India's carmakers boost ad budgets

22 December 2011

MUMBAI: Indian automakers are increasing their marketing spend, despite signs that sales in the category are falling.

The Economic Times reports that expenditure in the sector is up by around 40% in the present fiscal year, when compared to 2010. Separate figures show that actual sales in the category have declined by 4% over the same period.

Carmakers' need to spend extra on marketing has been boosted by the category's increasingly crowded schedule for product launches.

In the last few months, Renault has unveiled its Fluence sedan and its Koleos SUVs while Tata is promoting its "crossover" Aria range. Elsewhere, Honda Siel has launched its Brio range of small cars, while Toyota Kirloskar is concentrating on its new Etios sedans and small cars.

Looking to the future, around 30 new car launches are also expected in India for 2012.

Anil Nair, chief executive & managing partner at ad agency Law & Kenneth, said the launches had been a crucial factor in raising overall adspend for the category.

"If I am producing 1,000 cars, I need to get them on the road," he told the newspaper. "So auto brands have no other option but to continue spending in marketing and advertising."

Signs of a cooling economy, with ratings agency Moody's predicting this week that annual Indian GDP growth could drop from 8.5% in 2011 to below 7% in 2012, have added to the pressure on car manufacturers.

With consumers less willing to spend tha before, budget allocation has been shifted towards generating short-term sales, rather than long-term brand-building. Much of the extra marketing cash is going towards "tactical spend" – promotions, discounts and free extras – rather than above-the-line ad campaigns.

Shashank Srivastava, chief general manager for marketing at Maruti Suzuki, told the newspaper that the firm's tactical spend, as a proportion of the total marketing budget, has risen from its normal 30-35% to 55% in the current fiscal year.

"When the going is good, one tends to spend more on the brand but when times are difficult one has to resort to discounts, subventions and schemes," Srivastava added.

For a closer look at the Indian car market, Warc subscribers can access this exclusive article.

Data sourced from Economic Times; additional content by Warc staff