Lack of Local Production Keeps Jeep from Meeting Growing Demand in China

Jeep has become so popular in China that the country now boasts 1,500 licensed clothing outlets; selling branded shirts, shoes, backpacks and belts. In 2011, sales of Jeep vehicles in China grew by a whopping 63 percent, to 19,013 units. But a lack of production capacity is keeping Chrysler’s Jeep’s 120 Chinese dealerships from meeting the growing demand.

Jeep CEO and President Mike Manley said, “Our brand awareness and consideration is running way ahead of where our actual volumes are. That’s why I can’t say strongly or often enough just what an opportunity China offers for us.”

General Motors Company’s footprint dwarfs Jeep’s presence in China. GM’s 2,900 China dealerships sell more vehicles in a typical three-day period than Jeep sold in all of 2011.

Manley wants to see Jeep’s parent company, Chrysler Group LLC, increase its China dealer network by 29 percent this year and resume local production of Jeep models by 2014.

Chrysler’s former regional vice president of Northeast Asia and current president of Synergistics Inc. Bill Russo said of Jeep’s dilemma, “It’s not that the brand isn’t known; it’s known. It’s not that people don’t have a positive impression; they do. It’s just that they can’t get it. They can’t get what’s available around the world here in China, not at anywhere near the price point that you get anywhere else in the world.”

Johns Hopkins School of Advanced International Studies author-in-residence Jim Mann said, “It’s amusing to think that when Jeeps were first produced in China, there were few cars on the streets, only three ring roads in Beijing and no freeways from city to city. The enterprise has had a series of problems, but survives, like a cat with nine lives.”

In 1989, Mann wrote “Beijing Jeep”, a book that chronicled the daunting challenges the automaker overcame to become the first American auto manufacturing partnership in China.  At that time, Jeep had recently been acquired by Chrysler from American Motors. In 1998 Chrysler merged with German automaker Daimler-Benz AG.  In 2006, the U.S. unit was acquired by Cerberus Capital Management LP and production in China was suspended.  Jeep came under the control of Fiat S.p.A. as part of Chrysler’s government-backed bankruptcy reorganization in 2009.

Russo says, “Chrysler had so many challenges in dealing with the change of ownership that they really couldn’t put the investment and the attention into building up any joint venture in China. They really scaled back to focus on the crisis back home. Now that the boat is afloat, so to speak, everywhere else, you’ve got to sail it back to China.”

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