Basically, when temperatures fall below 50 degrees, battery-driven cars start to lose significant range. The CNBC story quotes a 41% loss of range when it is 20 degrees outside. Then, imagine how bad it becomes when it goes even lower than that, as we have seen in many parts of the U.S. in recent weeks. You don’t need to look too far around the Internet to see far worse scenarios than “just” a 41% range loss.
That’s obviously a huge problem if your plug-in car has only a battery, and no gasoline engine backup plan. You don’t want to be stuck driving in 10 degree below zero weather somewhere between Idaho and Wisconsin because suddenly your plug-in electric car can’t make it more than 50-100-150 miles, as opposed to the 200-300 miles advertised.
That brings us to the other trend in automotive: Rugged, off-road and retro-looking utility vehicles. I’m talking about the Jeep (FCAU) Wrangler, of course. In the U.S. alone, Fiat Chrysler sold 240,032 Jeep Wranglers in 2018 -- up a whopping 26% over 2017. This is about as hot as it will ever get for an established vehicle that is not being subsidized by the government, or otherwise getting special privileges such as carpool lane access.
That’s where the plug-in hybrid (PHEV) version of the Jeep Wrangler comes in. Even if it’s deep freezing Winter, you will not have to worry about range in your plug-in Jeep Wrangler. That’s because the iconic Jeep will have a gasoline engine and tank to continue operating the vehicle in a normal manner, even in the coldest weather. You won’t run out of range, and you won’t be cold while you’re trying to survive.
On the February 7, 2019, Q4 financial results conference call, FCA explained that the Jeep Wrangler factory is being reconfigured in Q2 of this year, 2019, in order to start production of the PHEV version of the Jeep Wrangler in time for an early 2020 launch:
Now, in Q2, we'll have reduced production of Wrangler as Toledo North goes down to prepare for the launch of the new plug-in hybrid Wrangler in early 2020.
-- Mike Manley, CEO
In some ways, it’s as if FCA is picking up the mantle from where General Motors (GM) is leaving the scene with the Chevrolet Volt, which is going out of production on March 1, 2019. First, the Chrysler Pacifica PHEV -- a minivan -- and now the Jeep Wrangler PHEV. The Jeep Wrangler PHEV is in many ways what the second-generation Chevrolet Volt ought to have been: An off-road utility vehicle.
Why? Because that’s what the current automobile market wants, that’s why. The market is hot for rugged and retro off-road SUVs.
FCA has not said anything about the technical specifications of the Jeep Wrangler PHEV. We don’t know what the various powertrain components and modules will be. From engine to motor, transmission, battery and placement -- we know essentially nothing. Jeep will probably present this information well before the end of 2019, in time for the Wrangler PHEV arriving in dealerships in early 2020.
In the end, this Jeep Wrangler PHEV will be the plug-in vehicle that “breaks the ice” on being able to handle the cold and rugged conditions of rural America located between Idaho and the Northern Midwest. You can plug it in and go off-road, but you also don’t need to worry about reduced range or other cold-world winter problems with batteries.
FCA will already launch the Gladiator pickup truck version of the Wrangler in April 2019. It seems like this PHEV version of the Jeep Wrangler will be a great opportunity for FCA to further expand the Wrangler franchise into an area where competitive products have yet to prove suitable.
Where the Chevrolet Volt failed to gain traction, and Tesla (TSLA) struggles with Winter performance, the Jeep Wrangler plug-in may just be the ticket to success for a large share of the American land mass. Is it the sleeper “in” product of 2020?
FCA has a small problem in its two Toledo, OH, factories right now. After it moved the production of the Jeep Cherokee from Toledo in April 2016, the factories are split into two different parts:
Toledo North, which makes the Jeep Wrangler. This annual capacity is around 250,000 units per year, or a little more with overtime.
Toledo South, which is about to start producing the Jeep Gladiator by April 2019. This factory would have an annual capacity of a similar 250,000 unit number.
However, the part of the factory making the Gladiator will not be producing anywhere near 250,000 of those Gladiators per year. The company is looking at 80,000 to 100,000 per year at the very most. This means that you are left with 150,000 unit excess capacity.
Thankfully, the Jeep Wrangler and Gladiator are extremely similar vehicles in terms of their construction and how they are built along the assembly line. This means that they are easy to mix on a single assembly line if needed.
And that’s where the PHEV version of the Wrangler comes in. While it will be produced on the current Wrangler line in Toledo North, FCA could add production of the “regular” Jeep Wrangler side by side with the Gladiator in Toledo South. This could fill up the capacity from under 100,000 units per year to closer to the 250,000 mark that would constitute full capacity.
By introducing the PHEV version of the Jeep Wrangler, FCA would therefore be able to introduce the plug-in version at the lowest cost imaginable, as it would be produced without having to build excess capacity in a new plant, or a factory expansion. It would roll down the line inside the existing capacity ceiling. This is how you maximize margins in the automotive industry.
Selling government-mandated plug-in vehicles is hard enough on the margins. At least FCA will be able to do so in the most favorable factory situation conceivable.
Get More Mileage Out Of Your Auto Investing
The auto industry moves fast, and it can be tough to stay on top of everything that's happening. I designed Auto Insight For Wall St. to keep you aware of all the changes without your needing to spend all the time. I attend new vehicle launches, press conferences, and industry events and share that insight with my subscribers. Looking for more? Sign up for a free trial today.
This article was written by
Disclosure: I am/we are long FCAU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: At the time of submitting this article for publication, the author was short TSLA and long FCAU. However, positions can change at any time. The author regularly attends press conferences, new vehicle launches and equivalent, hosted by most major automakers.