Automakers cling to old models around after redesigns

on Jul2

Even as new versions come out, automakers still sell older designs such as the VW Tiguan and the Dodge Grand Caravan, below.

They are the automotive equivalent of cold pizza or chicken salad — leftovers that are still plenty appealing by themselves, even if they are no longer the freshest thing in the refrigerator.

For automakers and dealers, keeping older vehicle designs in production after their replacements are introduced is becoming an important strategy to protect market share and inventories while keeping budget-conscious customers happy.

Volkswagen is the latest automaker employing this strategy. When it launches its redesigned three-row Tiguan later this summer, the German brand will keep its current two-row Tiguan around as the “Tiguan Limited,” a cheaper version with fewer trims and options.

VW is not the first company to try this. When Nissan introduced its redesigned 2014 Rogue, it kept the previous version around for two more model years as the Rogue Select. General Motors adopted the strategy earlier in the decade when it redesigned its Impala and Malibu sedans, keeping the previous versions for fleet sales as the Impala Limited and Malibu Classic.

“Whenever I see a car go on long past its ‘sell by’ date, I always tell myself that it’s a pure numbers game,” said Karl Brauer, executive publisher of Autotrader and Kelley Blue Book. “They usually have amortized the car, and they know how much it costs to keep it going. And if there’s still an upside there, they’ll keep it going.”

Minivan extension

Most automotive leftovers are kept around to fill a specific need, such as demand from daily rental fleet customers.

That was one of the main motivations for Fiat Chrysler when it chose to extend temporarily production of its Dodge Grand Caravan minivan after the automaker replaced its Chrysler-badged twin, the Chrysler Town & Country, with the Pacifica in early 2016. The Dodge had been the less expensive of the two models, and was a favorite vehicle for daily rental fleet operators, with more than 60 percent of Grand Caravan registrations going to fleet customers, according to Polk registration data.

But FCA had other important reasons to keep the Grand Caravan around. The Dodge minivan was a best-seller in its native ​ Canada, where the currency exchange rate made the more expensive Chrysler Pacifica more cost prohibitive, and where FCA was battling with Ford to become that nation’s top-selling automaker.

The Grand Caravan is by far Dodge’s best-selling vehicle in the U.S., with sales through May up 7.8 percent to 63,657.

The Grand Caravan could have died on Aug. 31, 2017. After that, the minivan would no longer comply with a federal side-curtain airbag safety regulation adopted in 2011.

Until earlier this year, FCA gave no indication that it would reinvest in the Grand Caravan to bring it into compliance with the new regulation.

But in June, the automaker told dealers they should stock up on Grand Caravans for their lot, and confirmed that modified ones — which would by definition comply with the new regulation — would arrive by January for a surprise 2018 model year.

Dealers also were told this month that only the two lowest-trim — and lowest priced — versions of the Grand Caravan will be available through August: the $27,090 SE and the $29,790 SE Plus. Prices include shipping. By comparison, the least costly Pacifica starts at $30,090, including shipping.

FCA will produce its JK Wrangler well into 2018.

“Part of the issue with the Grand Caravan was the aggressive decision to replace two minivans with one,” says Stephanie Brinley, senior analyst at IHS Markit. “The Pacifica is a terrific van, but it’s more expensive. They’re trying to migrate people over, but they’re taking their time in doing it.”

Sometimes keeping an old design around even after the launch of a new model is simply about making sure dealerships have vehicles to sell. When Ford Motor Co. made the switch to an aluminum body on its 2015 F-150, it kept its plant in Kansas City producing the previous design for months while the automaker ramped up its launch in Dearborn. FCA plans to copy Ford’s strategy next year with launches of two of its most profitable products: the Ram 1500 and the Jeep Wrangler.

In the case of the light-duty Ram, FCA is retooling its Sterling Heights Assembly plant in suburban Detroit to produce the next-generation Ram 1500, code-named DT, beginning in January. However, to make sure dealers have ample supplies, FCA will continue to crank out the current generation Ram 1500, code-named DS, at its nearby Warren Assembly plant. Supplier sources say the overlap might run a year or more.

FCA will do the same with its new Wrangler, set to go into production this November. Code-named JL, the redesigned Wrangler is longer to accommodate a new eight-speed automatic transmission, and will be built on a new assembly line being built in the portion of FCA’s Toledo Assembly complex that previously built the Jeep Cherokee.

To keep supplies of Wrangler available, FCA will continue to build the current JK version well into 2018, ensuring that dealers will have both versions on their lots, at least for several months.

Brinley said automakers make these kinds of production plans to help dealers keep adequate inventory on their lots, and to help customers adjust to higher new car prices. There’s very little to lose if customers keep buying and dealers keep ordering the cars. Ultimately, the decision boils down to one thing:

“It’s all about money,” she said. “It’s always all about money.”

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