Wrangler Has Priority Over Gladiator

[steveorama]

This is one of those absolutely no brainer moves by Jeep. The Wrangler is the epitome of Jeep and their cash cow. When you say Jeep, it's literally what everyone envisions. As others said the Gladiator is a niche market for Jeep and up until the car crisis, was the one of the worst moving vehicles they offered. Now that you can't buy anything else they are moving pretty well, but how long will that last if the market stabilizes? Like @KurtP stated, I too would be surprised if the Gladiator made it to the next model refresh. Luckily, if previous Wrangler generations are an indication, each generation is about a decade or so. I imagine that's not what many owners want to hear, but in the grand scheme of dollars, it's just good business.

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[ShadowsPapa]

Location Location ? here in N AL. I see a lot more Wrangler's than JT's but Wrangler's have been being sold since 96. So a lot more of them not a lot of the older Wrangler's now but JK's, JKU's, JL's and JLU's not likely for them to not build the bread winner over the lower sales market vehicle. The dealership I drive past only has a few JL's and JT's available, they probably sold a hundred plus JT's last year and double that in JL's /JLU's or more. There is 6 dealership's or so near me selling the crap out of all of them last year. So the market was flooded and dropped the markup profits. The Wrangler has a higher profit margin I'd bet, less metal in building cost.

They've already recovered R&D costs long ago. It's no longer about the JT having a higher profit margin. I worked in manufacturing - that lasts only so long, and then the footings are equal.
Today the JT has nothing over the Wrangler as far as recovering costs of R&D - that's done. They are on more equal footings - it's costs directly associated with building and transportation.
What gets developed for one ends up with both in many cases now.

 

[foo.c]

They've already recovered R&D costs long ago. It's no longer about the JT having a higher profit margin. I worked in manufacturing - that lasts only so long, and then the footings are equal.
Today the JT has nothing over the Wrangler as far as recovering costs of R&D - that's done. They are on more equal footings - it's costs directly associated with building and transportation.
What gets developed for one ends up with both in many cases now.

That doesn't mean profit margin is equal and one the biggest factors in running a business is cash flow. Speed of sales is important.

Would you rather have 10% profit today, or 10% 6 months from now, or 12% 9 months from now, or 6% in 2 months, etc. .... ? Time value of money.

 

[ShadowsPapa]

That doesn't mean profit margin is equal and one the biggest factors in running a business is cash flow. Speed of sales is important.

Would you rather have 10% profit today, or 10% 6 months from now, or 12% 9 months from now, or 6% in 2 months, etc. .... ? Time value of money.

Last part of your quote doesn't add up........ it's a "huh" thing. I've owned and operated businesses, including a farm that earned me a congratulatory letter from the bank for being one of their only customers to year after year increase net worth and have positive cash flow figures. This was in the 80s when everyone around me was going bust and selling off land and downsizing.

Didn't say profit margin was equal - just saying you can't include the R&D part in the Wrangler's profit as that's long since recovered. We know the margin isn't equal - can't be equal.

It was said that the JT was more profit because the Wrangler already covered the development costs. That's not necessarily true - after this many years, the development has little to do with it.
The JT and Wrangler are on almost even footing as far as the impact of development costs goes against profit margins. The R&D of Wrangler is in the past.

Jeep knows the numbers needed to come out on these things - everything else is pure speculation and that's all it can be.

I'll do the math and if all things are exactly equal, I'll look for the plan that gives me the most gain after years, not "I want it now". Maybe it's why my businesses have not just succeeded, but have blown even the expectations of the SBA. I knew when to hold 'em, and when to fold 'em and looked to the future, not later today.
I know - corporate America is in such trouble because investors want return NOW, they don't give a rip if a company goes bust in 2 years, they'll move on.

BTW - Jeep will stop selling 2 door Wranglers in the European market - in favor of hybrids and electric vehicles. It looks like only the 4 door will be sold there.

 

[foo.c]

Last part of your quote doesn't add up........ it's a "huh" thing. I've owned and operated businesses, including a farm that earned me a congratulatory letter from the bank for being one of their only customers to year after year increase net worth and have positive cash flow figures. This was in the 80s when everyone around me was going bust and selling off land and downsizing.

Didn't say profit margin was equal - just saying you can't include the R&D part in the Wrangler's profit as that's long since recovered. We know the margin isn't equal - can't be equal.

