Weird Correlations 101: As primary season gears up, car sales downshift
Campaign ads squeeze out their ads, costing them sales “There has always been tension in the past”
With the presidential primaries less than a month away, one constituency is dreading the coming barrage of political advertising more than any other: auto dealers. In swing states, campaign ads can soak up a third or more of local broadcast television advertising time, crowding out car dealerships, typically the biggest buyers of local TV ad time. That’s had a measurable effect on auto sales in political battlegrounds.
Yearly auto sales have fallen only twice during presidential election years since Lyndon Johnson beat Barry Goldwater in 1964, according to Edmunds.com. But Ken Goldstein, a Bloomberg Politics analyst and politics professor at the University of San Francisco, and Carly Urban, an economics professor at Montana State University, say that when political ads displaced car ads, auto sales weren’t as good as they might have been.
Nationally, the rate of new-auto sales slowed by 1.5 percent just before the last presidential election—but by three times as much in markets such as Cleveland and Las Vegas that had the most political ads, according to an analysis of data from market-research firms Kantar and Kelley Blue Book. In Cleveland, the number of car ads that ran on local broadcast stations in October 2012 dropped 16 percent, to 4,553, from the previous year, while the number of political ads soared to more than 27,000. Car and light truck sales rose just 5 percent in the greater Cleveland metro area, while national sales gained 16 percent, according to Kelley Blue Book. “Ohio was carpet-bombed with political TV ads in the months before the 2012 election,” says Bernie Moreno, who runs the Collection Auto Group, a chain of car dealerships around Cleveland. “We were not able to get our message out as effectively.”
Auto dealers spent $8.1 billion on advertising in all of 2014, with the average dealer allotting $114,145 to TV spots, according to the National Automobile Dealers Association. During the 2016 election season, Kantar’s Campaign Media Analysis Group predicts, local television stations may get more than $3 billion in political ad spending.
Candidates and super PACs have already pumped an estimated $112 million-plus into local broadcast television advertising, buying more than 113,800 ads, mostly in Iowa and New Hampshire. By law, political campaigns are guaranteed the lowest rates for airtime, based on prices offered a year earlier. Super PACs, which this year will outspend candidates, pay market rates, and are often willing to pay a substantial premium to book airtime at the last minute.
In 2012, according to Goldstein and Urban, in weeks when political ads made up less than 2 percent of local broadcast spots, local dealerships bought about 14 percent of airtime devoted to ads. When political ads spiked above 30 percent of available ad time, auto ads’ share fell to 6 percent. “There has always been tension in the past, especially in markets where the political contests are the hottest,” says Kip Cassino, an analyst with Borrell Associates, a Virginia-based company that tracks media trends.
This year, dealers are trying to maintain momentum after selling a record 17.5 million new cars and light trucks in the U.S. in 2015. Analysts predict 2016 growth will be slower. “When you talk about looking at 2016 as one that’s following a record year, obviously it’s not too difficult for us to see the market contract,” says Alec Gutierrez, an analyst for Kelley Blue Book.
TV executives usually bend over backward in advance of the election season to make sure dealers are taken care of, according to Steve Lanzano, head of TVB, a trade association for broadcasters. “The stations are very good about trying to be accommodating to the advertisers that are with them 365 days of a year, vs. those with them four to six weeks, maybe, every other year,” he says. But the uptick in super PAC spending expected this year may make it harder for stations to honor time promised to loyal clients. Moreno, the Cleveland-area dealer, isn’t taking any chances. He’s shifted most of his ad budget to digital and plans to “only spend a very small part of our budget on TV.”
The bottom line An analysis of 2012 ad data shows auto dealers lost sales when their ads were elbowed out by campaign commercials.