2017 Dodge Durango R/T(PID:24500028628) Source
posted by alias iBSSR who loves comments on his images on Sunday 12th of November 2017 09:39:14 PM
How Fiat Chrysler Crafts Profits In Unique Ways: The Curious Case Of The Dodge Durango Nov.10.17 | About: Fiat Chrysler (FCAU) Anton Wahlman FCA is criticized for selling cars based on old platforms. For example, who would make a three-row SUV based on a muscle-cop car with almost 500 horsepower? Well, FCA did with Dodge Durango, and it’s on track for 75,000 annual 2017 sales in the U.S. and Canada combined, almost 2x Tesla. The Dodge Durango is one example of how FCA has exploited a niche in the market to come up with a car that really lacks a direct peer. This shows how the market is under-appreciating FCA’s ability to yield profitable financial outcomes despite less R&D and green-driverless investment than its peers. 103 years ago, November 10, 1914, the first Dodge rolled off the line. After not quite 103 years of spending time with almost all major automakers, one thing stands out to this analyst: Fiat Chrysler (FCAU) is different than the others. FCA is occasionally mocked in the media for having too few investments in electrification, hydrogen or "new platforms." It is viewed as a laggard which has underinvested in new cars and their associated technology. Its R&D budget is too small. It's selling too few electric cars at a $20,000 a unit loss. It needs to merge. I'm here to tell you that FCA is able to grow its profits because it does things a little differently than all the other automakers. It doesn't cost more to design a more beautiful ca than an old car. It also doesn't cost anything to avoid spending billions of dollars on technology that's fashionable among 22-year-old laptop reviewers in San Francisco and among "spend other people's money" government bureaucrats, but are shunned by regular people. FCA's Dodge brand is a case in point. It's most certainly not a Toyota (TM) Prius or a Tesla (TSLA). In fact, it's pretty much the opposite. Dodge sells the last remaining true muscle cars: The Challenger is a coupe that unlike its General Motors (GM) and Ford (F) ostensible rivals, actually fits adults in the back seat. That makes a huge difference for a lot of people. There's nothing wrong with a Camaro or a Mustang, but the Dodge Challenger does retro better - and more practical - than its Detroit rivals. It's a classic just like the Porsche 911. You can even get the muscle car in a four-door version, the Charger, which is a popular cop car as well. And yeah, you can get it with either all-wheel drive (AWD) or 707 horsepower 6.2 liter V8. No other car makes you feel like Clint Eastwood in Dirty Harry ca 1971. But wait, when it comes to Dodge, it gets even better. This is 2017, so SUVs are all the rage, even more so than when they first emerged in a meaningful way in the 1990s. What if we took a muscle car, made a three-row SUV out of it, and sold it for as little as $30,000? Any other automaker would laugh at this proposition. The car would either be a lot more expensive - think Mercedes GLS, its closest mechanical competitor, which starts around $70,000 with the top trim over $125,000 - or it wouldn't really be a rear wheel drive based unibody muscle car. But not Dodge. Rear-wheel-drive-based unibody muscle car, starting at $30,000? It's so crazy and politically incorrect that… only Dodge could make it. No, it is neither a joke nor a dream: Dodge actually went ahead and made a muscle car in a three-row SUV format. And it's been a raging success. So far this year in 2017, it has sold 57,829 Durangos in the U.S. and 5,596 in Canada: FCA US Media - FCA US Reports October 2017 Sales. It is therefore on track for approximately 75,000 Durangos sold in U.S. and Canada combined in 2017. That compares to 37,257 for Tesla thus far in the year, on these shores: Monthly Plug-In Sales Scorecard. In other words, this muscle-car SUV from Dodge outsold Tesla by not too far from 2:1 in 2017 on these shores. Considering that FCA actually makes money, and Tesla is operating at a 22% negative margin, one might ask why FCA's Dodge Durango isn't worth at least in the ballpark of as much as all of Tesla's entire market cap, currently at over $50 billion even before applying the fully diluted share count. FCA's Dodge Durango may be outselling