It was said that the JT was more profit because the Wrangler already covered the development costs. That's not necessarily true - after this many years, the development has little to do with it.
The JT and Wrangler are on almost even footing as far as the impact of development costs goes against profit margins. The R&D of Wrangler is in the past.

Jeep knows the numbers needed to come out on these things - everything else is pure speculation and that's all it can be.

I'll do the math and if all things are exactly equal, I'll look for the plan that gives me the most gain after years, not "I want it now". Maybe it's why my businesses have not just succeeded, but have blown even the expectations of the SBA. I knew when to hold 'em, and when to fold 'em and looked to the future, not later today.
I know - corporate America is in such trouble because investors want return NOW, they don't give a rip if a company goes bust in 2 years, they'll move on.

BTW - Jeep will stop selling 2 door Wranglers in the European market - in favor of hybrids and electric vehicles. It looks like only the 4 door will be sold there.

Usually you amortize R&D over a long time frame.

Even if the margin was equal, the daily sales are not (by appearances anyway). If you were making a vehicle on spec and had a choice to make between 2 vehicles with the same margin but one sells 30 days quicker, you produce the quicker selling one. Margin doesn't include time, we don't include it in our calculation anyway.

There's more than one kind of business of course, but the time value of money is real thing. $100 now is worth more than $100 in the future. That's why they charge you interest to borrow.

 

[Caraholic]

Interesting. I found this little gem at the bottom of the article from Motor1.com, written by Chris Okula on August 1, 2021 :

"Flagship products like the Jeep Wrangler are given priority of the scarce supply while more niche products like the Gladiator suffer. This doesn’t mean you won’t be able to find a new Gladiator on a dealer lot. Jeep will resume production when they need to build more Gladiators for customers once the current stock is depleted. Until then, Jeep will build what it can with the limited microchip supply."
Source: The Detroit News

Wierd, that a 80k unit per year sales figure makes it a niche product. That’s a lot of units

 

[Caraholic]

Maybe a your area thing or the dealer over ordered.

FCA stated at the Gladiator launch that production capacity and expected sale was around 75K a year. They sold 40K in a short 2019 production year and 77K in 2020 and have sold 48K year to date in 2021. So it is meeting expected business goals for Jeep.

Wrangler though, is almost a 3X sales leader over the Gladiator. Makes business sense that they would put Wrangler production priority over Gladiator.

https://carfigures.com/compare-vehicles/us_jeep_gladiator-vs-us_jeep_wrangler

Nice reinforcement with numbers and graph sir

 

[steveorama]

Wierd, that a 80k unit per year sales figure makes it a niche product. That’s a lot of units

It's perspective and a number game. I would argue under 80k (77k)units a year is basically a niche market. I understand all car sales were down over 2020 overall, but to put that in comparison the F150 sold 10x that in 2020 almost 800k units. Ram sold almost 600k units and Silverado/Sierra sold almost 750k.

Yes those are all full size trucks, so to compare, here's mid size rivals. The Tacoma sold 240k units, Ranger sold 100k units, and Colorado/Canyon sold 125k units. That means for 2020 US truck sales, the Gladiator only beat out the Honda Ridgeline (32k), Nissan Frontier (54k), and the Nissan Titan (26k).

Jeep sold a total around 800k units in 2020 so that means the Gladiator made up less than 10% of all sales for the brand. The Wrangler sold just over 200k units so that would be 25% of all sales. The Cherokee sold 135k units (17%), the Grand Cherokee moved 200k units (25%), the Renegade sold just over 60k units(7%), and the Compass sold 79k units(10%). That means every Jeep out sold the Gladiator in 2020 except for the Renegade and one left over Patriot floating around on a dealer lot from 2017. (there's an article about it, it's pretty funny.)

Manufacturers don't make a high profit on cars, it's around an average of 6-8% for US car companies. So if the average Gladiator sold was around $48k we could assume that would be $3k per unit. So Jeep made around $230Million from Gladiator sales in 2020. Not bad at all, but consider if they made the same amount of profit of $3k on each Grand Cherokee or Wrangler sold, that means they made $600million for each model or $1.2Billion just from those two lineups. Ford made $2.4Billion just from F150 sales in profit using the same math. When you put dollars to units sold it starts to put everything in perspective. Companies put a ton of resources and effort into designing and producing a car. If you're going to put that much effort into something they want to maximize profit by selling as many units as possible. I'm not saying car companies don't release vehicles expecting low sales, but if they do it's already destined to be a niche car and most likely won't survive many iterations other than it's purpose as a "halo car" to drive excitement or foot traffic.

