Why Chrysler Jeep Dodge Ram Customers Are Double-Screwed Right Now

There are many reasons I might not envy the average Chrysler/Dodge/Jeep/Ram dealership right now. With the highest inventories and the weakest products, there isn’t a lot of room to improve. It’s even worse for the customers who “took a bath on their last vehicle” and are now entirely stuck.

The shortage-fueled sugar high that Chrysler/Jeep/Dodge/Ram parent company Stellantis was on during the pandemic has fully resulted in an inevitable crash landing. I often tell the story of the industry each Morning Dump from, well, the perspective of the industry. In this case, I think the customer view is a little more interesting.

Still, I’ll let Carlos Tavares explain why he thinks sales are faltering in North America and it’s kind of amazing how wrong he is. At least, how wrong I think he is. His fellow CEOs might also disagree with him about how Europe should proceed with its decarbonization efforts.

EVs are still on the rise globally and it’s due mostly to one country.

Stellantis Customers Are Getting Hit With A Boomerang

I’m not sure that any carmaker fared better because of the pandemic than Stellantis. When it looked like the world was shutting down carmakers quickly canceled their orders for semiconductors. This was, seemingly, the wrong choice as automakers discovered there were few backups. To make matters worse, the chipmakers prioritized getting up the kind of personal electronics that were suddenly in high demand (everyone was at home) and more profitable.

This caused automakers to lose a lot of production, but not necessarily a lot of money. I cover this in great detail in my Trimflation article, and you can read that if you want a fuller picture. TL/DR: Car companies lowered incentives to zero, prioritized the building of the priciest models over lower trims, and took advantage of near-zero interest rates to sell cars at extravagant prices.

Stellantis made gigantic profits during this period as it was an automaker with a lot of old product lines, easy-to-produce products, and was investing less in electrification than some of its peers. While a vehicle like the Durango or Compass might have been old even four years ago, they were still relatively cheaper than some alternatives and, being old, gave Stellantis huge margins.

This is obviously biting the company in the bustle back now, with its dealers calling Stellantis a “disaster.” I’ve been focused on the old product and lack of competitive incentives in my critiques of Stellantis. What I missed was the obvious problem of old customers coming back to dealers in the United States and finding themselves in a tough position.

The Detroit Free Press has an enlightening interview with Scott Kunes, the COO of a Midwestern dealership group, that just closed two Stellantis stores. While he talks about all the big issues, it’s the negative equity issue that struck me as a big deal this morning:

Kunes said the inventory situation has improved slightly, but he noted that because it hasn’t improved enough and dealers are being squeezed by high rates they have to pay for the vehicles on their lots.

And Stellantis customers who might be thinking about a new Stellantis vehicle are also facing challenges, he said, because they are in “negative equity positions that we can’t overcome on newer vehicles,” making it hard for them to stick with the automaker’s offerings knowing they “took a bath on their last vehicle.”

Imagine you paid over-sticker with only a small down payment for something like a Dodge Durango in 2021 but kept your monthly payments relatively moderate because you got an extremely low interest rate for 72 months. That Durango is now worth a lot less given that there’s all this low-priced new inventory out there that’s being heavily discounted.

Now you’ve decided that your car payment is too high and you want to lower it or, at maybe, you want to get a new car for roughly the same monthly payment. What you owe on your old car is more than the current value (you’re “upside down” or in “negative equity”) and the best interest rate you can get is suddenly much higher. You’re not going to be happy with your Dodge dealer who is telling you to get a new Durango you’ll have to raise your monthly payment significantly.

This is bad for Dodge dealers, who just lost a customer. It’s bad for Dodge customers, who can’t easily replace their cars. This isn’t entirely unique to Stellantis brands–most people who financed a large percentage of a car purchase between roughly late 2020 and early 2023 are at risk–but Stellantis dealers are sort of uniquely hosed by having sold some of the most average cars for some of the most above average prices and lack good, affordable alternatives to sell people.

It’s like a boomerang was fired off at the start of the pandemic and now it’s coming back to hit everyone involved with Stellantis.

