwanath, Managing Partner, MediaCom. The auto segment spends around 42% of its total adex on print, whereas TV gets around 32%.

Until October, the auto segment in India was posting a near 15-20% growth on an average. But the ongoing festive season hasn’t been particularly good for the auto industry. Festive season is big for all businesses in the country with many categories netting about 15% of their revenues from September to January. The automobile industry is no different. But this festive season saw the category registering an 11% dip in sales.

Vishwanath feels that the rising fuel prices, lack of big festive season offers and the lingering effects of the Kerala floods are some of the reasons contributing to the falling auto sales.

Hariharan Vishwanath

“Rising fuel price is one of the major reasons for the dip in auto sales. Other factors that must have contributed to the decline are the repercussions of the Kerala floods. Take Maruti, for example. Maruti is the market leader in the category with around 50% market share and Kerala is among their top 3-4 markets. And despite being a small state it is a big market for luxury cars,” said Vishwanath.

Another reason for the dip in sales, according to Ashish Bhasin, Chairman and CEO, South Asia, Dentsu Aegis Network, is the fact that the market is volatile and sometimes some months fare better for a category than the others.

No alarm bells yet

But as far as advertising spend is concerned, it still isn't a case for worry in the short term. In 2018, the category is likely to contribute more than Rs 6,500 crore to India's total adex of Rs 69,000 crore.

Ashish Bhasin

“It is true that some months will be better for a category and some will not fare very well. What people are not taking into account here is the fact that last year Diwali was in October and this year it was in November. But if you compare it on the basis of a 12-month period, the category is showing robust growth and India is one of the few markets in the world where the category has been doing consistently well,” said Bhasin.

Both Bhasin and Vishwanath feel that there is not going to be any major impact on adex in the short term.

“Auto, just like FMCG, is one of the steady categories when it comes to advertising. In fact, over the past two-three years, the auto industry has seen fantastic growth in the country; this is applicable to both two-wheelers and four-wheelers. Auto is likely to continue to be a bellwether kind of a category for advertising. There are aberrations and statistics vary and depend on a lot of factors,” said Bhasin.

Bhasin also said that he doesn't see sales not growing in the long term too. “The way to look at this will be to look at it from the lens of a long-term trend and the long-term trend looks very promising right now,” said Bhasin.

While Vishwanath agrees that ad spends might slow down a little, he is positive that the growth trajectory will recover in a few months.

“India is a large country and there is a lot of headroom for auto brands to grow in the country,” said Vishwanath.

Vishwanath also added that brands might start looking more towards digital given the circumstances.

“Print will continue to hold out as the largest medium for auto as a category, followed by TV. But digital will also start playing a huge role because marketers will start using digital to drive awareness and generate leads,” said Vishwanath.

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