Have U.S. Auto Sales Peaked? What's Next?

Auto sales have made a huge comeback since they reached a 27-year low in 2009, a year in which more vehicles were scrapped (14 million) in the U.S. than sold, meaning the car park actually shrunk for the first time in decades. To complete a six-year growth streak, U.S. new vehicle sales set an all-time record in 2015 at 17.5 million units, surpassing the previous high in 2000 of 17.4 million, and many industry experts believe this is the natural level for the United States.

Although the U.S. population is growing, meaning more potential new drivers will be on the road, many are waiting to get their license or don’t drive at all. According to the University of Michigan Transportation Research Institute, in 2014, only 24.5% of 16 year olds obtained a license, down from 46.2% in 1983. The continued rise of public and shared transportation, and ride-share services such as Uber and Lyft, have also fractured the long-held American dream of vehicle ownership. Greatly improved vehicle quality has also kept the average vehicle on the road now at a record 11.5 years, extending the interval of vehicle transactions. With these seismic changes, how will the auto industry respond?



The strategy a decade ago of heavy incentives to artificially inflate sales, although tempting, is not a sustainable business strategy. For automakers that want to remain on top in an increasingly competitive market, they will need to aggressively adapt to the undeniable shift of combining new and innovative products with digital-first strategies.

Automaker spending on TV advertisements is expected to drop below one-third of total media ad spend by 2020, according to eMarketer. This dip can be partially attributed to live television viewership going down 7% in the past two years, DVR (time-shifted viewership) remaining flat, and digital video consumption increasing over 70%, according to a recent Nielsen study. TV is still a powerful medium, but even the traditional dominance of franchises like the NFL are showing that they are not immune from changing consumer behavior, as their ratings were down 11% during the first six weeks of the season when compared to last year. Automakers have historically been stalwarts for network and cable television gobbling up prime spots in major primetime programming, but with more than 90% of new vehicle purchases starting with internet research, the auto buyer origination point is clearly online. Mobile adoption and mobile video consumption has been a key driver in this consumer behavior shift, and some auto marketers are now responding with digital first strategies.

Progressive automakers who continue to grow sales and market share in a flat U.S. market, are moving beyond the traditional roles of spot TV and website retargeting to harness the true power of digital and data. Leveraging your own customer data is one key step, which can enable a smarter and more proactive marketing strategy. By accessing first party data on known customers, auto marketers can target consumers across all of their devices and deliver relevant messaging and manage frequency, no matter how early or far along they are in the purchase process. Once a consumer purchases, they can further calibrate their ad budget by removing them from the targeted pool and diverting money to new in-market shoppers. They can now also tie the success of their campaigns directly with an individual's purchase. This same deterministic approach can be pursued on conquesting and expanding your customer base. 

Despite the fact that television has massive scale, attribution and accurate measurement of return on ad spend (ROAS) are still challenges. But leveraging digital channels, and better integrating television and digital strategies, means better measurement. Auto marketers struggle to determine if someone who saw their TV ad came to the dealership or purchased a vehicle, but a people-based approach in digital make that a reality today and bring all the channels together in a meaningful way.

The automakers that are able to embrace new approaches, and see digital as a complement to their TV strategies, will have a leg-up on the competition. Although auto marketers may be in a peak market and are facing new challenges in the sales cycle, the consumer shift toward digital and the people-based approaches available make this cycle more of an opportunity than a struggle.

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