Five Reasons: Why Did Scion Fail?

February 4, 2016

Has Toyota’s youth-oriented sub-brand, Scion, failed, or merely timed out in its mission?

Jim Lentz, Toyota’s CEO for North America, announced yesterday in a video statement that the brand will be phased out after the 2016 model year, with all products but the tC coupe reappearing with a Toyota badge (and, perhaps, a new corresponding Toyota name).

Some will argue that Scion’s death was a long time coming, a result of some ill-conceived vehicles, a tenuous product plan, a focus on music and lifestyle themes that are no longer seen as in sync with car culture, and a general resistance to change and evolve with its core demographic, a moving target of 18-34 year olds.

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Ironically, those born in the late 1990s, when Toyota first formed its initial Genesis youth-and-diversity marketing group that would help launch the Echo subcompact and birth Scion a few years later, would be driving age today—and essentially in that core demographic.

At face value, it comes as a bit of a surprise that one of the most strong-selling and prolific automakers in the U.S. market—Toyota—could fail with Scion. It’s always done small cars well, after all, and while they’d become stodgier in recent years, all it needed to do was insert a little more panache into its formula for the winning Corolla, which has sold at well above a quarter of a million units, annually, for all but one of the past fifteen years.

Lentz had in recent years advocated for turning Scion into a tech-savvy premium small-car brand instead—one that would chase a sub-$30k price point, slotting just below Lexus and potentially rivaling the Audi A3 and Acura ILX. Toyota has the bandwidth in its product portfolio for it, and such a move seems smart as inserting more models at the lower end of Lexus’ lineup might muddle its stellar image. One can only speculate at this point why the automaker opted against it, but a concern might have been that the brand might funnel some of the more exciting cars away from Toyota, where sales would almost certainly be higher.

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Toyota will say that Scion hasn’t failed; that it instead was a laboratory for how to connect with younger buyers; and that the laboratory has achieved its mission. But this reporter was there at the start, with the launch of the brand in San Francisco in 2003, and various presentations and interviews between then and now. 

I believe Toyota would have liked to see Scion succeed as a brand, not a closed-ended experiment. What follows is largely editorial: Here are five reasons—some obvious, some not—for why the brand failed to be a sales success.

The Obvious: Lack of product

2004 Scion xB

2004 Scion xB

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Pure and simple, good product fuels a brand. And while the Scion brand offered several hints of greatness—the early cult following of the perfectly boxy xB, and the Euro-tuned greatness of the original tC coupe, for example—it was often lacking enough product (or an evolved product) at the time when it might be best received by the market.

Scion wanted to provide Americans with a style of upscale small-car product that they wouldn’t otherwise get. Back at the launch of the xA, Scion officials pointed to the Peugeot 206 as a benchmark.

That’s a great start, but going back to that first Scion launch, the brand was focused on the sales and marketing experience itself and said that specs, functionality, and performance weren’t emphasized because of a belief that if that was right, “the product will pretty much sell itself,” as a spokesperson put it.

2005 Scion tC

2005 Scion tC

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But there’s plenty of evidence that, all along, buyers were more into the product than the marketing. Scion’s sales numbers peaked back in 2005-2007—topping the 150,000-per-year mark in 2005 and 2006—during a period when small cars were out of fashion, thanks to the xB especially. Yet they plunged to less than a third of that peak by 2010, when small cars were surging—in part because they started listening to American product clinics and no longer delivered an edgy, different vehicle.

If Scion hadn’t already read the writing on the wall, the most significant SOS call for the brand probably came during in 2009. Remember Cash for Clunkers, the program that put nearly every small-car model on the market in short supply? Somehow Scion didn’t see a significant blip from that in its sales numbers.

Scion C-HR Concept

Scion C-HR Concept

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Though the move seems a little surprising after some serious movement to bolster product. Most notably, Toyota went to the trouble to show the upcoming C-HR crossover—a Mazda CX-3 rival—as a Scion. And in a wide-ranging interview with Scion chief Doug Murtha last year at the New York Auto Show, corresponding to the brand’s introduction of its new iA and iM models, it sounded like the brand was returning to a more product-backed strategy—including talk of a five-year product plan.

The Obvious: Failure to evolve with the target demographic

Scion claims that over its nearly 13 years and more than a million vehicle sales, 50 percent of its buyers have been under the age of 35; but they’ve been skewing a lot older at times in more recent years.

In 2004, when Scion was launched nationally, its average buyer age was just 35; yet by 2011 it had risen to 43. Since then it’s come down somewhat, and officials continue to argue that the average driver age is much closer to 30.

The original model was largely centered around the idea that Gen Y, as it was then called, would be much like Gen X, but even more focused around individualism, and bright, expressive, accessorized cars—and yes, lots of DJ events and socials that had nothing to do with the car.

Market research had suggested that 15 percent of Gen Y (the younger component of Gen X that’s since been folded into Gen X) were “trendsetters,” and willing to spend on accessories so that they would have a vehicle seen as expressive or unique.

And while Scion’s models—rather expensive all along as they were assembled in Japan—were priced at bargain base prices, the business model hedged on young drivers’ willingness to spend on flair.

In the early light of the ‘00s, and in the tuner craze that hit for a few years in the early part of the last decade that might have been a good bet to make. But even before the recession began, it was becoming clear that younger buyers’ priorities were starting to change, with more of an emphasis on practicality, interior appointments, and even technology—with more of a want to be taken seriously than to look daring and different.

2009 scion xb rs 60 002

2009 scion xb rs 60 002

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Oddly, Scion’s model and its focus on exterior and performance accessories never changed much, and the brand never offered any significant ways to customize inside, with the technology or the interface. This past spring, VP Doug Murtha said that the brand saw no evidence that a significant enough portion of buyers were willing to pay more for upgraded infotainment hardware, for instance—the very items that might have brought a younger yet more affluent demographic back into the brand.

As it was, Scion buyers often had to contend with weird, aftermarket audio systems, when what was available through mainstream Toyota channels was often quite a bit better.

All said, there’s been a severe disconnect with Millennials. Scion had it all backwards for today’s youth. In this Mac and iPhone culture, it’s the outside hardware that’s the price of entry, but it’s what’s inside that’s the expression—kind of the opposite of the starting premise.

 
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