Japan offers proof of Jeep's global appeal

GIFU, Japan — If American vehicles can't sell in Japan, why is Jeep doing so well?

Jeep is a rare American success story in a country other U.S. car brands have all but quit. Granted, overall volume is paltry — just 6,344 vehicles were sold through August.

But in Japan's tough import arena, Jeep keeps exclusive company.

The iconic American off-road marque is consistently a top 10 foreign brand in the world's third-largest auto market. In the first three months of the year, Jeep's sales rose 6.9 percent, ranking it No. 7, mostly behind European luxury players.

The next-best Detroit contender, Chevrolet, moved just 373 vehicles — fewer than Ferrari. Even Lamborghini outsold Cadillac, which managed a meager 327. Last year, Ford Motor Co., battered by years of sliding sales, abandoned Japan altogether.

The ability — or inability — of the big U.S. brands to compete in Japan has been a hot-button issue for decades. Critics often blame nontariff barriers for Detroit's dead end here. This year, President Donald Trump stoked the debate by complaining it is "impossible to sell cars in Japan" and pledged to finally pry open the country. In reality, Japan's finicky standards for quality and status are equally big hurdles.

Yet Jeep has found traction in this vexing market, thanks to top-notch brand management and a willingness to cater to Japanese tastes.

"We have to spend money and engineering hours to do it, but we think it's worth it," FCA Japan CEO Pontus Haggstrom said at a Jeep showroom opening in this central Japan city this year.

"They are things that make our jobs harder and make it more expensive and time consuming to bring cars to Japan," said Haggstrom, who took the helm in 2011. "But are they trade barriers? My honest opinion is, no. Are they excuses for why I can't sell or succeed in Japan? No."

Jeep's appeal in Japan also underscores its global brand power. If it can make it in one of the world's fussiest markets, it can make it anywhere. That attribute is not lost on a growing list of international suitors interested in acquiring the brand, the brightest gem in the Fiat Chrysler Automobiles crown.

Indeed, Jeep is cruising to its eighth consecutive year of sales growth in Japan. Its annual sales volume wallowed at around 1,000 vehicles in 2009. But by 2016, sales reached 9,388, helped by the addition of the subcompact Renegade, a pint-sized offering that proved perfect for Japan's narrow streets. This year, FCA targets sales of 10,000, with additional lifts expected from the upcoming arrival of a new Compass.

The momentum should continue into 2018 with an updated Wrangler. Japan is the world's fourth-largest market for the Wrangler.

But the success — modest as it is — has not come easy. FCA has worked hard to keep Jeep on an upward trajectory. Among its efforts:

All Jeep models are offered as right-hand drive.

Drivetrains were tweaked to meet Japan's eco-car incentives, a U.S.-brand first.

Models are fitted with folding side mirrors for Japan's tight parking lots.

Jeep offers factory-installed Japanese navigation systems.

It has more than doubled its local marketing and advertising budget since 2010. And Jeep is expanding its dealer network, with plans to add two stores this year bringing its Japan total to 82. That is up from just 52 in 2010.

Meanwhile, Jeep has embarked on a two-year campaign to rebuild or refurbish more than 50 showrooms nationwide by the end of 2018.

The network overhaul aims for a more premium, modern image. Jeep doesn't wave the American flag or conjure Route 66 nostalgia to sell vehicles, as U.S. brands often do overseas.

"It's more about the brand and less about the origin," says Haggstrom, a native of Sweden. "In previous stores, it was very much the U.S. dealership transplanted in Japan."

At Jeep Gifu, dealer Yukio Okumura shuttered an old showroom that had fluorescent lighting, linoleum floors and a giant Chrysler pentastar on the wall, and reopened a sparkling new showroom just down the street.

The new place features cool black tiling, woody decor and airy two-story windows. There is ample parking — a rarity in cramped Japan. And spaces are oversized to accommodate the bulky rides of Jeep buyers and other SUV lovers.

Another new feature: a special delivery room where new customers are pampered in handover ceremonies.

The new shop also adds service bays, including one designated only for quick-service items such as tire or oil changes. And because the labor market for mechanics is extraordinarily tight in Japan, Jeep is making its workshops more inviting places to work. Those improvements begin by simply installing air conditioning and heating — creature comforts rare in Japan's auto retail world.

Unlike in the U.S. or Europe, a showroom attendant waits on customers to take drink orders. And unlike overseas, the salesperson handles both sales and service. Japanese customers prefer the personal touch of interacting with the same person over the lifetime of the vehicle.

This is the blueprint for Jeep's dealership overhaul across Japan.

Okumura, who started selling the brand in 1996 and now owns eight Jeep stores and four Volkswagen dealerships, says Jeep's quality has vastly improved over the years.

He bemoans the bad old days when he claims the vehicles would leak in the rain.

"But everything has changed," Okumura said. After splashing out some 300 million yen ($2.7 million) on the dealership improvements, he expects to boost his Jeep sales 10 percent.

In Japan, Jeep is all-American, but in a positive way. Its rugged, free-spirited, go-anywhere DNA is unlike almost anything else sold by its American or Japanese rivals.

"I've dreamed of driving a Jeep ever since I started making money on my own, because Jeeps are stylish like no other," said Chikako Fukuda, 41, a hairstylist from Toyama prefecture who bought her first Jeep, a white Compass, in 2014.

"I find all Jeep models cool."

Tellingly, at Okumura's new Jeep Gifu showroom, any whiff of the Chrysler brand has been erased. The 300 sedan is the only Chrysler nameplate on sale in Japan. But its sales are negligible.

"The image of American cars as low-quality still persists here, even though a bit underserved," said Christopher Richter, an auto analyst with CLSA Asia-Pacific Markets in Tokyo. "But Jeep has the most brand equity of any American brand. Japan shows it has a global following."

It is Jeep's cachet that fuels corporate acquisition interest.

China's Great Wall Motor Co. made waves this summer when its overtures to acquire Jeep came to light. The latest rumor focuses on the Hyundai Motor Group as another potential partner.

A South Korean auto analyst made the case last month to the Korean Herald, arguing the two companies perfectly dovetail — with Hyundai bringing small cars and FCA bringing trucks. They could merge, it was argued, into the world's No. 1 automaker with sales of more than 11.5 million vehicles.

A Hyundai spokesman later dismissed such speculation as "totally groundless." Hyundai, coincidentally, also failed to penetrate Japan. The Korean giant gave up in 2009.

Haggstrom says there is plenty of room for continued Jeep conquest in Japan. But can an outspoken Trump, with his combative talk of opening Japan to American exports, do anything to further improve prospects for U.S. brands here?

Yes, says Haggstrom: "Probably tweet a bit less."

Naoto Okamura contributed to this report.