The Chinese market is red-hot, and the SUV segment is even hotter. (Clarence Tabb Jr / The Detroit News)
With Jeep poised to sell a million vehicles this year, Fiat-Chrysler has big plans for expanding the brand worldwide — particularly in fast-growing markets in Asia and South America.
While the rest of the newly combined company is focused on getting more vehicles out of existing factories, CEO Sergio Marchionne wants to add new assembly lines in China and Brazil to produce Jeeps for sale in those markets.
He and Jeep brand president Michael Manley also hope that new offerings such as the 2014 Cherokee will allow the automaker to boost exports from the United States.
Jeep sold a record number of 731,565 crossovers and sport utility vehicles worldwide last year. Manley is confident the brand can do even better in 2014. But to do that, he will need more factories overseas to avoid import costs and tariffs.
“If you’re going to achieve volumes in international, you need to expand the manufacturing footprint,” Manley told The Detroit News. “And the markets that come to mind are China, then Brazil and eventually Russia.”
Both Marchionne and Manley said the company is “close” to inking a deal with Fiat’s Chinese partner, the Guangzhou Automobile Group Co., to manufacture Jeeps in China for the Chinese market. But both men have been saying that for at least a year.
“Discussions are going well,” Manley said. “It’s just the nature of those discussions, the process and the applications that you have to go through. Most discussions in China are two-way. What we’re looking to do is leverage Fiat’s relationships, so those discussions are three-way. There’s just a little added complication.”
Still, Marchionne and Manley said they hope to conclude an agreement with Guangzhou by the end of March.
The Chinese market is red-hot, and the SUV segment is even hotter.
But Manley said he needs to be able to build Jeeps locally to compete at the lower end of that market where cost remains an important factor.
“Even as an import brand, since 2009 our volume has increased six-and-a-half times in Asia, and that’s predominantly China,” he said. “But it’s still limited.”
Head start in Russia
Jeep was the very first foreign car brand sold in the communist nation, but it failed to take advantage of its early lead.
The Beijing Jeep Corp. — a joint venture between Beijing Auto Works and American Motors Corp. — was established in 1984 and began producing Jeep Cherokees a year later. “Jeep” soon became Chinese slang for any off-road vehicle. But Jeep production at the joint-venture factory ended in 2006, just as the Chinese car market started to take off.
Manley said the Cherokee name still resonates with Chinese consumers, and he has high hopes that Chrysler’s all-new version of the compact SUV will do well as an American import. And not just in China.
“It’s got huge potential. We just started shipping to international markets,” he said. “I think there’s some significant volume available for us to add on with that.”
Ultimately, Manley plans to sell the Cherokee everywhere Jeep has a showroom.
But he is starting with China. In fact, the first Cherokees already have been loaded onto ships and are making their way across the Pacific. Europe is next, with the first Cherokees scheduled to arrive there by the end of March.
Another key to Jeep’s global growth will be the launch of a subcompact Jeep that Manley believes will prove popular with consumers in markets not used to full-size SUVs.
The as-yet-unnamed cute ute is slated to launch in Europe at the end of this year, but Manley said it will probably not go on sale in the United States until early 2015.
“That will be a big addition to the range,” he said. “(So will) Grand Wagoneer sometime around 2016. It’s another opportunity for us.”
Unlike the Cherokee and Grand Cherokee which have replaced older models in the Jeep lineup, the Grand Wagoneer will take the brand into a segment of the market it has not occupied in recent memory: the full-size three-row SUV segment. There, it will compete with the likes of the Chevrolet Suburban and Ford Expedition EL.
'Strong in most markets'
Analyst Stephanie Brinley of IHS Automotive said Fiat-Chrysler is right to make Jeep the vehicle for the group’s global expansion.
“They’ve had a laser-like focus on holding on to what that brand means,” she said. “It’s an iconic product, and it’s pretty well known across the world. And the SUV segment remains strong in most markets.”
That is certainly true in Brazil, but that country’s high taxes on imports have relegated Jeep to niche-brand status.
“Our brand awareness is really good in Brazil. But as an import brand, we pick up all the tariffs — which means our pricing is beyond premium,” Manley said. “(A local factory) would give us a stronger foothold in a very, very important market.”
Fortunately for Jeep, Fiat is already building a factory. But Marchionne said the uncertainty surrounding Fiat’s ownership of Chrysler has kept Jeep out of the equation — until now.
“The issue of the international expansion of Jeep across the NAFTA environment was really contingent on the cooperation of Fiat,” Marchionne told reporters at the North American International Auto Show last week, after Fiat reached an agreement to buy the rest of Chrysler from the United Auto Workers trust that owned a minority stake the Auburn Hills automaker.
“It’s a world-class manufacturing site,” Marchionne said of the plant being built in the northeastern Brazilian state of Pernambuco. “We’ve been holding up the involvement of Chrysler in that venture for the Latin American market now for a long period of time. The resolution of the ownership (of Chrysler) has allowed us now to move at the speed of light to allow Jeep to come in and Chrysler itself to come into that project and effectively co-own the investment with Fiat.”
Marchionne said the “weakest links” — the Compass and the Patriot — still need to be addressed, but added that the new small Jeep will help do that.
As for the possibility of selling 1 million Jeeps this year, Manley said it is doable.
“If we maximize the potential of Cherokee and have no major incidents in the markets that we play in, we can get very, very close to it — if not on it.”