The Weekend Mumbo: Big spend, big sales for the automotive industry
Welcome to the Weekend Mumbo.
Against advice, after a massive night at the Mumbrella Awards and having not started this until Friday morning, I’m going to look at some data.
But it’s good data. It’s data that goes some way to proving what we all like to reinforce. Spend on marketing, gain in sales.
Hi Damian,
There is not a direct link or correlation between Ad spend and new vehicle sales as the SMI and then VFACT numbers suggest.
The basis issue is here is that the numbers have basically caught up with the lag effect of COVID.
Car manufacturers were caught out by the lack of supply of parts such as computer chips and screens coming from China for example and wiring looms (circuitry) come from Ukraine and Eastern Europe, which has obviously been impacted by the war in Ukraine. This is exactly what drove the values of used cars as Dealers could not access new stock.
Furthermore, manufacturing plants were impacted differently by the pandemic and global output was reduced to each manufacturer (brand) but also varied through country x country as the COVID health policies varied by country.
Global distribution (freight and shipping) capacity was also impacted by the pandemic and were Customs Laws requiring additional cleaning of vehicles arriving through Australian seaports.
As the global parts supply issues were resolved and manufacturer capacity increased, the backlog of new vehicles have started to flow through. As Australia is a relatively small import market and we are right hand drive vehicles, we have not been a priority market for early supply. Wait lists varied by model also – Toyota Yaris, RAV4 Suzuki Jimny and Ford Ranger topped the charts at close to 2 years in some instances!.
Whilst you were lucky and added a new car to you garage, many of the new sales orders were not delivered for the above reasons.
VFACTS reports a new vehicle sale upon registration. Whilst the car can be purchased in January, waits can be 12 months (post COVID) and the sale (registration) can be December for example.
The reported SMI Automotive category Ad Spend needs a bit of an asterix. Again, because of supply issues manufacturers were unable to get access to stock and have delayed new models which have come through under a lag. This underscores the sudden surge in category ad-spend and the actual new car sales figures (registrations), rather than a correlation between reported Ad spend and new sales.
What is interesting especially post COVID, is the emerging Agency model of new car retailing. Increasingly, manufacturers are taking control of the end to end manufacturing through retail process. This means, cars are ordered on customer spec and by individual order or where limited inventory is released.
This means flat pricing exactly like an Apple Store or McDonalds and the room to haggle at Dealership is fundamentally eroded and supports a move to online purchases where the dealership serves as a physical display and collection point in the sales process. The stock of Mercedes Benz cars is actually owned by a Chinese intermediary and they own the floor stock.