Jeep - the canary in the automotive coal mine (03May2023)

This section (in italics) is taken from Twitter user CarDealershipGuy:

Jeep is the most *under-discussed* canary in the coal mine in the car world: It just had its *worst* first quarter in at least six years with sales falling 20%. For starters, Jeep launched a line of luxury SUVs in 2021. But Jeep's timing couldn't have been worse... This was right before the economy peaked and interest rates started rising, stifling consumer demand for expensive vehicles.

Jeep sold a measly 2,000 Grand Wagoneers and about 5,600 Wagoneers across the entire U.S. in Q1. An absolute textbook case of a bull-market investment manifesting in a bear-market. But it's not just the Wagoneer... Jeep's volume-leading Grand Cherokee had a sales decline of *27%* to 54,502 units in Q1. And if you needed more proof that people are disinterested in overpriced luxury Jeeps and simply want affordable... Jeep's least expensive models — Cherokee and Compass — were the *only* models that experienced a year-over-year sales increase: +31% to just over 13,000 units... Alright, so what happens next?

Jeep's management needs to QUICKLY sober up: — Fewer expensive models — Fewer luxury lines. Focus on the bread-and-butter Jeep customer and stop chasing the illusion of high-margin luxury vehicles. Because... newsflash: high margins don't matter if you don't sell the cars.

My investing muse

There is an increasing trend towards EV. While Jeep is branded to be both luxurious and rugged, the increase in gasoline prices would have no doubt made this a much more expensive vehicle coming to maintenance. 

As a young boy, I kept seeing this brand in war movies and my heart skipped whenever a jeep drove past me. I told myself, “This is one vehicle I would love to own when I am older”. For “Total costs of ownership” (including maintenance, fuel, repairs, insurance & tax over the lifetime of the vehicle) have steered me to consider other brands. I have eventually settled for a small Japanese MPV hybrid that is more value for money.

With high inflation and interest rates, I am glad that the family got the Japanese car with a much better mileage (averaging about 17 km per liter) and almost hassle-free maintenance. Companies like Jeep need to consider a review of their product offerings. CarDealershipGuy is right to propose a better affordable range. What can happen to this canary in the coal mine? Is it too late? Will Jeep be one of the casualties over time?