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Analysts dismiss Jeep’s 2018 goal

by Bill Cawthon on

Jeep-Globe-Web
When Fiat Chrysler Automobiles CEO Sergio Marchionne was on the floor of the New York Stock Exchange last Monday, he repeated his goal of making Jeep the company’s top global brand with annual worldwide sales of 1.9 million by 2018.

Analysts quickly pounced on the  statement, saying Jeep couldn’t possibly hit that target.

According to a Reuters report, Jeff Schuster of LMC Automotive pegged Jeep sales at 1.2 million in 2018; Brian Johnson of Barclays Capital predicted 1.4 million deliveries and longtime industry analyst Maryann Keller simply said, “Realistically, he’s not going to make the numbers.”

1.9 million sales is an audacious target. If Jeep can hit a million sales worldwide this year, it still will take growth averaging 17.5% annually to get there.

While this sounds like a huge challenge, the analysts’ criticism appears to ignore factors that make the next four years difficult to predict.

First, Marchionne’s plan calls for most of the growth to come from outside North America. In 2013, 73.1% of worldwide Jeep sales came from the United States and Canada. The success of the Jeep plan is predicated on that share dropping below 50%.

Second, Jeep is introducing new vehicles and will use more international production to meet the goal. Chief among these is the Renegade.

From an international perspective, the Renegade is possibly one of the biggest game changers in recent Jeep history. The smallest and perhaps least “American” Jeep ever (despite Klaus Busse’s many Easter Eggs), it’s a new benchmark of the compact capability that’s valued in  many countries. Furthermore, it’s offered with an efficient diesel engine and real off-road chops unmatched in its class.

Jeeps-Army-Renegade-Web

In a recent review of the Renegade Trailhawk, Great Britain’s Car magazine said, “We tried it all (including the skid plates…), and found the Trail Hawk deeply impressive. Not just for a small vehicle, but for an SUV of any description. A top whack (Škoda) Yeti ain’t bad, but this is a different class of mud-plugger entirely.”

Third, Jeep’s reach is growing. When it’s fully up to speed, the Renegade will be on sale in 100 countries, a Jeep brand record, and it has four years to build a market that could make it one of the best-selling Jeep vehicles.

Finally, while past performance is no guarantee of future success, the past five years have demonstrated Sergio Marchionne’s ability to deliver on the majority of his promises.

There are some potential minefields ahead: Marchionne has got to be banking on improving sales in the European Union; the settlement of the Ukraine issue that has caused serious problems in the Russian market; the Latin American market resolving its financial problems and China. This last is a major consideration; Marchionne is depending on FCA’s joint venture with Guangzhou Automobile Group to dramatically increase Jeep sales in the world’s largest vehicle market.

Jeep-Chinese

There is also a potential bump in the road here in the U.S. In every decade since the end of World War II, there has been a correction in light vehicle sales. Generally, the earlier in the decade the correction takes place, the milder it is. The most recent correction, in 2009, was the largest since the Great Depression so the industry should avoid the shellacking it took then, but it’s almost guaranteed there will be a bad year before 2020.

In order to gain some perspective on the future, it’s worth understanding what Jeep has achieved in recent years.

From 2007 to 2009, Jeep sales plunged by more than 50%. From 2009 through the end of 2013, Jeep sales grew faster than any other major brand, more than doubling in that time; 2013 was Jeep’s best U.S. sales year since 2000.

From June 2009, when Fiat took control of Chrysler, to the end of last month, Jeep U.S. sales have totaled more than 2.3 million units. That’s more than Jeep’s total production from the first CJ2A after the end of World War II to 1986, the last year Jeep wasn’t a Chrysler brand.

Of all the “civilian” Jeeps (CJ, YJ, TJ, Wrangler, etc.) produced in the past 70 years, 20.7%, or more than one in five, have been sold since June 2009.

At the end of September, Jeep U.S. sales totaled 516,387 for the first nine months of 2014, 38,709 shy of the 12-month total for 1999, Jeep’s all-time record sales year. Jeep should surpass that record by the end of October.

With those facts in mind, it would be a shame not to dream – and plan – big.

Bill Cawthon grew up in the auto industry in the 1950s. His Dad worked for Chrysler and Bill spent a number of Saturdays down on the plant floor at Dodge Main in Hamtramck. Bill is also the U.S. market correspondent for just-auto.com, a British auto industry publication, and a member of the Texas Auto Writers Association, which has named the Jeep Grand Cherokee the “SUV of Texas” several times and named the Ram 1500 as the “Truck of Texas” two years running.

Bill has owned five Plymouths (including the only 1962 “Texan”), one Dodge and one Chrysler and is still trying to figure out how to justify a Wrangler. He also has owned at least one of every 1:87 scale model of a Chrysler product. You can reach him directly at (206) 888-7324 or by using the form.

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