Toyota's Scion: Time To Pull The Plug?

Toyota has a long history of offering thrifty, sporty cars here in the United States. Ever since the first Mustang-inspired Celica hit our shores in 1970, Toyota has kept a few youth-oriented models alongside the more utilitarian cars in their lineup. While they were never a true sportscar alternative to the 'merican pony cars of the day, their size, style, and price kept them popular with one of the most sought after demographics in all of marketing.


By the late 1990's, though, Toyota's brass discovered a disturbing trend: The age of the average Toyota buyer was increasing at a faster rate than the industry as a whole. Most outside observers weren't surprised with this: The baby boomer generation was getting older, and the uninspired, "safe" designs Toyota was selling at the time were their ride of choice. 


In an effort to combat this problem and lure coveted young buyers back into the showrooms, Toyota launched the Scion brand through an aggressive marketing campaign in 2002, followed by vehicle launches in 2003 (xA and xB) and 2004 (tC).


On paper, the concept makes sense: A lineup of inexpensive, efficient, easily customizable compact cars pushed by edgy marketing. Sounds perfect for Generation Y buyers, right? Despite aggressive marketing, budget pricing, and "hip" designs, the buyers never materialized.

Scion xB, tC, and xA (2006 models)

The funky little Scion trio were selling in modest numbers by 2007, but the marketing folks at Toyota saw another problem on the horizon: The average age of Scion buyers was 39 years old. While this was the lowest brand average in the industry, and a far cry from Toyota's 54 year old average, it still was too high for a lineup specifically targeted at buyers born between 1982 and 1995.


Efforts to lower the average buyer age seemed to only hurt sales further. The xA was replaced by the even funkier xD in 2007, and the once "hip to be square" boxy xB wagon was made larger, heavier, and even less conventional for the 2008 model year. Sales peaked in 2006 at 173,000 units, but have since slid to just under 58,00 in 2009 and 45,000 units in 2010. 


As the recent bankruptcies of General Motors and Chrysler should indicate, managing multiple brands is an expensive and difficult operation. It was quite a surprise to see conservative Toyota, the master of the 2 brand business model (which has since been adopted by Honda, Nissan, and most recently Ford), embark on launching an additional badge. The cost of brand marketing, awareness, and sponsorships alone is staggering, and that's before you've even supplied your line with product. The numbers get uglier when you start to consider the low pricing on Scions, likely carrying paper-thin margins for dealers and Toyota alike.


While Generations X and Y have long been considered the Holy Grail of execs marketing anything from soda to shoes to cars, it might be wise for them to reevaluate this demographics purchasing power. How many twenty-somethings are buying brand new cars? How many own cars at all? In this age where college seems to last well into your mid-20's, focusing an entire operation at this group doesn't make a lot of sense.

Scion iQ concept (2009)

Scion recently launched an updated version of the aged tC coupe (the nameplate only sold 15,000 units in all of 2010), and beyond that the only new product on the horizon is a badge-engineered version of the Japanese Domestic Market Toyota iQ. Since Scions are only sold out of certain Toyota stores, they don't have a dedicated dealer network to support with a huge amount of product or volume.


I don't look for Toyota to pull the plug on this experiment anytime soon. While the brand's sales look measly on their own, each Scion sale is actually counted as a Toyota sale. The Scion brand isn't broken out from Toyota's numbers on their monthly sales reports. While the amount of profit Scion brings to the company coffers is likely mostly offset by the cost to keep the lights on, Toyota's quest for sales and marketshare should keep them in business for the foreseeable future. Profitability be damned.