Jeep's Cherokee is carving its niche
The Jeep that wasn't "Jeep enough" is finding its place atop the brand's lineup a year after driving into dealerships.
The Cherokee, which many Jeep enthusiasts criticized due to its non-boxy design and sleek headlamps, led the SUV brand's sales in September and is carving a place for itself in the midsize sport utility and crossover vehicle segment.
"People are blown away with the whole package," Jeep marketing director Jim Morrison said in a recent phone interview. "We're getting a lot of new, conquest buyers out of imports and domestics."
Chrysler has sold about 154,000 Cherokees since the vehicle started arriving in U.S. showrooms in late October 2013, including an average of more than 14,200 per month this year. It is on pace to top 170,000 U.S. sales in 2014, which would put it among the automaker's best-selling vehicles and near the top of its segment. Global sales this year are 167,211 through September.
The Cherokee represented about 10 percent of the midsize utility and crossover vehicle segment during the first nine months of the year with 128,133 vehicles sold, according to Kelley Blue Book. It trailed only the segment-leading Chevrolet Equinox at 184,805 and Jeep Grand Cherokee at 136,310.
Morrison attributes the Cherokee's success, which comes after a delayed launch and problems with its nine-speed transmission, to a mix of the segment's popularity and its capabilities.
"What we have at Jeep that nobody else has is the four-wheel-drive capability DNA," he said. "If you want a real 4x4 SUV, there's nobody else that can come close. That's what separates us from the competition."
Two distinct buyers, according to Morrison, have emerged for the Cherokee.
The first is the everyday driver who may never have driven a Jeep before, but is attracted to the vehicle because of its styling, and it offers up to 31 miles per gallon and 4x4 capabilities.
Those buyers, according to Morrison, make up about 80 percent of Cherokee sales: 10 percent entry-level Sport model, 45-50 percent Latitude and 25-30 percent high-end Limited.
The rest are more traditional Jeep drivers looking for the off-road capability of the Trailhawk model, which Jeep specifically designed to live up to the brand's off-road heritage.
"We had to have a truly capable vehicle that proved that we were still Jeep," Morrison said. "The main philosophy was driven by us being true to our brand."
Morrison said that vehicle's capability was especially important once the brand decided to resurrect the name Cherokee, a name Jeep used from for a traditional boxy SUV that sold more than 2.5 million vehicles from 1974-2001.
About 2 out of every 3 buyers, according to Morrison, opt for the Cherokee's four-wheel-drive system that offers three driving options and a segment-first rear-axle disconnect that seamlessly switches between two- and four-wheel drive to improve fuel economy and performance.
A slight majority of buyers is choosing the optional 3.2-liter V6 that produces 271 horsepower and 239 pound-feet of torque over the standard 2.4-liter four-cylinder, which is rated at 184 horsepower and 171 pound-feet of torque.
The cost concerns
Before the Cherokee's launch, some speculated that the new vehicle and Grand Cherokee would compete against one another. In reality, the average buyers are different. Both average buyers, according to Morrison, are in their mid-40s and well-educated, but what they're willing to pay differs.
The Cherokee's starting price is $22,995 for a Sport, but can get as high as about $30,000 for a Trailhawk model. The more upscale Grand Cherokee's starting price ranges from $29,595 to more than $64,000 for the high-performance SRT model.
KBB reports the Cherokee's average transaction price this year is $30,627 — that's $4,500 less than the segment average and more than $11,600 less than the Grand Cherokee.
Karl Brauer, KBB senior analyst, said he expects the Cherokee to continue doing well, thanks to the growth of the segment and "distinctiveness" of the brand.
That distinctiveness, including a smooth exterior design and non-circular headlamps, was a cause of concern for some Jeep loyalists when it was introduced.
But Brauer said all of the design "controversy" seems to have vanished a year later — particularly since its predecessor, the Jeep Liberty, was not considered a success with mainstream consumers.
"Everyone hates different initially," he said. "The problem with the Liberty was it was probably one of the most capable off-road vehicles in that segment, but it was terrible on the road."
Part of the Cherokee's success, according to analysts, is due to the overall growth of the non-luxury compact and midsize sport utility and crossover vehicle segments — the two major segments the Cherokee competes in.
IHS Automotive reports the two combined segments have more than doubled in the past five years to nearly 2.2 million sales, or 22.5 percent of the entire U.S. automotive industry.
"At the end of the day, it seems the consumer likes a small crossover rather than a small car," said George Magliano, IHS Automotive senior principal economist.
The segment's growth, according to Magliano, comes at the expense of the midsize car segment, which has declined in recent years to represent about 15 percent of industry sales.
Bob MacKenzie, general manager of two Suburban Chrysler Dodge Jeep Ram dealerships in Metro Detroit, said customers are primarily trading in sedans and smaller crossovers/SUVs for the Cherokee.
"It appeals to a wide range of consumers," he said. "From our perspective, it's a great value."
Globally, Chrysler sold more than 167,200 Cherokees through September, making it the third best-selling vehicle in the Jeep lineup. Morrison said the brand is on track to sell 1 million Jeeps this year, a goal announced by Chrysler CEO and Chairman Sergio Marchionne in January during the 2014 North American International Auto Show in Detroit.
"What we like about the Jeep brand is once get them into the Jeep brand, we get to keep them forever," Morrison said. "Once you get a little Jeep in their blood, they stick around."