Toyota has rightly been put on a pedestal as the example of what a late 20th / early 21st century volume automobile maker should be.
Its rise in contemporary times has been meteoric, globally recognised and respected, from the African taxi-bus driver in a 20 year old Hiace van to captains of industry who glide through New York’s Upper East Side in the new LS600h L hybrid.
The Toyota brands burgeoning domination of the mainstream segments (LM, M, L, then S) was in 1989 joined by Lexus to tap into the growing premium segment. The Lexus story - from inception to delivery and onto today -has become the veritable case-study of automotive industry success; now enjoying the highest volume sales of any premium car-maker.
Hence the Toyota and Lexus lineage of doing things right gave immediate confidence to the financial markets and industry observers when the corporation announced its youth orientated ‘Scion’ brand in 2003. The “Son of” Toyota was created to appeal to the distinct Generation Y-ers who were rejecting Gen-X and previous demographic populous’ values and traits. Scion was to be a targeted, tribal-driven, community-minded option straight out of ‘left-field’ for the a reactionary rejecting youth that wanted anything but mainstream and common…something far more personal and ideally co-created, it’s origins in California the trend heartland of the US, and from their to ideally go global.
Of course that ideal of ‘co-creation’ is not peculiar to Scion, it’s been part of the philosophy (step by step growing in fundamental engagement) behind 1997 New Beetle, 2001 New Mini and 2007/8 New Cinquecento. But unlike VW, BMW and Fiat, Toyota and Scion have – without iconic product history – tried to develop something that does not lean on past glories and halcyon yesteryears. Instead the brief was to create for a new consumer from a blank canvas, not just focusing on product design but also on utilising the potential of the web to create platforms for tribal interfacing, discussion and bonding, so building the cultural web. (In this regard it’s an evolved version of GM Saturn’s face-to-face ‘Saturn Family’ efforts in the early 90s)
The start was impressive, the radically boxy and space efficient bbX concept was very original to American eyes but was in fact a re-modelled near production ready version of the Japanese bB. So here was Toyota bringing something original to the table, unlike the US Big 3, VW, other Japanese and Koreans. Whilst initial interest was very positive attracting much attention and sales, the developing product range was far more conservative since they were (like the xB but not as original) adaptations of Japanese and European models; hence much of the initial Scion flavour was being, not distilled and improved, but watered down. The current car range consists of (‘angular’ small) Gen2 xB, (‘soft’ compact) xD and (‘soft’ compact coupe) tC – in our opinion the latter 2 of the 3 nigh on aesthetically conventional….the (soft small) xA discontinued
But for all the effort in trying to maintain that original marketing punch, it has decidedly gone off the boil as sales have markedly dropped over the last 16 months (on a YoY basis). What was supposed to herald a new era of Toyota-Consumer connection has had to be heavily critiqued in California and Tokyo if the sub-brand is to remain true to is ideology and roots as linking with urban trend-setters and being an “experimental social and product laboratory”. From today’s standpoint, given the influx of less than original altered and re-badged cars, and possible pressure to ‘move metal’, Scion could be accused of having become a cynical sales exercise. Especially so in these latter days of stagnant markets. But given that the compact segment is so important, Scion needs maintain and improve its stance to compete against an ever crowded marketplace with influx of smaller cars.
investment-auto-motives believes that a main failing point of Scion is the ‘reality gap’ between how the marque presents itself and its products as highly graphic and ‘cool’ and the business reality off offering base cars that look anything but highly graphic’d and cool. Much needs to be done to customise a car (obviously at a cost) to reach the Scion image nirvana. Thus many customers buy a base car and slowly, given the funding restrictions of youth users, build-up an eventually part or fully customised car. But that time lag and the real world issue of caution in spending on a depreciating asset does undermine the Scion image. This essentially means that many of the Scions seen by Gen-Yers out on the street don’t reflect the advertising.
