Why Toyota’s Scion brand may sell more cars after it’s dead and buried – CNET
On Wednesday, Toyota announced plans to shutter its long-struggling Scion brand, putting an end to an experiment that started 13 years ago. That the Japanese auto giant decided to wind down its long-struggling division was not a surprise. However, the timing was.
After enduring several years without new products, Scion dealers finally netted some fresh metal: the entry-leveland , both of which arrived last fall as 2016 models. Further, Toyota had recently confirmed Scion would receive a new small crossover based on its , and it was widely expected to quickly become Scion’s best-selling model.
But there may be a silver lining to this black eye. Most of Scion’s product range won’t die with the folding of the brand, they’ll be absorbed into Toyota’s model lineup. And that’s where things could get interesting, because even if only their emblems change, some of the rebadged models will very likely sell better than they did as Scions. According to Stephanie Brinley, a senior analyst at the industry forecasting firm IHS Automotive, “There is a very strong likelihood that at least some of the Scion products see better sales performance under the Toyota brand than they did as Scion brand — this may be especially true if Toyota is able to incorporate some of the sales and service elements from Scion.”
There are a number of reasons to think that Scion’s sales picture may be rosier after the brand dies. Those factors include Toyota’s far superior brand awareness and its reputation among car shoppers. It can take decades to seed a new automotive nameplate in the eyes of the buying public, and Scion lost most of its marketing budget years ago, back when sales slackened. Consequently, there are a large number of consumers who simply don’t know about the brand at all.
A 2014 Consumer Reports brand perception study charting auto brand awareness across seven categories corroborates this notion. Toyota topped the survey with a score of 145, the best of any automaker. Scion? It finished near the bottom, with a score of just 17. As Brinley notes, “The resources that Toyota had been allocating to support the Scion brand can be brought to bear with the Toyota brand, with impact likely greater than the input. Toyota has a broader audience than Scion did, which inherently means a broader pool of potential consumers.”
There’s also the simple matter of the number of sales outlets — Toyota has more of them, with over 1,200 dealers to Scion’s 1,004 franchises. That means more people will have the chance to see these rebadged models, even if they’ve come in to test drive a Corolla or Camry. In fact, at least one company official suspects the brand may have actually have been hampered by its parent company. Scion’s communications manager, Nancy Hubbell, agreed it’s possible that some model sales will improve under Toyota, noting, “Scion was competing against some of the biggest brands of the industry –including Toyota — to get recognition.”
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(Side note: Scion was laughably “overdealered.” Its 1,004 showrooms lived off sales of just 56,167 units in 2015. That works out to 4.7 vehicles sold per dealer per month — and that’s with seven distinct model ranges in the Scion family. For perspective, Toyota sold 60,063full-size sedans over the same time period, and it’s considered a modest seller.)
As far as what vehicles will make the transition to Toyota, starting in August, the FR-S coupe, iA and iM will arrive in Toyota dealers wearing 2017 model year designations. Scion’s long-runningwill end production at the same time.
The aforementioned C-HR crossover will slot in below the, giving Toyota an overdue foothold into the exploding small crossover SUV market. As Brinley notes, “The C-HR may be much more successful as a Toyota — in part because Scion was not a brand one would expect to consider when looking for an SUV.”
Fellow analyst Dave Sullivan, manager of product analysis for industry research firm AutoPacific, concurs, noting that Scion’s closure was “probably overdue,” and he found some logic in the timing of the announcement, noting, “They didn’t want to have to launch this thing [the C-HR] twice, once as a Scion and again as a Toyota.”
There could be other benefits to axing Scion, too. Toyota built its reputation by offering thoughtfully designed, safe and reliable products, but that’s come along with a sheen of dullness, something that CEO Akio Toyoda, has been vocal about wanting to change. Absorbing the rear-drivewill mean Toyota dealers have a sports car to sell again, and, as Hubbell notes, “[it] will definitely add a youth and sports element to the lineup that they [Toyota] don’t currently have.”
On the flip side, Toyota’s dealerships will suddenly have a lot more models to make room for, and those storefronts that weren’t already paired with Scion franchises will likely find themselves space constrained. That could force affected dealers to limit the number of examples of each vehicle line they keep in stock, which could lead to fewer sales of some models.
In addition, the consolidation effort will suddenly find Toyota overrepresented in small cars, with four distinct models: iA sedan, Yaris hatchback, iM hatchback, and the Corolla, America’s second-best selling car. Inexpensive small cars have faced tough sales sledding recently, as cheap gas prices and greater availability of inexpensive SUVs have pulled buyers out of the segment.
Sullivan sees the potential for a sales increase with Scion models, but cautions, “We don’t know what their pricing or trim levels will look like… they could make them more expensive and they may not be as good a value proposition as they are today.”
In the end, closing a car brand is never an easy process, but turning out the lights at Scion will almost certainly be much easier for both Toyota and its franchisees to stomach than it was for other companies that have had to close divisions in the past. This isn’t a similar situation to General Motors closing Hummer, Pontiac or Saturn during its bankruptcy, or even Ford phasing out Mercury. Scion has no standalone dealers, and by and large, Toyota’s dealership base is extraordinarily healthy.
Neither IHS Automotive nor AutoPacific have published updated sales forecasts yet, but if former-Scion models do end up registering sales gains in the coming years, they’re unlikely to be massive.
Even so, it’s ironic that closing Scion may end up being the best thing that ever happened to the brand’s vehicles.