Strategy: Why Jeep is breaking all-time records in the USA

The 1940 Bantam BRC40 is one of the ancestors of the Jeep.

While Jeep had never before in its 73-year history topped 60,000 US sales in a month, it delivered an out-of-this world 70,203 in May, passing Kia, teasing Hyundai which also broke its all-time record this month, doubling Volkswagen and tripling Buick. The Cherokee, Wrangler and Compass nameplates all beat their all-time monthly volume records this month. According to Autonews, Jeep did so with only modest financing and lease subsidies, making it all the more impressive.

1967 Jeep Jeepster

To show how far Jeep has traveled, lets back-track 8 years ago, prior to the global financial crisis, when the market was at a similar level as it is now. In July 2006, Jeep sold 35,831 vehicles in the US, a little more than half of what it sold last month, with a market share of 2.4% vs. 4.4% last month. What is behind Jeep’s sudden and tremendous current success in the USA? Autonews says it’s a matter of ‘right time, right place’…

Riding the SUV wave

Alec Gutierrez, senior analyst for Kelley Blue Book, says “All of the major growth in the marketplace seems to be isolated in the CUV and SUV segments. Given this is Jeep’s entire portfolio, they seem to be benefiting more than anybody else. No brand has gained more market share in the USA since 2010 than Jeep. And the brand has accomplished the feat with modest fleet sales.”

2014 Jeep Cherokee

The role of the new Cherokee

Jeep’s impressive growth streak can be pinpointed partly to the addition of the 2014 Cherokee mid-sized SUV which replaced the lacklustre Liberty at the end of last year. Albeit controversially designed, the new Cherokee immediately stroke a chord with US buyers, selling over 10,000 units for its first full month of sales last November. It never dropped below 5 digit sales figures since, adding up to 92,881 sales so far and will pass the 100,000-unit milestone in June, only 8 months after launch. Don Lee, president of Lee Auto Malls which operates two Chrysler-Jeep-Dodge-Ram stores in Maine, said “The new style of the Cherokee is so dramatically different than previous Jeeps that it’s bringing a new buyer into our showroom that we haven’t seen before: they’re a younger buyer than the typical Jeep buyer.”

1974 Jeep Cherokee

Quality perception

According to Autonews, Jeep brand head Mike Manley said the average age of Jeep buyers has dropped nearly 2 full years in the past year. He declined to reveal precise numbers. Meanwhile, in a survey released two weeks ago 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 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.

Blake Helfman, new-vehicle sales manager at Helfman River Oaks Chrysler-Jeep-Dodge-Ram, confirms this: “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 US$30,390 while the Mercedes M class starts at $48,715.

2015 Jeep Renegade

Production constraints

In addition to the record US sales in May, Jeep sold 30,004 vehicles overseas, eclipsing the 100,000 monthly units global mark for the very first time. “A number of our international markets are constrained because of the demand we have in the U.S.,” Manley said. This didn’t prevent the Grand Cherokee to break into the Australian Top 10 for the very first time… The brand’s 5 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 US in 2015, is scheduled to go into production in Europe earlier, before the end of 2014. “The sooner that we can bring that international manufacturing onstream, the more product that we can use to continue to feed the US dealers,” Manley said. Manley said the brand remains on track to sell 1 million Jeeps globally in 2014 for the first time in its 73 year-history, but further growth will require more production. “If it continues this way, we’ll naturally bump into the production capacity limits,” Manley said.

Arguably a nice problem to have.