by FP Staff Apr 4, 2013 02:45 IST
DETROIT (Reuters) - Toyota Motor Corp (7203.T) executives are weighing repositioning Scion as a line of premium small cars as they debate the youth brand's future in the United States.
A decade after its launch as a way to lure younger buyers into Toyota showrooms, Scion is still a work in progress as it looks to rebound from low sales during the recession. The brand is a relatively small seller for Toyota, with its five models selling 73,500 vehicles last year. That compares with Toyota's four-car Prius line, which sold almost 237,000.
The Japanese automaker's top executives concede that Scion is at a crossroads of sorts.
"There's still debate on where we should go from here," Jim Lentz, Toyota's newly appointed chief executive of North America, told Reuters in a recent interview.
"One of the alternatives is we've always felt that there's going to be a big segment created of premium small cars in the U.S.," he added. Lentz cited the push by the German luxury brands into lower-cost entries such as the Mercedes-Benz (DAIGn.DE) CLA that will sell for less than $30,000.
As part of the effort to boost sales, Scion at the New York auto show last week showed off a redesigned tC coupe that will go on sale in late May. However, the brand's future is already being discussed and options include adding a hybrid vehicle, a crossover or even a four-door sedan.
"Any of them could happen," Lentz said.
Scion's sales total last year was less than half of its 2006 peak, but far improved from 2010's nadir of about 46,000 vehicles. Officials expect to sell about 80,000 this year and research firm LMC Automotive forecasts the brand to hit 108,000 in 2020, but company officials insist the brand has never been about the numbers.
Introduced as concept vehicles at the New York show in 2002, Scion began selling cars the following year with the idea of appealing to Generation Y buyers who perceived Toyota vehicles as too stodgy. The brand's buyers are 37 years old, on average - the youngest in the industry - compared with age 50 for Toyota, and 75 percent of Scion buyers are new to the Toyota family, company officials said.
What Scion - whose name means "heir" and which refers to the brand's cars and owners - stands for remains unclear to many analysts and consumers, however. Some industry analysts were confused last year when Scion introduced the FR-S sports coupe at a higher price than the brand's other four models.
"Toyota still hasn't found its feet with Scion," said Art Spinella, president of research firm CNW Research. "They're still hunting and pecking around, trying to figure out what the heck the darn thing is."
FORK IN ROAD
Lincoln Merrihew, auto analyst with Compete, a unit of WPP Plc's (WPP.L) Kantar Media, said Scion is "at a fork in the road."
Is the brand all about sporty coupes like the tC and FR-S that go in and out of fashion relatively quickly? Or is it quirky, yet functional boxy vehicles like the xB wagon, he said. Scion also sells the xD four-door hatchback and iQ urban minicar.
Most Scion vehicles range from about $16,000 to $20,000. The FR-S, which starts at $25,000, is a strange fit in the portfolio for many analysts, some of whom insist the car would be a better fit under the Toyota brand.
Rapidly expanding Scion does not seem to be in the cards. "If we could add a sixth, we can probably manage that. I don't see us doing 10," Scion Vice President Doug Murtha said at the New York show.
As the market changes, however, so might Scion, Lentz said. That discussion is not new.
"The Prius C, quite frankly, could have been a Scion product," he said. "We kind of debated which channel makes more sense." The car was placed with Toyota in the end because younger buyers favor better audio systems or wheels, and it made more sense financially to market all the Prius vehicles together.
Toyota's mistake with Scion was targeting a young demographic instead of creating a brand that appealed across many demographics with a common psychological pull like BMW's (BMWG.DE) Mini cars, LMC senior analyst Joe Langley said.
"Toyota still needs to develop a more clear identity and direction for the brand," he said. (Editing by Matthew Lewis)
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