• by Jack Loechner , Staff Writer @mp_research, July 29, 2011

According to an Insights Brief from Jon Swallen, SVP Research, Kantar Media, automotive advertising, which has been at the forefront of the recovery in ad spending, has slowed sharply during the second quarter. After a 20% jump in category spending for 2010 and a 23% increase during Q1 2011, growth rates are now pacing at one-fourth to one-half these prior levels according to preliminary data from April-May.

While that is still strong performance, auto's importance to the media advertising economy which accounted for more than 11% of all measured ad spending in Q1, means that any significant change in rate of spending has far reaching impact on media sellers.

Change in Automotive Ad Spending vs. Previous Year
	Percent Change
Media	Q1 2011	April 2011	May 2011
Total	23%	6.7%	na
National TV	37.2	6.6	na
Spot TV	3.4	1.6	na
Newspapers	12.2	6.9	6.5
Magazines	31.3	12.8	-8.4
Internet display	41.9	18.4	na
Radio	22.2	9.6	na
Outdoor	34.1	-2.3	na
Source: Kantar Media, July 2011

TV typically accounts for 50-60% of auto category spending. Although TV expenditure information is not yet available for May, full data on the volume of ad time aired by auto marketers points to a slowing pace:           

Percent Change in TV Automotive Advertising vs. Previous Year
	Percent Change
Media	Q1 2011	April 2011	May 2011
National TV	34.0%	1.3	9.7
Spot TV	11.6	7.0	0.8
Source: Kantar Media, July 2011

This advertising slowdown is partially explained by the March earthquake and tsunami that struck Japan. It led to U.S. inventory shortages for major Japanese automakers, most notably Toyota, because of reduced manufacturing capacity at damaged plants and disrupted supply chains. With a dwindling number of vehicles on dealer's lots, April media spending for Toyota was cut across all tiers, including factory, dealer associations and local dealerships:

Toyota Automotive Ad Spending vs. Previous Year
	Percent Change
Media	Q1 2011	April 2011
Factory	30.3%	-13.9%
Dealer association	13.3	-21.6
Local dealers	19.9	-2.8
Source: Kantar Media, July 2011

In the immediate aftermath of the Japanese earthquake, non-Asian automakers with significant exposure to Japanese parts suppliers also had to assess the impact on their own vehicle production. It seems probable that these manufacturers scaled back advertising budgets until they had a handle on production capacity and maintaining deliveries to their dealers.

The ad expenditures stats for April give credence to this hypothesis. Factory industry spending was up just 0.9% versus last year as compared to 24.2% growth in Q1. By contrast, spending from local dealers, focused on building customer store traffic, surged 25.9% in April, a pace similar to Q1.

Advertising aside, May was also notable for a sudden drop in the rate of new vehicle sales:

Percent Change in U.S. Light Vehicle Sales
Month (2011)	Change (M/M)
Jan	+17.2%
Feb	27.2
Mar	16.8
Apr	17.7
May	-3.9
Source: Ward's AutoInfoBank/KantarMedia, July 2011

Swallen concludes that, "... as much as anything else, the current pace of auto advertising may be a reflection that the sales climate is a bit cooler right now and ad budgets are being scaled back to reflect near-term sales potential... "

For more of the study, and access to the PDF file, please visit Kantar Media here.