Germany’s auto industry is central to the economy of the country and the region. But because of macroeconomic trends—like the volatility of the US-China trade negotiations and US President Donald Trump’s mixed trade signals on German cars—the automotive sector in Germany is underspending on ads compared with other industries. The medium-term prognosis remains uncertain.
The automotive industry in Germany will spend more than €1 billion ($1.18 billion) on advertising for the first time in 2019, a 9.6% increase from 2018. Ad spend growth will continue to decrease next year (8.7%) to €1.1 billion ($1.3 billion). Auto continues to make up more than 14% of Germany’s digital ad market, but this share has been inching down each year since 2016, when we began breaking out this number.
Car parts and vehicles are Germany’s biggest exports by an enormous margin, according to MIT’s Observatory of Economic Complexity. However, the auto market is showing weakness in 2019, and in the short term, we expect the industry’s sales and profits will be some of the most affected. For one thing, the auto market is especially susceptible to macroeconomic trends. Also, cars are major investments for most consumers, and sales suffer if potential buyers feel generally uncertain or pessimistic. Even though consumers in Germany are relatively confident, consumer sentiment in other parts of Europe, where many German cars are sold, is less optimistic. Signs of a possible recession in Germany in Q3 2019 will also weigh on the automotive sector.
We estimate that the German auto industry’s digital ad spend grew 11.4% in 2018, while total ad spend was up 11.6%. In other words, automotive was one of the highest-spending industries, but it underperformed the total market with respect to growth. We believe similar conditions will prevail in 2019, leaving digital ad budgets for auto companies flat compared with 2018.
Automotive brands have always spent more on ads destined for larger screens, including TV as well as desktops and laptops, because it’s important to convey vehicles’ interior and exterior details. So it’s no surprise that in 2016, for example, desktop/laptop formats accounted for more than 61% of all digital ad spending by auto brands. In 2019, though, auto ads on desktops and laptops will claim just 47.3% of digital ad spending by those brands. At the same time, auto industry spending on desktop/laptop ads will continue to rise, in absolute terms, and as a share of all spending on desktop/laptop ads.
Clearly a sizable chunk of the auto industry’s spending on digital ads is now moving to mobile. We estimate that mobile devices accounted for just more than half of total automotive digital ad spending in 2018; this year that share is expected to be 52.7%. Annual growth in auto brands’ mobile ad spending in Germany was 25.2% in 2018, but will be about half that (13.4%) this year. Double-digit growth will continue through 2020, pushing mobile spending to an estimated $726.1 million.
In terms of all mobile ad spending in Germany, though, the share attributable to auto brands is actually falling, due to comparatively greater increases in mobile ad outlays by other industries like financial services, healthcare and pharmaceuticals.
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