Toyota is killing its youth-oriented Scion brand after learning an important lesson: Young buyers simply want Toyotas.
Scion was formed in 2003 to court Generation X buyers, who didn't like their parents' brands and didn't trust traditional marketing, says Bob Carter, Toyota Motor Corp.'s senior vice president of U.S. operations. It was known for its funky designs, like the boxy xB, and was the brand Toyota used when it wanted to experiment with new kinds of marketing, like pop-up test drives or no-haggle pricing.
But as those buyers matured, they started buying Toyotas.
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Next came the Millennials. For a while, that generation delayed car buying because they were underemployed and had too much student debt. But when they did buy, they liked their parents' brands and wanted Toyotas, too.
"For those buyers, frankly speaking, Toyota as a brand is more aspirational than Scion was," Carter said. Carter said Millennials made up nearly one-third of the Toyota brand's buyers last year.
There were other issues with Scion. The small, oddball lineup never connected with buyers and cost a bit more, since features like touchscreens that were optional on other cars came standard on Scions. Scion's best-seller, the tC coupe, starts at $21,330, or $2,600 more than a Honda Civic. Scion also doesn't have any SUVs, which are rapidly becoming the most popular style of vehicle in the U.S.
At the brand's height, in 2006, Americans bought just over 173,000 Scions. In 2015, they bought 56,167. By comparison, Toyota sold more than 363,000 Corolla sedans last year.
So, beginning in August, 2017 model-year Scion vehicles will be rebadged as Toyotas. The FR-S sports car, iA sedan and iM 5-door hatchback will be a part of the Toyota line-up. So will the C-HR, a small SUV concept shown at the L.A. Auto Show that Toyota will likely make. The tC coupe will have a final release series edition and end production in August, according to Toyota.
Toyota says it achieved what it had hoped with the Scion, including attracting younger buyers. Half of the 1 million Scions sold were bought by people under 35, Carter said, and 70 percent of those buyers were new to the Toyota family.
Katie Seals, 22, was new to the Toyota family when she bought a Scion xD subcompact about five months ago. Seals, a television reporter, lives near the beach in San Diego and wanted something easy to park. She also wanted something reliable but thought the Toyotas and Hondas she looked at were dull. And she loved the xD's sound system.
Toyota may not keep buyers like Seals. She said she liked having something different, and would probably look around at other brands when it comes time to buy again.
Carter said the company will bring some of its experiments at Scion to its other brands. The Toyota Care maintenance program, which provides two years of free maintenance, originated with Scion, he said. Lexus is currently running a no-haggle pricing pilot borrowed from Scion, and Toyota will soon offer an express purchase program. Scion taught Toyota that consumers want transparent pricing and want to spend less time buying.
"Scion was the test bed," Carter said.
Sarah Wall, a 39-year-old marketing and communications executive in San Francisco, said she bought a Scion xD in 2010 because of the no-haggle pricing policy. The car is distinctive, easy to park and has low maintenance costs, she said.
Wall said she's "devastated" that Scion will no longer be a separate brand. But she says she would consider a Toyota in the future, especially if the brand adopts no-haggle pricing.
Toyota's decision will have minimal impact on dealers and owners. Scion, which is only sold in the U.S., Canada and Puerto Rico, has no stand-alone dealerships. The brand is sold through 1,004 Toyota dealerships, which will continue to service the cars.
It's not unusual for automakers to kill a brand or pull it out of a particular market. Ford Motor Co. killed its Mercury brand in 2010, and multiple brands, like Izusu and Renault, have left the U.S. market. But Kelley Blue Book senior analyst Karl Brauer said this is the first time a U.S.-specific brand launched by a Japanese manufacturer has been scrapped.
Brauer says Scion was a victim of the success of the Toyota brand. The Toyota Camry sedan has been the best-selling car in the U.S. for 14 years, and the brand has a full lineup that appeals to Millennials and Baby Boomers alike.
Scion's demise doesn't necessarily spell trouble for other small car brands, like BMW AG's Mini or Daimler AG's Smart, said Ivan Drury, an analyst for Edmunds.com.
Those brands differentiated themselves from their parent brands more than Scion ever did, he said.