Automakers and their dealers are faced with a new dilemma as the U.S. enters its second holiday season amid the COVID-19 pandemic: how best to advertise their vehicles when the supply of those vehicles is limited. 

 

Given the challenges of the global supply chain — and the well-documented auto manufacturing plant shutdowns that have taken place this year — there just aren’t as many vehicles for sale as usual. And that leads to questions about how much to encourage demand.

 

The answer, it seems, is to dial things back. A recent report by Reuters found that both manufacturers and local dealerships have decided to reduce the amount of advertising expenditures they’ll make this year.

 

Ad dollars already have been in decline during the pandemic. Analytics firm Pathmatics found that automakers reduced their digital advertising spending by $24 million, about 10%, between late July and the end of October, compared to the same time frame in pre-pandemic 2019. 

 

Another analytics firm, EDO, found that spending on broadcast television commercials during those same months was down $57 million, or 5% compared to 2019.

 

"Winter sales events are such an institutionalized event that it’s hard not to do them," said Kevin Krim, EDO’s chief executive. "But if they do their jobs really well, they could make people unhappy if the cars aren’t there."

 

Simply cutting back on advertising because the showrooms are a bit barren is not the straightforward solution it might seem to be. Data from PureCars shows that dealers that cut back on advertising spending between March and August this year had more of an overall sales drop-off than dealers that changed their advertising messages alongside spending more. PureCars found dealers who decreased the amount spent on advertising 50-89% had an average sales volume drop of 28%. But dealers who increased their ad spending by 9% had a sales drop of just 9%.