Toyota forced to reassess its approach with youth-targeted Scion line of cars

After five years generating big headlines and relatively small sales, Toyota’s youth-oriented Scion brand is at a crossroads.

Toyota executives are rethinking some of the basic principles they set out for the brand – how many and what kind of vehicles Scion should sell – as they work to keep it fresh and innovative.

It’s unclear whether they can do it, and some industry observers have begun to ask whether Scion was a misstep by Toyota’s usually sure-footed strategists.

“Toyota doesn’t need Scion,” said Art Spinella, president of CNW Research, in Bandon, Ore. “They should have spent the money on developing Toyota-branded products,” he said, likening Scion to Saturn, which some critics say distracted GM from improving its established brands.

Most of the world’s automakers would love to have Toyota’s problems, of course. Even in a lousy year, the automaker just announced quarterly profits of $3.2 billion, and it stands a good chance of surpassing GM to become the world’s best-selling automaker this year.

The seeds of trouble have been germinating at Scion for some time, though. The brand’s sales fell 25 percent from 2006 to 2007. Its monthly sales were worse than the year before every month from October 2006 through March this year.

Even the introduction of the new xB and the brand-new xD, last year didn’t help. Sales have picked up since April as soaring gasoline prices fueled the small-car market, however.

Scion was proclaimed a huge success when the brand debuted in 2003. It attracted hip young customers who dismissed Toyota as their parents’ brand. They snapped up the boxy and affordable little xB hatchback and spent freely on performance and audio customization at Toyota dealers.

Toyota seemed to have found the pulse of the youth market by combining affordable little cars with Web-based marketing, special events and sponsorship of up-and-coming musicians, artists and filmmakers.

“It’s an elusive target,” said Dawn Ahmed, Scion corporate manager. “We have to challenge ourselves to be relevant to trend-setting customers. We’re looking at ways to enhance and refresh our products.”

Scion is considering adding two models to its lineup. The vehicles would be small, inexpensive and have unique looks, Ahmed said.

All three current Scion cars are compacts, but they haven’t been among the leaders in fuel economy. It’s working to address that. “We are trying to look at ways to deliver performance and fuel economy,” Ahmed said.

Adding vehicles is the easiest way to boost sales, but it flies in the face of Scion’s original brief, which was to offer two or three models at a time and replace each of them with something drastically different when the time came.

Scion violated the second of those commandments when it launched the new xB last year. A very good car and an excellent value, it’s also a straight-line successor to the one that came before, just bigger, more powerful and slightly less distinctive, Spinella said.

Very few automakers have the will to walk away from a brand’s most recognizable model, but Scion was created to rip up all the rules

“Scion is no longer cutting-edge,” Spinella said. “I don’t think Toyota understands the brand any more.”

If that’s true, the company would never admit it, and Ahmed says the Scion team is “looking to innovate every day.

“Scion was established five years ago with a blank sheet of paper,” she said. “As we look to the next five to 10 years, there are no sacred cows. We want to make the Scion brand special, unique and exclusive.”

Contact Mark Phelan at phelan@freepress.com.

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