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Supply Chain Crisis Makes Auto Firms Ditch Holiday Promos



Santa Holding Christmas Tree | Supply Chain Crisis Makes Auto Firms Ditch Holiday Promos | featured

This holiday season, the ongoing supply chain crisis is causing US automakers to slash their ad and promo spend. Traditionally, automobile companies promoted heavily during the last quarter of the year.

Now, most, if not all companies have no plans to offer deals and discounts. 

RELATED: GM Halts Pickup Production As Chip Shortage Continues

Supply Chain Crisis Leaves Auto Companies With Less Inventory

Factory industry worker working with face mask to prevent Covid-19-Supply Chain Crisis

Industry insiders say that automakers and dealers are on track to reduce their ad and promo spending this year.

The current supply chain crisis is not conducive for dealers to offer the usual promos and discounts during the last two months of the year.

With scarce parts and delays in deliveries, manufacturers can only supply about 33% of the normal inventory for car dealers.

This gives them little to no incentive to spend on glitzy advertisements or launch promotions. Roy Harvey, VP of General Motors’ Cadillac brand, confirmed the move.

“We will not be promoting the holiday season as we have been. Why would you?” He referred to near-empty lots in most dealerships nationwide. Even without promos, these cars would sell out quickly due to supply and demand. 

Less Ad and Promo Spending This Year For Automakers

In 2019, General Motors spent an estimated $106 million on TV commercials for Cadillac. In addition, it spent another $16.4 million on digital ads for the brand.

These figures are according to estimates from analytic firms EDO and Pathmatics. Now, this year’s spending is looking paler compared to 2019. 

Automobile manufacturers and dealers are traditionally big spenders during the holiday season. They spent around $23 million on digital advertising between July to October this year.

The total is about 10% less compared to the same period in 2019. The auto industry also spent 5% less on TV commercials this year compared to 2019 levels. 

Global Supply Chain Crisis Affected Most Industries

Automakers are not the only business affected by the global supply chain crisis. Consumer goods ranging from computers to toys to apparel are in short supply.

Semiconductor shortages are delaying the production of dependent products such as computers, video game consoles, electronics, and cars.

Meanwhile, COVID-19 outbreaks are closing ports and terminals randomly. This led to delays in transporting goods all over the world.

Add the shortage of truck drivers and the rapid rise in fuel prices and you’ve got a global supply chain crisis. 

Kevin Krim, CEO of EDO, said there’s not much to sell. “Winter sales events are such an institutionalized event, that it’s hard not to do them.

But if they do their jobs really well, they could make people unhappy if the cars aren’t there. It is a December to forget for the automakers,” he noted. 

Some Car Companies Proceeding With Holiday Ads, Not Promos

That doesn’t mean all car companies are quietly going about their ways. Ford Motor Co launched their holiday campaign called “Get Holiday Ready,” to promote its F-series pickup and selected SUVs. Lexus also pushed through their annual  “December to Remember” advertising campaign. However, they just promoted the idea of giving a luxury car as a holiday gift. 

Vinay Shahani, Lexus USA VP, said that they had to go with the campaign. “For us to change it dramatically, it's too important to the brand. It's part of our DNA,” he said.

Despite the lower inventory, Lexus' spending will remain “in the ballpark” of past years. However, he cautioned that “certainly you could expect the offers may not be as compelling” as two years ago.

AutoNation Also Thinks of Spending Less Due to Supply Chain Crisis

AutoNation, the country’s largest auto retail chain, said they plan to spend less on advertising and promotions this year. Executive VP Marc Cannon said that while they will still give discount offers, “they will be light all around.” 

Media companies that sell advertising time for national commercials are feeling the hit. Michael Nathanson, an analyst with MoffettNathanson, expects the total numbers to dip.

Total national TV ad spending can decline by 1% year on year in the fourth quarter. Without the numbers to sell, car companies will only need to run fewer ads.

In total, Nathanson expects ads to decline by 7% total compared to 2019. 

Watch the TODAY video reporting that shortages in automobile parts impact consumers, garages, and dealers:

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