a4 Advertising: Strategic Ad Buys Can Benefit Auto Brands in the Chip Shortage

By Optimum Media InSites Archives
Cover image for  article: a4 Advertising: Strategic Ad Buys Can Benefit Auto Brands in the Chip Shortage

Most ad sales reps are keenly aware that the automotive industry, one of media's largest revenue categories, has taken a hit in the last two quarters due to the impact of supply chain problems. a4 Advertising sees the challenge as an opportunity to help local car dealers continue their media buys in the current environment.

That's according to Michael Bartoli, Senior Vice President for local sales at a4 Advertising, the local and national ad sales team owned by Altice USA, the nation's fourth-largest cable operation.

At first blush, those opportunities might not seem apparent when considering what the auto industry is up against. Autos have been hurt more than any other industry. Hyundai, for instance, said earlier this month that it expected sales growth to slow down for the rest of 2021 "amid adverse business conditions caused by the unstable supply of semiconductor chips." General Motors saw slowdowns and downtime at eight plants in the U.S., Canada and Mexico.

AlixPartners estimates the semiconductor chip shortage will cost the international auto industry $210 billion this year, double the $110 billion it projected back in May. It's a big shock to the system, and it also affects auto advertising.

"The future is very uncertain," said Bartoli. "Some are saying the shortage will end in the first or second quarter of 2022, but others see it lasting into 2023. On top of the unavailable parts, there's a shortage of truck drivers and crane operators to unload cargo at the ports. There's a huge backlog of orders, and automakers are competing with other industries -- such as appliances and phones -- for the chips. When the cars are built, we're likely to see a surplus of 2021 models on the market. There will be pent-up demand, and we should also see the incentives come out again, starting with the domestic brands."

The crisis has also affected used cars, which have soared in value. According to Forbes, wholesale used-vehicle prices in August 2021 averaged $14,712. That was up 3.2% compared to July, and up a huge 9% compared to August 2020. "The downside is it's hard for dealers to find inventory to buy," Bartoli said. "They're reaching out to consumers and offering to come by with a flatbed."

Still, there are opportunities amidst the difficulties. "Brand loyalty is being challenged, because some popular models are just not available." Bartoli said. "Automakers with vehicles to sell can increase their market share, and dealers can win some new customers if they talk about the value of their product. Consumers can be brought over from a brand they rewarded with long-term loyalty. We're starting to see some of that."

An example of this would be truck owners who've routinely traded in their Ford F-150 (the most popular vehicle in America for many years) or Chevrolet Silverado for another model. These buyers may never have considered a Toyota Tundra or Nissan Titan, but once behind the wheel of these models -- which are built to please American truck buyers -- they may form new loyalties.

New shipments of vehicles are arriving at dealerships 80% to 90% sold already, so inventory is scarce, and in some cases dramatically marked up over the sticker price. Bartoli shared that some dealers have switched their creative to push lucrative service departments, which are now offering amenities such as free wi-fi, espresso machines and play areas for the kids.

A major perk for some owners is concierge pickup and drop-off for vehicles getting serviced. "Dealerships need to keep their brand in front of the public for name recognition, even in the absence of full lots," Bartoli asserted.

Inevitably, there has been some decrease in auto advertising across the spectrum, Bartoli shared. In 2018, Statista said, $14.28 billion was spent on auto ads in the U.S., making it the second-largest category behind only retail ($17.81 billion).

"We are close to our dealers and are having a lot of conversations with them," Bartoli said. "We're helping them come back."

As a solution, a4 Advertising is focused on offering them advanced targeting multi-screen advertising opportunities. With Altice USA as a parent company, a4 is able to gather huge amounts of data (with privacy maintained) on what consumers are viewing on TV and it can continue to target them on their digital devices, as well.

"It means that if an auto dealer is targeting an upscale brand, they will want an upscale audience," said Bartoli. "We find, for example, households that make over $200,000 per year, identify their viewing patterns and use other data sets to determine how much time they have left on their lease. The advertisers end up reaching exactly the viewers they need. At a4 Advertising, our goal is to be a partner with our local advertisers, continuously finding solutions to drive business even in challenging times like the auto category is currently facing."

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