How the 2014 Jeep Cherokee Helped Chrysler Trounce the Market

What has been driving Chrysler's huge year-over-year sales gains? There are several factors, but right now the biggest is the success of the new Jeep Cherokee. Source: Fiat Chrysler.

Fiat Chrysler (NASDAQOTH: FIATY  ) said on Wednesday that the Chrysler Group's U.S. sales increased 20% in August over year-ago results, as its Ram trucks and Jeep SUVs continued to find flocks of eager buyers.

Chrysler's sales gains trounced most estimates. Wall Street analysts surveyed by Bloomberg had predicted a 12% gain. It also trounced the overall U.S. market's 5.5% increase -- as well as the results posted by all of Chrysler's major rivals.

This was Chrysler's 53rd consecutive month of year-over-year sales gains -- a stunning run from the depths of the recession, which hit Detroit's No. 3 automaker harder than any of its rivals. 

How is Chrysler pulling this off? 

Exhibit A: A very hot Jeep
Here's one very important reason for Chrysler's big sales gains in 2014: the Jeep Cherokee.

Introduced last fall, the new Cherokee received a decidedly mixed reception from hard-core Jeep fans. But the mass market loves it: It's already one of the best-selling vehicles in the (white-hot) midsize SUV market segment.

Technically, the Cherokee replaced the old Jeep Liberty, which was phased out in 2012.  But the Cherokee was delayed for months, only arriving at dealers last October. That delay is the biggest reason for Chrysler's sales gains so far in 2014 -- it didn't have anything in the category for much of last year. Take away the Cherokee, and Chrysler's year-to-date sales would be up just 5%, about in line with the overall U.S. market.

But that said, despite the delay, the Cherokee is still a bona fide hit for Chrysler. Its sales so far in 2014 have already far outpaced the Liberty's full-year results from the last several years of its existence, as you can see in this chart:

Annual sales for Jeep Liberty and (new) Jeep Cherokee, 2002-2014 (YTD through August)

Source: Chrysler Group.

In fact, at its current sales pace, it's possible that the Cherokee's total 2014 sales could challenge the Liberty's best-ever result in 2002, its first full year on the market, when over 170,000 were sold at the height of the SUV boom.

Are these big gains sustainable?
It's unlikely. Here's why: The Cherokee started arriving at Chrysler's U.S. dealers in October of last year. The year-over-year comparisons are going to get tougher soon.

Chrysler has other new products on the way, but they're unlikely to have the dramatic impact of the Cherokee. Sales of the Dodge Charger and Challenger are both down year to date; revised versions that will roll out this fall should generate a boost in sales, but it won't be Cherokee-sized.

That said, at least one expert, Edmunds senior analyst Jessica Caldwell, thinks that Chrysler's sales boom has some other drivers that could continue to help. 

For starters, Caldwell notes that Chrysler has been somewhat more aggressive about lending to subprime customers than some of its rivals have. While that seems like something that should be worrisome, it's worth noting that Chrysler has long had a reputation for being a little more willing to work with those with damaged credit than the other guys.

Caldwell also points out that Chrysler has recently put much more effort into leasing. She notes that Chrysler "barely stepped onto the [leasing] playing field while it worked its way out of bankruptcy," but has since jumped in aggressively. 

Both of those things will continue to help as long as the economy remains strong. And Chrysler does have other factors going for it -- the Cherokee isn't the only Jeep doing well right now, and the Ram pickups have gained market share this year at the expense of old rivals General Motors and Ford.

But there's no question that the Cherokee has been a much-needed hit for Chrysler this year.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 05, 2014, at 12:15 PM, LouisTewl wrote:

    More of the all-too-typical John Roseveer anti-bias and anti-investor dis-information. JR is long Ford and GM, and you wil almost never get an honest article about FCA from him -

    60% of what JR says in this article is false.

    Looking forward, he only mentions new versions of the Dodge Charger and Challenger, the sales of which are "both down year-to-date," but says nothing about the new Chrysler 200 or the all-new Jeep Renegade.

    John Roseveer's strength is looking backwards and mis-representing data which he skews to shore up his anti-FCA/pro-Ford and GM bias, doing a distinct DIS-service to readers.

    John R., IMO, has done more to help serious investors than any other contributor - how? By DRIVING THEM AWAY from TMF to seek out other sources of auto-industry information for valid investing intel, myself included. Thanks, JR.

  • Report this Comment On September 05, 2014, at 12:19 PM, LouisTewl wrote:

    Since there is no edit feature on the TMF comments section, unlike on Seeking Alpha, the first "anti-" in the first line in my comment above shold read "anti-FCA bias

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