China’s expensive love affair with Jeep

Mitt Romney’s latest ad in Ohio, which alleges that the president "sold Chrysler to Italians who are going to build Jeeps in China" has been torn apart by fact-checkers. The claim appears to be based largely on a misreading of the lede a recent Bloomberg news story, which reported that Chrysler "plans to return Jeep output to China and may eventually make all of its models in that country". Yes, the wording is slightly confusing, but if you read the whole story by Craig Trudell, you will soon find out that this refers to building Jeeps locally for the Chinese market "rather than shifting output from North America to China."

Chrysler CEO Sergio Marchionne has also denied that the company has any plans to move U.S. plants to China and has in fact added new jobs at the Jeep plant in Michigan. 

Behind the politics, Jeep in China is actually an interesting business case — a brand with high name-recognition and popularity but little availability. Another Bloomberg story from last May explored the topic: 

Jeep gear is so popular in China that there are more than 1,500 licensed clothing outlets in the country, where only 120 auto dealers sell the brand. While Jeep has a strong image connected to an adventurous lifestyle, three decades of changing ownership have left it without local production and missing out on surging demand for SUVs in the world’s largest vehicle market.

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

Thanks to steep import tarrifs and the lack of a local manufacturing plant, a Jeep Grand Cherokee costs about $91,064, compared to $26,995 in the U.S. — the primary motivation behind Chrysler looking to ramp up production in China.