Jeep expands into international waters
Once made only in the U.S., new factories will be in India, Brazil, and China.
In just a little over a year, Jeep will leapfrog from an iconic American product made only in the United States to a global brand assembled on four continents with a vastly larger manufacturing capacity.
A factory in Italy began making the new Jeep Renegade late last year, a factory in Brazil began making the Renegade earlier this year, and the automaker hopes to begin production of the Cherokee in China by the end of this year.
Fiat Chrysler Automobiles also plans to begin reassembling the Jeeps in India this year from kits produced elsewhere as the brand is launched in the world's sixth-largest car market.
Jeep's annual production capacity will increase by 590,000 in a span of just 18 months. It's likely to take several years to build sales and its dealer networks enough to justify full production, but the company's foundation is set for reaching its annual sales target of 1.9 million.
That makes 2015 a crucial year for the SUV that was born in Toledo, Ohio, and served in Europe alongside the U.S. troops during World War II.
"All global brands have a global footprint, and we started that with Renegade," said Mike Manley, CEO of Jeep brand for Fiat Chrysler Automobiles (FCA).
Jeep was designated as the lead global brand for FCA in 2009. Since then, Jeep sales have more than tripled to nearly 1.02 million in 2014, with 31 percent of those sales coming from outside the United States.
But until last year, when production of the Renegade began in Melfi, Italy, Jeeps were produced only in the United States.
That severely handicapped the brand's ability to take advantage of its global name recognition, said Stephanie Brinley, an automotive analyst for IHS Automotive. Other brands, such as Ford, Chevrolet, and Toyota, have had a global manufacturing presence for years.
"This is what a lot of manufacturers have been doing for a long time," Brinley said. "This is a good thing for Jeep and the company because they have products that are in demand . . . and that should perform well in international markets, but they have not had access."
In February, the automaker announced that it plans to add 1,000 workers at its plant in Melfi this year because European consumers have been snapping up the Renegade and the Fiat 500X crossover.
Jeep also is building big production in Brazil, hoping it can bring prices down for the local market. Right now, a Grand Cherokee in Brazil costs twice as much as one would cost in the U.S. That has been reflected in relatively minor sales.
Fiat Chrysler Automobiles is investing $1.3 billion in Pernambuco, Brazil, at a 400,000-square-foot plant that can build up to 250,000 Jeeps annually.
Production of the Renegade has begun in Brazil; the subcompact SUV will go on sale in April.
"I believe it changes the playing field for us," Manley said. "We've been in market for a long time, but our relative number of dealers . . . are small because our volumes are tiny."
Until now, import tariffs have forced Fiat Chrysler to price Jeeps out of the reach of most consumers. Last year, FCA US, the American subsidiary of Fiat Chrysler Automobiles, sold just 7,290 Jeeps and other American nameplates in Brazil.
"By localizing the production of our vehicle . . . that gives us the ability to price in the heart of the market and with a very appealing vehicle," Manley said.
Jeep also has advantages in Brazil that other niche automaker players wouldn't have. First, the brand name is well-known and respected.
Also, Fiat sells more cars in Brazil than any other automaker - the top seller for 13 straight years. Last year, Brazilians bought 698,236 Fiats.
"In Brazil, we are Brazilians," Fiat Chrysler CEO Sergio Marchionne said in January. "Fiat is a Brazilian brand. It is of Italian origin, but it is a Brazilian brand. And Jeep is about ready to go through the same type of dunking into the Brazilian world."
Brinley said Fiat's experience in Brazil would be invaluable, as the automaker seeks to build its Jeep sales there, and as it works to expand its dealer base from about 24 to more than 150.
In China, Jeep tried to reestablish a connection with consumers in what has become the world's largest market for new cars while other automakers have been producing cars there for years.
Jeep beat most competitors to China in 1983, but the automaker pulled out in 2006 just before Jeep's owner, Chrysler Group, was sold by Daimler to the equity firm Cerberus.
"So we are showing up late to the party - not too late, but late," Marchionne said in January.
Jeep plans to begin producing Cherokees by the end of this year through a joint venture with Guangzhou Auto.
It took Manley nearly two years to negotiate the joint-venture agreement. The agreement calls for Jeep eventually to build three models in China that will be sold to Chinese consumers.
In India, the automaker plans to assemble Jeeps at a manufacturing plant near Pune that is a joint venture between Fiat and Tata Motors.
This year, the automaker plans to begin reassembling Grand Cherokees and Wranglers in India at that plant from what the industry calls knockdown kits for sale there.
But that is likely to be just the beginning in India, Manley said.