Throughout the recession and the Chapter 11 filings that nearly destroyed General Motors Co. (NYSE: GM) and Chrysler, the ad industry lost one of its most important categories. Even Ford Motor Co. (NYSE: F), which barely dodged the courts, pulled back as sales collapsed. Car ads, a staple of every medium from local newspapers to the Super Bowl almost disappeared.
What a difference a couple of years makes. The Sunday New York Times is heavy with cars ads. Manufacturers made up the largest portion, based on category, of Super Bowl ads last year. As a matter of fact, as the glut of ads that accompanied the presidential election year faded, the rise of the car was an essential foundation to hold media sales at the level of stasis.
And the numbers are likely to get better. KKB, one of the industry’s primary research firms, projects that auto sales in the United States will be up 16% in July, compared to the same period last year. That makes over a year and a half of monthly advances. This in turn, has put all three American car companies into the black, despite a near depression in Europe figures. Ford and GM each recently posted earnings above expectations for the second quarter.
Another point of leverage for media that carry car ads is the return of Honda Motor Co. Ltd. (NYSE: HMC) and Toyota Motor Corp. (NYSE: TM), which went through a year of forced absence at the top of the market share chart. First the Japan earthquake, then parts shortages from Southeast Asia, ground their factories to a fraction of capacity.
It was a mystery, and remains one, as to why American have bought cars and light trucks in such large numbers. Unemployment remains relatively high in the United States. Real income is flat, or perhaps down from a decade ago. That leaves low interest rates on car loans and the age of the entire American “fleet” at record levels. It may be that buying a new car is less expensive than repairing one that is eight to nine years old.
The renaissance of car advertising is likely to continue, as there is no end in sight to the improvement in sales.
And perhaps, the rise in ad dollars may be enough to sustain many media until the mid-term elections.