Toyota’s youth brand fulfilled its purpose, if not its potential

Scion Vice President Andrew Gilleland introduces the CH-R concept in November at the Los Angeles Auto Show. The closure of Scion spares Toyota a confusing custody battle between brands over the compact crossover.

Scion’s original idea was elegantly simple: Take affordable, efficient, quirky cars from Toyota’s global lineup and rebadge them for the United States. Wind them up and aim them at the finicky young buyers who wouldn’t be caught dead in Dad’s Corolla.

It was an experiment Toyota seemed ready to jettison at any time if things got hairy.

“This is the classroom for us,” said Jim Press, then COO of Toyota Motor Sales U.S.A., introducing the newborn brand’s two concept cars at the 2002 New York auto show. “We’re listening. Are we going to make mistakes? You bet we are.”

Fourteen years later, those mistakes led Toyota to finally shutter Scion. But within the failed experiment are crucial successes that Toyota will draw on long after Scion fades to a footnote on Wikipedia.

Toyota maintains Scion did exactly what it needed the brand to do: attract the industry’s youngest buyers and bring them into the Toyota fold. Seventy percent of Scions were bought by people who never had owned anything built by Toyota.

And yet over Scion’s brief life span, it was Toyota that ultimately became the aspirational brand for young buyers.

Fleeting youth brand Scion took off quickly, but never regained its early momentum.

2003: Scion sales start in California with the segment-busting xB and xA compact hatchback.

2004: Brand goes national and launches tC coupe, which would go on to be the brand’s best-selling nameplate.

2006: Sales peak at 173,034.

2007: xD replaces xA, but sales begin to tail off ahead of recession.

2010: Sales bottom out at 45,678; Toyota’s sudden-acceleration crisis shifts corporate attention and resources away from Scion.

2011: iQ minicar joins Scion lineup but sells weakly.

2012: Scion launches the FR-S sports car co-developed with Subaru.

2015: Brand gets first new products in 3 years: the iA, built by Mazda, and iM.

2016: Toyota announces closure of Scion, with 2017 models to be badged as Toyotas.

Last year, Scion accounted for 56,167 of the Toyota Division’s 2.1 million U.S. sales, not even 3 percent. And yet, 27 percent of Toyota Division buyers in 2015 were millennials, said Bob Carter, senior vice president of operations for Toyota Motor Sales.

If Scion was a failure for Toyota, then the automaker failed upward.

Even Andrew Gilleland, a onetime Scion field representative who just five months ago returned to run the brand, said he saw the writing on the wall.

“We were seeing people coming into stores because of Toyota, not Scion,” Gilleland said in an interview. “That got me thinking: What was the purpose of the brand at this point?”

The purpose was much clearer in 2002, when Toyota — proficient as ever in selling Corollas and Camrys to repeat buyers — was wary of becoming the next Buick, so devoted to its loyal customers that it would be unable to attract new ones.

Scion served Toyota as a proving ground for experiential, grassroots marketing efforts, such as pool parties, events at nightclubs, downloadable toolbars for Web browsers, college tours, even advertising on young people’s foreheads in Manhattan.

Youth leadership In 2015, Scion had the lowest median buyer age among major auto brands (Mazda was next, at 47 years) and the highest share of millennials, those born from 1977 to 2010 (Mitsubishi was No. 2, at 29.7%).

On the retail side, limited trims and options cut down on complexity and risk for dealers, who also were handed a catalog full of aftermarket bits for endless customization and healthy profit. Scion also introduced Pure Price, a no-haggle pricing structure on all of its models.

More recently, Scion was the first to test the Pure Process Plus online-buying concept, aimed at reducing the time a customer spends in a physical store to around an hour. The Toyota brand is planning a similar system within the year.

As for product, Scion set trends with its out-of-the-box xB and its tC coupe, which went on to become its best-selling nameplate. By 2006, the brand’s sales hit 173,034.

But the first act proved tough to follow. The global recession severely damaged the purchasing power of young consumers, and sales bottomed out in 2010. Toyota’s sudden-acceleration crisis led headquarters to conserve its resources, and over the next several years, Scion suffered through product droughts.

“When the going got tough, they didn’t stop making new Toyota or Lexus products,” Karl Brauer, senior analyst with Kelley Blue Book, told Automotive News. “But they cut off the pipeline for Scion.”

Scion finally got its product infusion in 2015: the iA subcompact sedan and the iM hatchback. But by then, its future was already in question. The motley product mix — the pricey Subaru twin FR-S sports car alongside the spartan iQ minicar and the Mazda-built iA — left it without a clear identity.

At the same time, the resurgent Toyota brand, fortified by innovative products such as the Prius, was showing up on millennials’ consideration lists more often.

Toyota, characteristically, took time to study its options.

“Two to three years ago, we still didn’t have enough data to make a decision,” said Gilleland. “Intuitively, we had the feeling, but we didn’t have enough research to back it up.”

But once the numbers on such factors as sales, buyer demographics and marketing expenses proved out, Toyota needed to act quickly. Scion’s existing products could slide easily into Toyota’s lineup with little overlap, but a more critical product hung in the balance: the C-HR compact crossover, shown as a Toyota in Frankfurt in September and as a Scion in Los Angeles in November.

The C-HR would have filled a big hole in either brand’s lineup, but launching it as a Toyota globally instead of a Scion would save it from a confusing custody battle down the road and probably lead to far higher U.S. volumes than the 36,000 annual sales Scion was hoping for, Gilleland said.

Gilleland said closing Scion was exactly what the company needed to do. “Toyota has always been willing to do stuff that’s a little uncomfortable but is the right thing to do in the long run,” he said.

That view is shared by Toyota’s North America CEO Jim Lentz, who is leading his operation through a wide-ranging reorganization and headquarters move that he says will better position the company for the future. In a video address last week, he described the Scion closure as “a leap forward for Toyota.”

Back in 2002, Lentz held the job Gilleland holds now. He calls the launch of Scion the “most exciting job” he has had in his 34 years at Toyota and a necessary step in Toyota’s evolution. Yet even then, he saw the end coming.

“Do you risk alienating the boomer buyer to get Gen Y?” Lentz said in a 2002 interview with Automotive News. “No, it’s safer to create Scion and keep the boomer buyer.

“But in the future,” he added, “we will have to integrate Toyota and Scion.”

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