Jeep CEO enacts turnaround plan after significant sales declines
Key Points
- Jeep is executing a turnaround plan of the quintessential American SUV brand after five years of consecutive declines in the U.S. market.
- The Stellantis brand has a target of selling roughly 1.5 million SUVs globally by 2027, including 1 million in the U.S.
- Jeep’s U.S. sales have plummeted 34% from an all-time high of more than 973,000 SUVs sold in 2018 to less than 643,000 units last year.
DETROIT — Stellantis’ Jeep brand is well known for scaling tough terrains, but its latest challenge of achieving 1 million vehicle sales domestically by 2027 will be a steep hill to climb.
Jeep, a coveted brand in the automotive industry, has been in a U.S. sales rut that has included five years of annual sales declines, with 2024 on pace to potentially become the sixth.
Nonetheless, Jeep CEO Antonio Filosa believes the brand’s worst days are behind it and it’s still possible to achieve the 1 million sales target. The company is executing a turnaround plan for the quintessential American SUV brand that he says is already beginning to pay dividends following a 9% sales decline in the U.S. during the first six months of the year.
The plan has included lowering pricing across its lineup, including on high-volume models such as the Jeep Compass and Grand Cherokee SUVs; rolling out special offers such as incentives or 0% financing; and increasing spending on marketing and advertising, Filosa said. It also will include an upcoming roadshow with dealers to address additional problems and concerns.
Such actions can eat into profits, but the brand’s average transaction prices have skyrocketed from less than $40,000 in 2020 to north of $50,000 this year, according to Cox Automotive. Jeep’s average transaction price has been above the industry average since 2021, Cox reports.
“The good thing is that the actions we implemented in the previous months, they are also resulting in important growth as well in the U.S.” Filosa told CNBC during a virtual interview Monday.
Filosa’s comments were made a day before the chairman of the Stellantis National Dealer Council penned a scathing open letter targeting Stellantis CEO Carlos Tavares over the company’s sales losses and other business decisions.
Stellantis sold more than 1.5 million vehicles last year in the U.S., a roughly 1% decline from 2022. That compared with an industry increase of 13% in 2023.
Jeep sales
Filosa said Jeep, which reports sales quarterly, saw U.S. sales rise last month: They were up 28% from August 2023 and 55% from July. Jeep also lowered its vehicle inventory by about 25,000 units during that time. But the brand has a ways to go to accomplish any notable turnaround in sales.
Jeep’s U.S. sales have plummeted 34% from n=an all-time high of more than 973,000 SUVs sold in 2018 to less than 643,000 units last year. While most auto brands increased sales last year, Jeep was off by about 6%.
The most recent declines follow the company ending production last year of the entry-level Renegade and the Cherokee compact SUV — two mainstream models with peak U.S. sales of around 300,000 units annually from 2016 to 2019.
“For Jeep to lose Jeep Cherokee … and Jeep Renegade has been an important hit to us,” Filosa said. “Our market coverage declined from an average of 80% to 45%.”
Filosa said Jeep expects to recover market share “very quickly” and return to an 80% market share coverage, which includes the segments Jeep competes in, by the end of next year, when it introduces an unnamed replacement for the Cherokee as well as new electrified models.
Looking forward
In addition to the termination of the new models, Stellantis’ brands such as Jeep have focused on profits over market share under Tavares’ time as CEO.
Tavares has been on a cost-cutting mission since the company was formed through a merger between Fiat Chrysler and France’s PSA Groupe in January 2021. It’s part of his “Dare Forward 2030” plan to increase profits and double revenue to 300 billion euros ($325 billion) by 2030.
As part of that plan, Jeep is targeting selling roughly 1.5 million SUVs globally by 2027, including 1 million in the U.S.
To achieve such goals, Tavares earlier this year said he has allowed leniency in some pricing, incentives and other financial targets after speaking with the company’s dealers.
Filosa said he is continuing those efforts by meeting with dealers regarding the turnaround initiatives. He’ll participate in a dealer roadshow beginning next month with the brand’s new North American head, Bob Broderdorf.
Also assisting Jeep, which is the top seller of plug-in hybrid electric vehicles in the U.S., will be several new vehicles. The brand is launching the all-electric Wagoneer S later this year, followed next year by a Jeep Wrangler-inspired “Recon” SUV and extended-range, plug-in versions of its large Wagoneer and Grand Wagoneer SUVs.
Ahead of such vehicles, Jeep has increased its media spending by 20% compared with the first half of the year, according to the automaker.
“Now it’s time to push, and to accelerate, sales to recover as much as [they] need to do. Next year, obviously, we will talk all growth, since we have new products. … I believe [next year] will be a completely different story,” Filosa said.
Jeep also is attempting to increase the quality and reliability of its vehicles, which have historically ranked below average in third-party rankings. He said this includes delaying launches of its upcoming Wagoneer S and Recon by four to six weeks.
However, building problem-free vehicles is easier said than done in the automotive industry. Jeep on Monday confirmed it is cooperating with U.S. auto safety regulators on an investigation into more than 781,000 newer Jeep Wrangler and Gladiator SUVs after reports of underhood fires.
Filosa confirmed knowledge of the probe, but he declined to provide additional details. Tavares earlier this year highlighted quality problems within the automaker, specifically at a plant in suburban Detroit that makes the company’s Ram 1500.
“We are very carefully monitoring the evolution of quality of Jeep Wagoneer S in the plant, and Jeep Recon as well,” Filosa said. “The only mandate that the plants have from me is to just deliver the car when it’s in perfect quality.”
The new all-electric SUVs will be produced at Stellantis’ Toluca Assembly Plant in Mexico. The company has not confirmed a production location for the replacement to the Cherokee SUV, which was produced at a now-dormant plant in Illinois.
Source : CNBC