Stellantis CEO Carlos Tavares Blames Marketing, Is Probably Not Correct

Feel free to re-read the above story and tell me if you really think the problem is marketing.

I’m going to go back to the Freep as it has a nice companion piece to the article I linked above. It’s from a conversation that Stellantis CEO Carlos Tavares, pictured above talking to reporter David Shepardson, had with the media at the Paris Auto Show this week.

“In the U.S., we were stumbling on the poor Q2 2024 marketing plan that created an inventory issue with the dealers, and now we are fixing that, and we are fixing it at the right pace. As we have already reduced inventory by 52,000 vehicles over the last three months and we want to be below 330,000 vehicles in dealer inventories by Christmas,” he said, noting that the automaker is on a “good track” toward a fresh start next year.

Tavares, who noted that the company’s regions have “a lot of autonomy,” said “the marketing plan that failed in Q2 was proposed and decided by the region.”

To be fair, he said, he’d seen that it was risky and that he could have stopped it but did not.

I’m sorry. Marketing? That’s your problem? I don’t buy it. Stellantis has been slow to release its grip on incentives in order to help dealers sell cars because it wants to maintain a margin that’s essentially impossible to maintain in this market. The company is starting to turn this around, but I’m not sure there’s a marketing plan in the universe that will get people excited about a Dodge Hornet.

Someone get this guy a Crystal Pepsi.

Interestingly, Tavares did come out in favor of keeping the EU’s difficult CO2 regulations, stating:

“The other day my youngest daughter was driving her car in a forest in Portugal, and the forest caught fire, and she had to drive through the forest on fire. The door panel on the right-hand side melted,” he said, describing the need for Stellantis to be on the “right side of history” and contribute to “fixing the global warming issue.”

“So how do you feel if one of your daughters is in this position, and you say, ‘I’m going to ask to postpone the CO2 regulations?’ There is a moment where you need to face reality,” he said.

Stellantis is one of those companies that might benefit from keeping BEV requirements in place as it launches its cheap, European-built Leapmotor electric cars.

BMW CEO: Let’s Talk About EV Requirements, Please

BMW’s Oliver Zipse was also at the Paris Motor Show and he’s arguing that the EU CO2 goals, which require electrification, are going in the wrong direction.

Per Reuters:

Oliver Zipse, who has long pushed for regulators to permit various technologies – including alternative fuels like e-fuels or biofuels and hydrogen fuel cell cars – said the mood in Europe was “trending towards one of pessimism” and the region needed a new regulatory framework to remain competitive.

“A correction of the 100% BEV target for 2035 as part of a comprehensive CO2-reduction package would also afford European OEMs less reliance on China for batteries,” Zipse said at the Paris Motor Show, adding: “To maintain the successful course, a strictly technology-agnostic path within the policy framework is essential.”

Sales For Electrified Vehicles Are Up 30.5% Worldwide

Electrification is coming, albeit slowly in most places. Obviously, the one place it’s accelerating is China.

Again, from Reuters:

EVs – whether fully electric (BEV) or plug-in hybrids (PHEVs) – sold worldwide reached 1.69 million in September, Rho Motion data showed.

Sales in China jumped 47.9% in September and reached 1.12 million vehicles, while in the United States and Canada they were up 4.3% to 0.15 million.

In Europe, EV sales rose 4.2% to 0.3 million units, thanks to a 24% jump in the United Kingdom and gains in Italy, Germany and Denmark, Lester said.

Chinese EV sales in the EU and Britain are on the rise.

What I’m Listening To This Morning

I heard an interview with Stephen Malkmus where he said he wanted to call his first solo album “Swedish Reggae” but the shot of him from the cover made it look too much like it might be an actual Swedish reggae album so they killed the idea. Probably smart. “The Hook” is my favorite song from that self-titled album, but it’s “Jennie and the Ess-Dog” that’s fueling my morning.

The Big Question

Marketing? Really? Please try to come up for a slogan or marketing plan to sell any current Stellantis product.