Tesla by almost 2:1 on these shores, and at healthy profitability, but is this muscle-car three-row SUV any good? To find out, I spent a collective few days behind the wheels of each of the Durango's three engine variants - one V6 and two V8s. In the briefest of terms, the Durango V6 has little over 300 horsepower, and the two V8s each have just under 400 and 500 horsepower each. The 5.7 liter V8 is a $4,000 option, and if you want the most powerful 6.4 liter V8 with almost 500 horsepower, it starts around $64,000. Think about it, it's essentially half the price of the Mercedes GLS AMG, arguably its closest competitor. One might argue that the Audi Q7 is the second-closest competitor, offering a longitudinal V6 but no V8 in the U.S. market. Still, even without the V8, the Audi Q7 is a lot more expensive than the Dodge Durango. Having driven all three engine variants of the Durango, I have firm advice: Just get the base V6. 300 horsepower is more than enough for all but the most extreme towing needs. That said, if you need to tow 8,700 lbs instead of 6,200, you need to pay up for the larger engine. In its class, however, the typical three-row unibody SUV tows 5,000. Nissan (OTCPK:NSANY) Pathfinder is the leader of the transversely mounted class at 6,000 lbs. Audi Q7 is at 7,700 lbs. Want to tow even more than 8,700 lbs in your SUV? Well, then the all-new aluminum body-on-frame 2018 Ford Expedition is for you. Why stick with the base V6? The biggest engine with almost 500 horsepower is just too noisy, and I had trouble getting it above 16 MPG no matter how I tried. The 5.7 liter V8 isn't noisy at all, but it's still thirsty, yielding 22 MPG highway and 14 MPG city. I did drive the 6.4 liter V8 version on a racetrack, and considering all the ways it is beefed up, it would still be the choice of the very few who will race this almost 500 horsepower muscle car SUV. It's certainly the right car for the soccer father who needs to feel like Dirty Harry on a moment's notice. The Durango is tied with the best car of any kind for in-cabin ease of use. There's just nothing in this cockpit to confuse the driver. Every automaker should follow this example and stay away from infusing too much confusing technology that does not belong in front of the driver. I mentioned above how the Dodge Durango handily outsells all of Tesla in North America. Well, it beats Tesla in another category too: Infotainment technology. Unlike Tesla, Dodge Durango has both Apple (AAPL) CarPlay and Android (NASDAQ:GOOG) (GOOGL) Auto. Once you have tried these, you most likely don't want to do without them. For reference, I had driven the GMC Terrain around the same time as the Durango. The GMC Terrain was approximately as lovely as the Durango overall, especially as it concerns the cabin interior. However, the front-wheel-drive based platform illustrates how it also felt very different to drive. Whereas the GMC Terrain is very soft and cushy, you feel like you're driving an elevated hard-sprung muscle car with the Durango. Some will like that, some won't, and yet others can go either way. I'm probably in the last category. That said, you just can't deny the smile that goes along with driving the Durango's muscle car platform. FCA's investor relations department really needs to do a better job pointing out how FCA's superior niche-crafting has led to major market success in most profitable market segments. If it had been Tesla coming out with a muscle car SUV and obtained these sales numbers, it could have been assigned somewhere in the ballpark of $50 billion of value. Instead, FCA's entire market cap today is half of that, $26 billion - and the Dodge Durango is barely 1% of the company's overall global unit sales. Something is clearly wrong in the market's valuation of automakers. The Dodge Durango and how it fits inside FCA's $26 billion market cap, looking to the outside world of far loftier valuations, is one good example of this. Disclosure: I am/we are short TSLA. 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 GOOGL. However, positions can change at any time. The author regularly attends press conferences, new vehicle launches and equivalent, hosted by most major automakers. FCA hosted product launch events and provided the cars for review.
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