 

[Orange01z28]

Is there a silver bullet reason for the chip shortage, or is this just fallout from lockdowns?

 

[Hootbro]

If you want to see what FCA Sergio Marchionne stated was the initial though process in the Gladiator launch, the link is below.

https://driving.ca/jeep/wrangler/auto-news/news/the-new-jeep-pickup-will-be-expensive-and-exclusive

Jeep‘s upcoming Wrangler-based pickup will aim upmarket, with a high sticker price and low expected production volumes, when it goes on sale mid-2019, Fiat Chrysler Automobiles CEO Sergio Marchionne confirmed this past week.

Marchionne – who says he’ll almost definitely be getting one of the new Jeep trucks himself – will be one of just 100,000 buyers FCA hopes to net annually, according to numbers he quoted during a press conference. The automaker is instead aiming to profit off the Jeep truck by sticking it with a hefty price tag and marketing it as “a lifestyle vehicle.” It will not compete against similarly sized trucks like the Chevrolet Colorado or new Ford Ranger.

....................

 

[Hootbro]

Is there a silver bullet reason for the chip shortage, or is this just fallout from lockdowns?

Way I understand it that when the pandemic hit last year, vehicle makers stopped orders not knowing where the pandemic would take them. The chip makers then switch over to consumer electronic chip making and now that the pendulum has swung back for new demand for vehicles, they do not have the capacity to catch up.

Contrary to what many think, silicon wafers have to be "grown" as part of the manufacturing process and that takes a bit of a lead time. There is also a bottleneck in what facilities can make the chips for vehicle use.

 

[Orange01z28]

Way I understand it that when the pandemic hit last year, vehicle makers stopped orders not knowing where the pandemic would take them. The chip makers then switch over to consumer electronic chip making and now that the pendulum has swung back for new demand for vehicles, they do not have the capacity to catch up.

Contrary to what many think, silicon wafers have to be "grown" as part of the manufacturing process and that take a bit of a lead time. There is also a bottleneck in what facilities can make the chips for vehicle use.

Thanks

I never really looked into why it was happening but that makes total sense to me now

 

[Hootbro]

Thanks

I never really looked into why it was happening but that makes total sense to me now

That is the Cliff Notes version as I understand it so some details may be left out. I also recall there was factory fire in Japan in one of their chip making plants back in March 2021 that is also a contributing factor. They had like 1/3 of the chip making market used in vehicle manufacturing.

 

[Blade1668]

They've already recovered R&D costs long ago. It's no longer about the JT having a higher profit margin. I worked in manufacturing - that lasts only so long, and then the footings are equal.
Today the JT has nothing over the Wrangler as far as recovering costs of R&D - that's done. They are on more equal footings - it's costs directly associated with building and transportation.
What gets developed for one ends up with both in many cases now.

?
What I was saying is the Wrangler is the most bang for FCA buck on profits and due to higher sales of Wrangler's and less material needed per vehicle.
Not the R&D cost, I would bet R&D cost on JT was recouped before 2020 first quarter ended.
Any way it's just my SWAG on FCA production.

 

[steveorama]

If you want to see what FCA Sergio Marchionne stated was the initial though process in the Gladiator launch, the link is below.

https://driving.ca/jeep/wrangler/auto-news/news/the-new-jeep-pickup-will-be-expensive-and-exclusive

Jeep‘s upcoming Wrangler-based pickup will aim upmarket, with a high sticker price and low expected production volumes, when it goes on sale mid-2019, Fiat Chrysler Automobiles CEO Sergio Marchionne confirmed this past week.

Marchionne – who says he’ll almost definitely be getting one of the new Jeep trucks himself – will be one of just 100,000 buyers FCA hopes to net annually, according to numbers he quoted during a press conference. The automaker is instead aiming to profit off the Jeep truck by sticking it with a hefty price tag and marketing it as “a lifestyle vehicle.” It will not compete against similarly sized trucks like the Chevrolet Colorado or new Ford Ranger.

This is pretty close to the definition of a "halo car". Limited number sold by design and a higher profit per vehicle by higher sales price. This drives exclusivity and it was designed and sold for the pure purpose of marketing.

Don't get me wrong. I love mine.

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