WASHINGTON (Bloomberg) -- As what promises to be the most expensive presidential election in U.S. history heats up, one constituency is dreading the coming barrage of political advertising perhaps more than any other: car dealers.
In some battleground markets, a presidential race can soak up a third or more of local broadcast television advertising time, crowding out auto dealers, who are typically the biggest buyers of local TV ad time, according to a Bloomberg analysis. That shift, according to the analysis of data from Kantar Media Intelligence, CMAG and Kelley Blue Book, can hurt sales.
Take Cleveland, for example, a major battleground in the 2012 campaign. The number of car ads that ran on local broadcast stations in October 2012, the final month of the race, fell to 4,553, a 16 percent drop compared to the same month a year earlier, while the number of political ads soared to more than 27,000 that month alone, according to the analysis. Actual car and light truck sales rose just 5 percent even as the nation rose 16 percent, according to data from Kelley Blue Book.
The flood of political commercials on broadcast TV in 2012, which bumped car ads off the air in local markets across the U.S., may have slowed the rise of new auto sales on average by 1 percent in September 2012 and 1.5 percent in October 2012 and could have been three times as much in the most intensely targeted political markets, according to the analysis, which was conducted by Ken Goldstein, a professor at University of San Francisco and an analyst for Bloomberg Politics, and Carly Urban, an economics professor at Montana State University.
"We relied heavily on TV during that cycle and Ohio was carpet bombed with political TV ads in the months before the 2012 election," said Bernie Moreno, who runs The Collection Auto Group, a chain of car dealerships in the Cleveland area. "We were not able to get our message out as effectively,"
The race for the White House has already pumped more than an estimated $98 million into local broadcast television advertising, according to data from CMAG, adding up to more than 95,000 ads mostly in Iowa and New Hampshire, which kick-off the presidential nominating process next month.
During this election season, CMAG estimates that local stations may get $3.6 billion in political ad spending, a 12.5 percent increase compared to four years ago.
The tension comes as auto dealers try to maintain momentum from a record 17.5 million deliveries of new car and light trucks in the U.S. in 2015, a 5.7 percent gain from the previous year, according to the Automotive News data center.
Analysts already say 2016 sales growth will slow and could be more susceptible to outside forces. Sales may rise 3.4 percent to 18.1 million this year, according to Edmunds, while Kelley Blue Book says sales may range from 17.5 million to 18 million.
"When you talk about looking at 2016 as one that's following a record year, obviously it's not too difficult for us to see the market contract," Alec Gutierrez, an analyst for Kelley Blue Book, said. "Depending upon on what economic conditions look like around the election this year, there certainly could be a little bit more of an impact this year than we've seen in the past."
Balancing the needs of political campaigns and long-time clients like auto dealerships is a delicate act for stations. In 2014, auto dealers spent $8.1 billion on advertising with the average dealer allotting $114,145 to TV spots, according to the National Automobile Dealers Association. That ranks them among the most important clients for local stations.
TV executives bend over backwards in advance of the election season to make sure they're taken care of, according to Steve Lanzano, head of TVB, a trade association for broadcasters that includes almost 700 TV stations. The rise of digital advertising has already been eating into TV stations' profits.
"If those clients come back, that's fine," said Goldstein. "If those clients desert or are pushed out of TV during the political year and then don’t come back then these TV stations get the short-term benefit of political dollars but might lose the huge long-term benefit of what's traditionally been their biggest advertisers -- local auto dealers."
Few battleground states
Lanzano is skeptical about the effect political ads have on national auto sales, noting there are really only a few battle ground states saturated with political ads for the presidential race. Annual autos sales have fallen only twice during presidential election years since Lyndon Johnson beat Barry Goldwater in 1964, according to Edmunds.
"I've never seen a direct correlation between auto sales and political years," Lanzano said. "The stations are very good about trying to be accommodating to the advertisers that are with them 365 days of a year versus those with them four to six weeks, maybe, every other year."
Local TV stations love election years and the money that flows in from campaigns desperate to reach their viewers, especially from outside political groups that have deep pockets. Unlike candidates, those groups aren't guaranteed the lowest rates available. The flood of ads and the last minute nature of their buys, often mean that those super-PACs are paying substantially more.
"We have a year of political advertising that looks like it's shaping up to be pretty phenomenal," Les Moonves, chief executive officer of CBS Corp. said last month at a conference held by UBS. "We love having all 16 Republican candidates throwing crap at each other, it's great. The more they spend, the better it is for us."
During 2012, in weeks when political spots accounted for less than 2 percent of local broadcast television ads, autos had about 14 percent of the ad share, according to Goldstein. When political ads spiked past 30 percent of the time, autos fell to 6 percent. The only thing to hold about constant was the amount of time stations dedicated to promoting their own programing.
"There has always been tension in the past, especially in markets where the political contests are the hottest," Kip Cassino, an analyst with Borrell Associates, a firm that tracks media trends, said in an e-mail.
But the era of stations promising so-called make-goods to auto dealers for being bumped from their slots may be running into trouble. He forecasts more dealers will move a greater share of their TV budgets toward spending on cable and digital platforms. "In this one, advertisers have a choice," Cassino said.
Moreno, the Cleveland-area dealer, has been early adopter, moving more money into digital advertising prior to this year. It's a decision that's being reaffirmed as he looks ahead to another year of non-stop political ads in Ohio, he said.
"This cycle, we are expecting the exact same situation, except we don't see an issue" for sales, Moreno said in an e-mail. "We have completed almost a complete transition to digital and only spend a very small part of our budget on TV."
Aside from the ad time, the mood around politics can also damp customers' willingness to buy a car, said David Metter, president of AutoHook, a division of auto consultancy Urban Science, and former chief marketing officer for a dealership group in the Washington D.C. area.
"You sense it in the showroom traffic at the dealership level and even in the conversations, when those consumers do come in, the majority of it is around that political atmosphere," Metter said. "As a car dealer, I was happy once an election was over."