Auto industry (except Tesla) spends an average $1,000 per vehicle in advertising

Tesla Model X

Elon Musk has said several times that he rarely thinks about marketing, and that if you build a truly revolutionary product, the marketing will take care of itself. Tesla has followed this philosophy since its founding. It participates in only the largest, most high-profile auto shows, gives access to only a few carefully selected journalists, and does little, if any, advertising.

How does this compare to the gargantuan sums that the legacy automakers spend on ads?

In an email to investors, Global Equities Research Analyst Trip Chowdhry (via Benzinga) revealed the wildly varying amounts spent on ads by several of the world’s major carmakers. According to Chowdhry, the industry average is $1,000 per vehicle sold (in the US market in 2015).

Most of the biggest spenders are luxury brands: Jaguar (owned by Tata) leads the pack, spending $3,325 in advertising per vehicle sold. Lincoln is in second place with $2,550 per unit. Oddly, Fiat/Chrysler is in a close third place, followed by Lexus and Cadillac.

Other highly popular brands spend much less. Near the bottom of the list are Honda and Toyota, which spent $258 and $248, respectively. The stingiest of all is of course Tesla, which Chowdhry says spent a mere $6 per vehicle sold in 2015.

The Benzinga article offers no details of what is considered to be “advertising.” Tesla does put on presentations for vehicle launches and other events, but we are not aware that it has ever purchased any TV, magazine or newspaper ads.

Sadly for the advertising industry, the company nevertheless receives massive amounts of publicity. “$6 of ad spent per vehicle for the product generating more than $8 billion in revenues and more than $14 billion in bookings is unheard of in the industry,” writes Chowdhry.

 

Source: Benzinga
Image: Nathania Johnson – CC BY 2.0

  • Brock Nanson

    I wonder how many of the ‘Tesla will never make a profit’ pundits allow for the advertising cost component that must be carved out of the competition’s profit margin?

  • jstack6

    Tesla also doesn’t spend or pay sales people so no commissions. No dealers with thousands of cars sitting around for months and years. No emissions testing on new models. Plus pre Order money available as they ramp up and start deliveries.
    They also get clean car credits they sell to other dirty car makes. Their new Giga Factory runs on Solar and Wind so no utility cost out power outages. . Not bad for a new USA car company. In fact it’s amazing =D———————————————————

    • Haggy

      They do pay sales people, but they are not on commission. They don’t need to be.Typical customers leave without buying the car and buy it later. They may need to think it over or do some research or look into what it costs to install an outlet in their garage. Since Tesla makes the same money whether customers later buy it on the Web or whether they go back to the store, and since it’s the same price no matter what, there’s no “what do I have to do to sell you a car today?” nonsense. There’s also no need for customers to check other Tesla stores to see if they can get a better price. Even if they are looking for something used, all stores have access to the same inventory and are not in competition with each other. The only reason a customer might need to go to another store is that they can’t see a particular color or listen to a particular sound system or see something else up close before they order it.

      Since the sales person will put the potential buyer into the computer, there will be a record of who went on to buy, so whether the person buys it later on line or in the store, Tesla can still judge the efficacy of its staff.

  • Barry L Alexander

    So for cars that most of us might buy it is 250/car. If they make a profit without subsidies of any sort that would be great.