Undoubtedly, car-specified options & accessories and after-market items direct from Scion add relative handsome margins to non-core revenues but the limited range of exterior, interior and (in reality pseudo) performance parts don’t really visually or performance-wise add much value. The real differentiator is the complete body kit, which necessitates relatively major body-shop work to spray, fit, (possibly fill), and spray-match to the receiving vehicle. Thus this key element of the Scion strategy to ‘provide the look’ is a relative rarity amongst buyers.
Equally, whilst Scion claims to be at the forefront of leading trends and apparently seeks out trend-setters, the normality is that there can’t be 130,000 pa trendsetters. By far the majority of Scion’s clients are seeking that image difference to add a style dimension to their regular lives, so they in themselves don’t reflect the ideology of the brand, and so there is a case that true trend-setters see Scion’s users as ‘vanilla wannabee’s’ from suburbia.
Hence managing this ‘reality gap’ should be at the top of Toyota North America’s Scion re-generation drive. Reducing inventories to reduce inter-dealer competition and raise unit margins has been undeniably a good move, but as reports suggest the 130,000 pa volume at today’s record US$ FX lows against the Yen, means that profitability will be tight
Toyota North America needs to:
1. Re-evaluate the basic profitability levers of the current business model
2. Properly identify the trends that can be incorporated into Scion product and lifestyle design
3. Find the magic that allows Scion to be both “niche” and “volume” to provide the high margins associated with niche and high unit turnover of volume. (The BMW 3 series, BMW Mini and Fiat 500 USPs)
Point 1 will hopefully see a detailed deconstruction and measure of the full Scion value chain from vehicle assembly to dealer methods & accessories fit to the fundamentals of the (real world and virtual world) ‘communities’ (such as 2nd Life and club-classifieds).
Regards point 2, apparently marketing executives are scanning London, Paris, Barcelona and Tokyo underground trends to pick-up on how to best evolve the stylistic element of the offering. The new concept car Scion Hako, displayed at the New York auto-show, melds the original xB boxy formula with an American-esque street rod flavour, and looks like “the son” of xB and a Chrysler PT Cruiser. From a design-strategy angle, this we hope, looks to be a quick interim show-case effort to demonstrate that Scion is indeed moving forward. (The xB + PT formula is a very obvious solution)
As for Point 3, the brand sits in a massively potentially profitable white-space between:
A. General Social Trends (fashion, web, tribes)
B. DIY Car Personalisation
C. High cost dedicated custom designers (eg West Coast Customs),
The trick is to find the key from each and integrate this into the business proposition.
With this in mind, there needs to be short, medium and long-term plans established and implemented across the board, a Product & Service Strategy that makes meaningful expansions of the brand character and infills the ‘reality gap’.
investment-auto-motives has looked at this issue and has identified critical areas for rapid, mid-term and long-stay product and service enhancement potential
In summary, Scion executives need to desperately re-assess their market position, competitor context and create stronger client links.
The competition is approaching fast with perhaps Hyundai’s Kia indicating a tailored vehicle approach, if not totally Scion-esque, to its next crop of small cars with the 3 variations of its Scion xB like ‘Soul’ car in ‘Burner’, ‘Diva’ and ‘Searcher’ guises. Beyond this near term threat is Nissan’s US only Electric powered Cube ‘box-car’ and of course the style icons of an expanding Mini range (Clubman and SAV beyond Coupe and Convertible) and Fiat 500 in various guises including Abarth.
Toyota did indeed make a market splash with Scion, and the ripples were expected to be more prosaic and long-lasting than has proven. It must now more than ever prove its present and future potential worth by radically moving the personal small vehicle game forward. Doing so before less complex & ambitious, but better directed, others smother the “son of” Toyota before he has had time to mature, both in the US and possibly internationally.
Scion was intended to eventually be the third leg of the mighty Toyota Corp in years to come, so Toyota’s financial backers, especially the heavily exposed Japanese, American, Asian and European pensions and insurance institutions must hold Tokyo and Californian management to task over exactly how a faltering prodigal son can be brought back from the edge through in-depth considerations of cost-efficiency and brand-creativity.