Wednesday, February 17, 2016

Editorial: Goodnight, Sweet Prince

Earlier this month, Toyota announced that it was giving the axe to its youth oriented Scion brand in August of this year. What happened? This is supposed to a brand that is marketed towards the millennial generation which, in theory, should have been a very profitable gamble. Scion also prided itself on a very straight forward pricing plan (what you see on the window sticker is what you pay), which also meant that Scion vehicles were generally very well equipped without having to spend all day negotiating with a salesperson. People hate dealing with shady salespeople, so this should have been great, right? I will tell you what happened that led to Scion's demise, or at least what I believe to be the reasoning behind Toyota's decision.

Image courtesy of Wikipedia
When Scion was introduced back in 2003, it was a pretty big gamble on Toyota's part to introduce a brand strictly marketed towards the younger generation (now more commonly referred to as "millennials"). Surprisingly, with the quirky initial line up of the xA hatchback and xB box on wheels, Scion did well, although not quite with the demographic that they were focusing on. Part of their success has to do with their pricing strategy, known as "pure pricing," which eschewed trim levels in favor of factory and aftermarket options to let customers personalize their own vehicle. The other reason for their success probably had to do with the uniqueness of the brand's vehicles. Scion marketed their vehicles as being sporty but practical; something that appealed to a large number of buyers, especially given the reasonable price tags and decent levels of standard equipment. With the later addition of the tC coupe for model year 2005, Scion saw its peak in sales in 2006, selling over 170,000 cars.

Image courtesy of Toyota
Scion began to see sales gradually fall in the late 2000s and by 2010, only just four years after its best sales year, Scion recorded sales of just 45,000 vehicles. From 2010 and on, Scion's sales continued to fall with only a slight uptick after the introduction of the FR-S coupe (known as the Toyota GT86 or FT86 in other markets around the world). What caused this massive fall in sales?

First is Scion's line up. As the years passed, consumers in the United States became more and more infatuated with SUVs and small crossovers, despite rising fuel costs. Since its introduction in 2003, Scion has never had and SUV or CUV in its line up. The C-HR crossover, which was originally introduced in concept form at the Paris Motor Show in October of 2014, was originally supposed to be sold under the Scion brand in the United States. Unfortunately, it is too little too late.

Second is the customer base. As many industry experts have mentioned over the years, and as my brother and I have written about in the past, millennials - saddled with massive student load debt and underemployment - have grown to care less and less about vehicle ownership. Ride sharing services like Uber and Lyft, or car sharing services like ZipCar continue to grow in popularity with millennials. With these services, and increasingly better access to public transit in many major metropolitan areas, the need to own a vehicle becomes less of a priority to millennials who find the sharing economy just as convenient, especially when their incomes can be unpredictable. As Scion was founded with the intention to market and sell vehicles to this younger audience, you can see why millennials waning interest in car ownership might serve to hamper Scion's mission. Plus, millennials that do suddenly find themselves needing to buy a car due to starting a family (or some other major life event) will most likely look at one of the many CUV and SUV options on the market as they are viewed as more practical.

I will be the first to admit that, despite being part of the millennial generation, Scion never really popped up on my radar. When Scion introduced the tC, it piqued my interest a little. After test driving it and realizing how cheaply built the car was, my interest in Scion went back down to zero up until the introduction of the FR-S years later. While the FR-S is an immensely fun vehicle to drive, it still was not quite what most millennials and SUV/CUV crazed Americans were looking for. In fact, the FR-S actually perpetuated a long-running issue with Scion, which is that the cars actually provided as much appeal to baby-boomers as it did to millennials, dampening and kind of "cool" factor Scion was counting on to help drive sales. A few months ago, I test drove the newly introduced iM hatchback (based on the Toyota Auris) and was very impressed by it. After driving the iM, and hearing about the C-HR concept, I thought that perhaps Scion was finally back on track.

Image courtesy of Wikipedia
It is a shame that Toyota ended up deciding to axe Scion instead of waiting to see how the addition of the iA sedan, iM hatchback, and C-HR crossover later in the year would affect sales. As mentioned, I thought that this line up, along with the FR-S (which is due for its mid-cycle refresh) would probably help push Scion back into sales relevance. What does this mean for the current Scion lineup? The FR-S, iA, and iM will retain their model names, but be sold under the Toyota brand name. Rather than debuting as a Scion model, the C-HR will make its debut as a Toyota. As for the tC? It is getting the axe along with Scion itself.

So what can we take away from Scion's rise and fall in the American automotive landscape? Marketing your cars to one specific generation, despite the lack of actual popularity among that generation, may not be the best business plan, especially if you do not adapt to changing consumer tastes quickly. I will be a little sad to see Scion go, especially since my image of the brand was just starting to change for the better.

And so I say to Scion: Goodnight, Sweet Prince. You will be missed...sort of.