Skyrocketing Jeep in the right place at the right time

The Cherokee, Wrangler and Compass had their best months ever in May.
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DETROIT -- Blake Helfman could tell that May was going to be a killer month for Jeep at his Houston dealership when customers started putting their names on SUVs that were still on the delivery truck on his lot.

"Our turn rate is so fast on Jeep," said Helfman, new-vehicle sales manager at Helfman River Oaks Chrysler-Jeep-Dodge-Ram. His hunch was right. He sold 221 Jeeps in May, a monthly record for the dealership.

Jeep -- which never before in its 73-year history topped 60,000 U.S. sales in a month -- scored a record 70,203 in May. It bested Kia, nearly beat Hyundai, doubled Volkswagen and tripled Buick. Jeep did so with almost no consumer cash and only modest financing and lease subsidies.

So why Jeep, and why now?

"All of the major growth in the marketplace seems to be isolated in the CUV and SUV segments," says Alec Gutierrez, senior analyst for Kelley Blue Book. "Considering that with Jeep, that's their entire portfolio, they seem to be benefiting more than anybody else."

No brand has gained more market share in the United States since 2010 than Jeep. And the brand has accomplished the feat with modest fleet sales, Gutierrez says.

Don Lee, president of Lee Auto Malls, which operates two Chrysler-Jeep-Dodge-Ram stores in Maine, said Jeep's remarkable growth streak has been driven primarily by the addition last year of the 2014 Cherokee mid-sized SUV. It replaced the lackluster Liberty.

The Cherokee, Wrangler and Compass had their best months ever in May.

"The new Cherokee is bringing a new buyer into our showroom that we haven't seen," Lee said. "They're a younger buyer than we would typically see on a Jeep; younger than the Liberty buyer."

In May, Lee had his best new-vehicle month at his Chrysler stores since 2005, thanks to strong Jeep sales.

"We're seeing previous import owners, more Hondas and Toyotas, coming in trade. The new style of the Cherokee is so dramatically different than previous Jeeps have been that it's more appealing to the younger buyer as well," Lee said.

Younger buyer


Jeep brand head Mike Manley said last week that the average age of Jeep buyers has dropped nearly two full years in the past year. He declined to reveal precise numbers.

Meanwhile, in a survey released last week by ALG, the analytics division of TrueCar, millennials who had purchased a vehicle placed Jeep third in perceived quality among all automotive brands, behind only Honda and Toyota. ALG defines millennials as those people born between 1979 and 1994.

Among all respondents, Jeep was the highest-ranking Chrysler Group brand for perceived quality and was above the industry average.

"I think what Jeep has done is given the consumer the best bang for the buck right now," Helfman explains.

"We're conquesting buyers from higher-end vehicles. I'm getting trade-ins from Mercedes, BMW, Range Rover, Lexus-type vehicles because people come in and typically, they leave with a similar quality vehicle at a much, much lower payment."

For instance, the Jeep Grand Cherokee's sticker starts at $30,390 while the Mercedes M class starts at $48,715. Both prices include destination charges.

The luxury trade-ins are lucrative sales opportunities, so the rise of Jeep is turbocharging used sales for Jeep dealers, too.

To show how far Jeep has traveled, consider July 2006, the last time the seasonally adjusted annual rates of sales in the United States reached May's 16.8 million.

In July 2006, Jeep sold 35,831 vehicles in the United States -- a little more than half of what it sold last month. In July 2006, Jeep's market share in the United States was 2.4 percent. Last month, it was 4.4 percent.

Manley said the brand is limiting fleet sales and constraining overseas sales to make sure U.S. dealers have sufficient inventory.

Manley, 50, has headed Jeep since 2009 and Chrysler's international sales since 2007. A manager at several dealerships in England earlier in his career, Manley is one of CEO Sergio Marchionne's top lieutenants. Marchionne has entrusted him with two key growth strategies for Fiat Chrysler Automobiles: Jeep and Asia.

So far, Jeep production has been able to keep up with demand. Chrysler had a 58-day supply of unsold Jeeps on hand in the United States on June 3, and only the Compass and Wrangler showed significant month-over-month drops in inventory levels.

In addition to the record U.S. sales in May, Jeep sold 30,004 vehicles overseas.

"A number of our international markets are constrained because of the demand we have in the U.S.," Manley said. "That's a balancing act. I think we could do more internationally."

Overseas production


The brand's five-year plan calls for building Jeeps in Asia, South America and Europe to feed domestic markets there. The Jeep Renegade, a new subcompact SUV that will come to the United States next year, is scheduled to go into production in Europe later this year.

"The sooner that we can bring that international manufacturing onstream, the more product that we can use to continue to feed the U.S. dealers," Manley said.

Manley said the brand remains on track to sell 1 million Jeeps globally in 2014, but further growth will require more production.

"If it continues this way, we'll naturally bump into the production capacity limits," Manley said. "But I think there's more growth to come."

You can reach Larry P. Vellequette at lvellequette@crain.com.


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