This Is Not Your Father’s Toyota
Toyota Motor Corp. is the world’s most profitable automaker. Its vehicles command premium prices, its broad product lineup rivals those of Ford Motor Co. and General Motors Corp., and its 11% U.S. market share is a record for an import brand.
Yet one thing Toyota doesn’t have is a young following. Its average buyer is 50 years old, right up there with the aging baby boomers who favor Ford, Chevrolet and Pontiac models.
So last month, Toyota launched a brand in California called Scion. The goal: to lure Generation Y shoppers who otherwise would steer clear of Toyota dealers.
How successful Scion is could say a lot about Toyota’s future.
“There’s not a whole lot of segments that Toyota hasn’t tapped into in the U.S., but they have this aging buyer profile,” said Jeff Schuster, director of national auto market forecasting for J.D. Power & Associates in Detroit. “Without the youth market, their growth years are probably behind them.”
Attracting younger buyers isn’t easy. The company’s own research shows that the Toyota name tends to leave under-30 consumers cold.
“They tell us that Toyota is for their parents,” said Jim Farley, 41, Scion division vice president.
That’s why, in a nod to the influence that West Coast cool has on young consumers, the first Scions are being sold only in California until a state-by-state rollout begins in February.
The first models -- a tall, narrow, four-seat van-like wagon called the xB and a more mainstream five-door hatchback called the xA -- are priced for young budgets. The xA with five-speed manual transmission goes for $12,965. A similarly equipped xB fetches $14,165.
Toyota hopes annual Scion sales will hit 100,000 units in 2005, when all of its dealers are on board and a third model, a sports sedan, is available.
The company is aiming for a low-key sales pitch and wants dealers to set up Scion showrooms as separate islands within larger Toyota dealerships. Toyota also wants to encourage would-be Scion buyers to “design” the cars themselves by ordering from a list of 40 options that include radios, under-the-dash mood lights, alloy wheels, turbochargers to beef up the small engines, decals, aluminum brake and clutch pedal covers and other eye-catching gadgets.
The Scions are outfitted to order at Toyota’s port facility in Long Beach and shipped to dealers in a few days.
If the Scion brand is a hit, it would help Toyota as it tries to pass Ford this year to become the world’s second-largest carmaker in terms of units produced. Ford is cutting production by an estimated 14% this year because of falling sales, and analysts say Toyota is likely to take over second place.
But in typically conservative Toyota fashion, the Scion rollout begins with an inexpensive line of vehicles based on models already sold in Japan -- the bB and the ist. They are reworked to meet U.S. safety requirements as well as to appeal to Americans’ tastes in handling and interior design.
Using vehicles already in production overseas cuts Toyota’s financial risk dramatically, analysts say. If Scion doesn’t draw enough younger buyers, the company won’t be out the billions of dollars it takes to develop cars from scratch.
Since the Scion launch June 9, 105 of the state’s 133 Toyota dealers have been selling the new models. They reported 1,351 sold through the end of June.
Analysts say that’s an impressive start, given that only 80 dealers have set up separate Scion showroom areas so far and that Scion is advertised mainly on the Internet and in lifestyle magazines aimed largely at young men -- many of whom can’t even pronounce the name correctly, dealers say. (For the record, it’s “Sigh-on,” not “Ski-on.”)
Last month the xB wagon outsold the hatchback 2 to 1 and pulled in the youngest buyers, according to dealers.
“I just liked the boxy look,” said John Pangilinan, a 23-year-old sales representative for a La Mirada auto parts maker. He bought an xB at Longo Toyota-Scion in El Monte the first week they went on sale. “I have a BMW I use for a show car, and I needed an affordable daily driver,” he explained.
Last weekend George Vargas, a 27-year-old Anaheim truck driver, was looking at an xB at Toyota of Orange/Scion of Orange. He is married, with two young children, and said he was interested in the van for its size, capacity, price and uniqueness.
“It doesn’t look like what everybody else is driving,” he said.
He was impressed by the vehicle’s handling and performance in a test drive, even though some analysts have criticized the xB’s 108-horsepower, four-cylinder engine as too small for buyers raised on auto racing video games and movies such as “The Fast and the Furious.”
“It’s not a race car,” Vargas said, “but I was driving the automatic and it did all right on the freeway. I wasn’t worried about not having enough speed, and there were four of us in it.”
Vargas didn’t buy that day, though. He worried that the xB might be “too out there” to hold on to resale value.
Still, Vargas hadn’t considered buying a Toyota before, so just getting him into a dealership was an accomplishment.
The automaker is encouraged because 60% of Scion buyers last month were new to Toyota.
“That’s critical,” said Wes Brown, auto industry analyst with Nextrend, a market consulting firm in Los Angeles.
“There’s still a big issue here,” Brown added. “If you are a hip and trendy twentysomething, are you going to want to go anywhere near a Toyota dealership?”
