Scion seeks second wind; Observers say innovation needed; line is to expand

Through October, Scion’s U.S. sales have fallen a resounding 50.6% versus 2008 — far more than Toyota’s corporate decline of 23.2%, worse even than the Chrysler Group’s 38% freefall.

Outsiders suggest the brand created to revitalize Toyota’s stodgy image may have lost its way, but Scion plans to expand its lineup and replace its mainstay tC coupe.

Scion debuted with hoopla in 2003. Developed by a team of young Toyota executives, Scion promised to sell a new kind of car in a new way.

The cars would be small, inexpensive and above all, cool. They’d win a new generation of buyers who dismissed Toyota as their parents’ car. Scion took guerrilla marketing corporate, teaming the appeal of indie rock bands with the engineering and sales savvy of the world’s most profitable automaker.

Scion launched with two cars: the xA, a little hatchback that never sold well, and the xB, a funky little box that quickly became the brand’s icon. It added the tC, which joined the xB as a second hit for the brand, in 2004.

Scion’s first act was a success, but it stumbled with the encore. The xD hatchback sold at about the same rate as the xA it replaced. The second-generation xB grew bigger and more powerful than the original, losing much of the first car’s hip club-goer appeal.

“Scion should be Toyota’s innovation factory — always at the cutting edge of where the auto industry is headed,” said Jim Hall, managing director of 2953 Analytics in Birmingham. “Scion should reinvent itself every five years.”

Early success may have undermined those change-the-system-from-within goals. Scion sales rose steadily, peaking at 173,034 in 2006 before beginning a three-year decline. Every automaker’s sales plummeted in 2008-09, but Scion dropped nearly 25% in 2007, the last of the auto industry’s boom years.

“Scion hasn’t been a standout for any product reason,” said Mike Bernacchi, a marketing professor at the University of Detroit Mercy. “There hasn’t been much innovation from Scion vehicles. It made an early splash, but hasn’t shown great legs.”

There’s a disconnect between Scion’s cars and its marketing message, said Rebecca Lindland of IHS Global Insight.

“Generation Y,” the 25- to 31-year-olds Scion targets, “doesn’t like to be patronized,” Lindland said. “You can’t force guerilla marketing onto a product that doesn’t appeal to them any more than you can give yourself a nickname.”

Scion scored some notable successes, however. The median age of Scion buyers — 47 — is second lowest among all brands, said Alexander Edwards, president of Strategic Vision, a San Diego research firm. However, it has trended steadily older since being an industry-leading 41 in 2006, he said. The median age of all new-vehicle buyers in 2009 was 54.

Scion’s internal figures show a lower median age, and three-quarters of Scion buyers are new to Toyota Corp., said Scion Vice President Jack Hollis. “We have the youngest customers in the industry.

“Scion’s not about sales totals,” Hollis said. “It’s about getting a new type of customer.”

Scion was initially conceived to have a two- or three-vehicle lineup, but it’s going to grow.

“My goal is to expand,” Hollis said. “There’s no way to say if it will be four, five or six models. We’ve got to figure out what’s the next type of buyer we want to reach and develop vehicles for them.”

Scion’s goal was never to keep buyers for a lifetime, but to feed them into a lifetime as Toyota and Lexus owners.

“They started with a very innovative and aggressive idea,” said Stephanie Brinley of AutoPacific. “When the first vehicles were successful, they got nervous about losing sales and lost the innovation.”

Scion’s next defining moment is to come when it replaces the sporty tC in 2010.

“Creating a brand to feed buyers into Toyota and Lexus is risky,” Lindland said. “If it doesn’t work, you’re committed to a brand that loses money. We’re not sure how many additional vehicles Toyota has sold because of Scion.

“Just because a brand has a mission, that doesn’t mean it will succeed.”

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