Auto majors rev up advertising expenditure

Top 5 spent Rs 2,600 cr in FY15, 19% higher than previous year's, following drop in sales

Automobile companies are spending record amounts on advertising and promotional activities, to boost sales.

In the year ended March 2015, the top five companies by revenue — including Maruti Suzuki, Mahindra & Mahindra (M&M) and Hero MotoCorp — spent a combined Rs 2,637 crore to push sales, up 19 per cent from a year before.

All the top five companies spent more on advertising compared to FY14. The bulk of the rise came from the largest respective entities in passenger vehicles and two-wheelers, Maruti Suzuki and Hero MotoCorp.

Ad expenditure as a percentage of revenue went up in FY15 for all the top companies, except Tata Motors. Maruti and M&M spent less than one per cent of their revenue on advertising. M&M’s 0.85 per cent is the lowest among the top five and lower than Maruti’s 0.93 per cent.

Hero MotoCorp and Tata Motors spent more than two per cent of their revenue on ad and promotion activities. Bajaj Auto spent 1.48 per cent of revenue on advertising against Hero MotoCorp’s 2.42 per cent. Hero’s ad spending as a percentage of revenue is the highest among these top five companies.

Passenger vehicle makers had a decline in sales volume in FY14, after several years of growth. This prompted them to spend aggressively on advertising and promotions in FY15. The country’s largest passenger vehicle maker, Maruti Suzuki, spent Rs 464 crore, about a third more than in FY14. The ad spends and an excise cut boost offered by the government helped the company grow domestic volumes by 11 per cent.

A Maruti executive said the ad spending in a particular year depends on launch of new models and refreshed versions, as well as regular brand campaigns. “Companies are adding more models every year and, therefore, more money is being spent on the publicity for new products,” he said.

Going by the launches done this year so far and what companies plan for the rest of the year, the ad spending is certain to rise further. Maruti launched a diesel Celerio, the S-Cross, and will be launching a hybrid Ciaz on Tuesday. It has also earmarked spending for Nexa, the new premium retail dealerships. Companies will also spend money on the Auto Expo in February 2016.

K V Sridhar, chief creative officer of ad agency Sapient Nitro, said clutter was added to the ad space, especially last year, with the result that companies had to spend in newer digital platforms to reach the target audience. “Gone are the days when TV advertisement used to yield the desired result. The efficiency of delivery from traditional media has come down and so, companies need to spend more,” he said.