Scion passes its mid-term exams; Toyota's youth brand selling strong
MARK RECHTIN | Automotive News
Posted Date: 12/17/04
LOS ANGELES -- In launching its Scion youth brand, conservative Toyota Motor Corp. has been anything but cautious.
Toyota gambled that trendy young buyers would identify with a splinter division of a mainstream company.
Skeptics abounded inside and outside the company.
But Scion has been selling strongly to spiky-haired urbanites in California for 18 months, and the buzz here is still strong for its signature vehicle, the boxy xB hatchback.
The Scion vibe spread quickly with June's nationwide launch of the brand.
But there have been hiccups, such as when Scion buyers are channeled to the finance and insurance departments of Toyota dealerships.
After six months of selling cars nationally, here is a report card.
A
Sales volume
Although their nameplate math was wrong, Scion executives are getting the right answer with their sales targets.
Executives thought the xA hatchback would be the volume leader, while the tC coupe and boxy xB would be niche vehicles.
But the xB and tC each account for 40 percent of sales.
Toyota factories have scrambled to get production in line with demand.
Scion sought 100,000 car sales annually.
Despite only selling in selected parts of the country until June, Scion has sold 88,573 units through November.
B+
Demographics
Scion has the youngest brand in the industry, exactly what it sought. An internal year-to-date survey of primary Scion drivers shows a median buyer age of 34, with the tC coupe having a median age of 25.
The overall age will continue to decline because the tC has been on sale only since June.
But some smaller markets - especially those near retirement communities - are doing well selling the xB to value-conscious retirees, says Art Spinella, president of CNW Marketing Research in Bandon, Ore. "There aren't enough kids in those areas to make it a viable brand. They also have to sell to 30- to 50-year-olds to justify the volume."
But Spinella adds that Scion has the youngest cadre of shoppers who aspire to a particular brand, which shows promise.
B
Awareness
Most major automotive brands have an 85 percent awareness rating from those under the age of 35. Scion is at 75 percent in California and 55 percent nationally, says Brian Bolain, Scion national manager for sales promotions.
That cuts both ways. While it is far below industry norms, Scion has only been around a short time, and the numbers are rising quickly.
B
Product
The xB is the perfect controversial car for twenty-somethings wanting to make a statement.
The xA hasn't had the same impact. It appeals more to single moms on a budget.
The tC is proving an able opponent for the class bully Honda Civic coupe.
Among the product complaints: not enough power in the xA and xB, which have wheezy 108-hp four-bangers. Cabin interior noise in the brick-shaped xB is a frequent complaint. Customers also want high-line features such as cruise control and leather seats.
But customers love the port-installed accessories, such as the LED interior lighting kits, Bazooka subwoofers, Hotchkis strut tower bars and AEM cold-air intakes.
Scion also is a bean-counter's dream. Despite the marketing costs to launch the brand, the product costs for the xA and xB mostly consist of federalizing Japanese domestic vehicles for the United States and jazzing up the vehicle interiors. The tC is a ground-up modification of an existing platform.
B-
Vehicle quality
Scion got ripped on this year's J.D. Power Initial Quality Study, scoring fourth-worst. The vehicles weren't falling apart, but Generation Y is a fickle group on squeaks and rattles.
"They have the same expectations for a $15,000 Scion that older customers have for a $50,000 Lexus," says Scion Vice President Jim Farley, recounting a letter from a grumpy tC owner who complained of moon-roof wind noise at 115 mph.
A-
Marketing
Scion smartly avoided a big national advertising launch, instead going small scale with obscure magazines and targeted Gen Y TV. By limiting the number of eyeballs, it has prevented older buyers from co-opting the brand, which happened to the Honda Element, Spinella says.
Scion avoided putting its name behind established rock music festivals such as Lollapalooza, "because who wants what Jeep sponsored last year? We didn't want to buy an existing property and slap our name on it," Bolain says.
Instead, the brand put its weight behind sponsoring as many as 70 small nightclub shows every month for up-and-coming deejays.
Scion representatives at auto shows carry Blackberry handhelds, which can upload specific requests for information from interested customers directly to Scion headquarters or the nearest dealer.
Advertising will shift in the spring to emphasize the personalization that the vehicles allow, Farley says.
B-
Market reach
A brand on a budget, Scion made do with launching mostly in large urban markets, sometimes at the expense of the secondary suburbs. That will change during the next six months, Bolain says.
Scion will extend its urban test-drive events to suburban areas. It also will conduct test drives on military bases and sponsor entertainment for the troops, he says. "Where you live does not dictate your personality type," he says.
C
Sales experience
Generation Y is keen on configuring vehicles online, then picking them up at dealerships. Scion holds bare-bones vehicles at port, then customizes them when customer orders are received. That idea has been successful, as has Scion's no-haggle pricing policy.
But when the customer has to go into the F&I office in the adjacent Toyota dealership, satisfaction scores have plummeted.
?
Service: Incomplete
Because there are so few units in operation, it's too early to tell how Scion owners react to taking their cars into a Toyota dealer's service drive. But Scion customers have Lexus-like expectations in this aspect as well, Farley says.
Expect Scion to introduce menu pricing. It also will require dealers to provide clear explanations of services performed and service manager sign-offs if no problem was replicated following a customer concern.
?
Future products: Shows promise
Scion will stay in similar segments and is not looking to expand into sport wagons or SUVs. Jim Press, COO of Toyota Motor Sales U.S.A. Inc., doubts there will be another boxy car to replace the xB.
"The next generation will have the same kind of impact on the market, but without just copying existing vehicles," Press says.
Stay tuned.
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