Jeep Sales Plummet In 2006, Is Image Declining?

According to Bloomberg, at least two out of the Big 3 USA automakers are having serious problems this year. GM is estimated to show a sales increase in August over last year, but the primary cause is thought to be a significant shortage in inventory during 2005 rather than robust sales results this year. According to independent analysts, Ford's sales will be down from 10% to 15% for the month of August compared to 2005, while Chrysler's sales are estimated to be down anywhere from 8 to 15%. Both are experiencing significant declines for the entire year. Chrysler's Jeep line of vehicles is experiencing a sizable downturn this year, which has to be troubling to Chrysler upper management!

The Jeep line historically has been somewhat of a pillar of sales strength for Chrysler, but 2006 is seeing an exception to this. According to Chrysler, sales of the Wrangler, Liberty, and Grand Cherokee are all down substantially from 2005. Chrysler reported that through July 31, 2006 year-to-date Wrangler sales were down 17%, Liberty sales were down 23% and Grand Cherokee sales were down 37% when compared to 2005 sales! Sales for July 2006 were down 32% for the Wrangler, 52% for the Liberty, and 58% for the Grand Cherokee. These are huge declines and one must wonder just what is fueling the drop. It has gotten bad enough that Chrysler has recently announced a big sale for their new Wrangler on September 1, 2006. See more details at http://www.automotive.com/features/90/auto-news/22878/index.html.

Can the huge decline in year-to-date sales for 2006 be due to Chrysler not significantly addressing fuel economy in its Jeep offerings? Are the latest Jeep additions, the Commander and Compass, eating into Grand Cherokee and Liberty sales? Are these drops to blame on last year's huge incentive programs? Did Chrysler miss the mark with its new version of the Wrangler? Or is the Jeep name losing some of its trading power?

Fuel economy has become a major component of car buying decisions and this could be hurting Grand Cherokee numbers, but, Toyota did not see declines in the sale of it's competitors to the Liberty and Grand Cherokee. The RAV4 saw its sales doubled compared to 2005, and 4Runner sales increased 4.4% over July 2005. Honda also reported sales gains in July of 6.8% in it's trucks category, which includes SUVs. So the argument for fuel economy being a major contributor to the decline would appear to be a weak one.

Cannibalization could explain some of the decline, at least for the Grand Cherokee, but that still wouldn't explain the huge drop for all three vehicles. The Compass has only been out a short while and during July it was reported that only 707 were sold. The Commander numbers do appear to be good and they could explain some of the drop in the Grand Cherokee numbers.

The incentive program hangover may also explain some of the decline but certainly not all of it. Once again sales numbers were up for Toyota and Honda. Wouldn't they be experiencing some affects from the major incentive programs of 2005? If they are not feeling the pain, why is Chrysler?

The critics all praised the new Wrangler and the general populace seems to have embraced it as well, at least in the discussion forums and such, if not at dealerships by buying the new model. Fuel economy, sales cannibalization and incentive program hangover may be contributing factors to declining sales, but it seems that there has to be more to explain the size of the decline, especially in the face of Toyota and Honda's performances.

Could these declines be explained by a diluted and declining image? The Jeep image has certainly been tarnished this year with the huge recall of the Liberty, and, the front brake problems and resulting litigation with the Grand Cherokee. It's hard to sell based on quality when you're recalling 800,000 vehicles. Critics bombing the new Compass, Chrysler's latest Jeep addition, hasn't helped the brand's image either. In the recent past some experts speculated that Chrysler would weaken the Jeep name with the addition of the more family oriented vehicles, the Liberty, Commander and Compass, and right now it would be hard to argue with this position. Chrysler seems to have gotten pretty far away from its very successful "Trail Rated" campaign with the Compass. To add insult to injury, the Dr. Z. advertising campaign has reportedly been a bust.

We may not understand all of the specifics, but the Jeep image and brand identity have seen some damage with the quality issues (see Grand Cherokee brake issue and Liberty recall) and the less than excited reception to its latest addition. It would seem that this may actually be what has lead to Jeep's declining sales. Current Chrysler management had better get to the bottom of their quality issues and learn how to manage the brand more effectively, or risk losing Jeep's wonderful marketing power!