Why Are Fiat Chrysler's Jeep Sales Soaring?

Jeep's iconic Wrangler isn't all-new, but it's popular: The Wrangler set an all-time monthly sales record in May. Source: Fiat Chrysler.

A decade after the heyday of the big SUV, and 15 years after its annual sales peaked, sales of Fiat Chrysler's (NASDAQOTH: FIATY  ) Jeep brand are soaring.

Jeep sales were up 58% in May, topping 70,000 for the first month ever -- in fact, Jeep had never before sold 60,000 in a month. 

For the year, Jeep sales are up 49%. What's going on?

The all-new Cherokee is winning new fans for Jeep
For starters, there are more Jeeps now than there were for most of last year.

The old and not-terribly loved Jeep Liberty was the brand's former midsize entry. Production ended in August 2012, but dealers sold down inventory for several months after that. Just over 6,000 were sold in 2013, most at the very beginning of the year.

The all-new Cherokee, the Liberty's replacement, was supposed to hit the market early in 2013. But it was delayed for months while Chrysler chased software gremlins in the Cherokee's new nine-speed transmission. It finally appeared in October, and sales have been brisk. 

It's a face that Jeep purists love to hate. But somebody's liking it: Sales of the new Jeep Cherokee have roughly doubled those of the model it replaced. Source: Fiat Chrysler.

Through May, the Cherokee has racked up 67,095 sales, an increase of 61,201 over the Liberty's sales through May of last year -- enough to give the Jeep brand a 33% year-over-year increase all by itself. (It's also about double the number of Liberties that Jeep sold through May 2012.) 

The Cherokee's styling hasn't exactly evoked joy from Jeep purists, but it has hit a sweet spot in the market. Crossover SUVs are white-hot at the moment, and the Cherokee gives off an approachable crossover vibe, along with the sure-footed off-road competence that comes with the Jeep brand. It's a winning combination.

But it's not all that is working for Jeep at the moment.

An old model gets more Jeep-ness
Jeep purists may hate the new Cherokee, but they have to be pleased with how the Jeep Compass has evolved over the last several years. Fiat Chrysler shareholders should be pleased, too: Aside from the all-new Cherokee, the Compass' year-over-year sales gain is bigger than any other Jeep model's.

Originally designed as a "soft-roader" without serious off-road hardware, the Compass' arrival in 2007 was widely derided as a sellout moment for the brand. With somewhat cutesy styling, and a glaring lack of a "Trail Rated" version, the Compass floundered, selling fewer than 40,000 units in 2007 and falling drastically from there.

 

The Jeep Compass was derided when it was first introduced, but it has evolved into a proper Jeep -- and sales have boomed. Source: Fiat Chrysler.

Jeep sold just 15,894 Compasses in 2010. But it unveiled a sharp redesign for 2011. Gone was the cutesy look; instead, the new Compass looked like a smaller Grand Cherokee. The interior was much-improved, and -- finally -- Jeep made a Trail Rated version available.

That rework did wonders: Compass sales rose to almost 48,000 in 2011. A big update for the 2014 model year brought a refreshed design and a new automatic transmission that improved fuel economy and performance. 

Now Jeep can advertises the Compass as "the most capable compact SUV off-road and in all weather conditions." Buyers have noticed: Sales are up 28% this year, while sales of Ford's (NYSE: F  ) rival Escape are flat through May. 

The right brand at the right time with the right products
The larger takeaway regarding Jeep's success is this: SUVs are very hot at the moment, Jeep is the SUV brand, and -- for the first time in a while -- the brand has a complete lineup of competitive products. 

The result is a big increase in sales, which isn't a surprise when viewed in context. But it's a testament to just how far Chrysler's products have come in the last few years, and it bodes well for the aggressive global expansion of Jeep that is the cornerstone of Fiat Chrysler's ambitious five-year plan.

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