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Millennials Say ‘No Thanks’ to Toyota’s Scion, Dooming Brand

Image: Cars for sale at a Toyota Scion dealer

Cars for sale at a Toyota Scion dealer in Hollywood, Calif. on Feb. 3, 2016. Toyota is discontinuing its Scion brand with the vehicles being rebranded as Toyota's. The 13 year old brand was originally conceived to attract young buyers. / AFP / Mark RalstonMARK RALSTON/AFP/Getty Images MARK RALSTON / AFP - Getty Images

If you build it … that doesn’t mean car-wary young people will come. Just ask Toyota.

The Japanese automaker, now the world’s largest, built its reputation by luring in Baby Boomers. But over the last few decades it has struggled to attract the younger buyers it needs to keep its momentum going. In 2003, Toyota came up with a possible answer: a new brand dedicated specifically to Gen-Xers.

Rolling out an assortment of quirky products, such as the square-as-a-box xB, the new Scion division proved an immediate success, boosting sales and creating sought-after word-of-mouth from hip, young opinion leaders. By 2006, Scion sold a record 173,034 vehicles — but it was a peak off which the brand-within-a-brand would quickly take a nose dive.

Even with the U.S. auto industry setting an all-time record last year, Scion sales plunged to just 56,167. That was down from 58,009 in 2014 — despite the addition of a string of well-reviewed new products, including Scion’s first-ever Scion, the little iA.

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Despite having several more new products in development, including what was to be Scion’s first utility vehicle, parent Toyota decided it was time to pull the plug. Scion will vanish at the end of the 2016 model-year.

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“This isn’t a step backward for Scion; it’s a leap forward for Toyota,” said Jim Lentz, the CEO of Toyota North America who, earlier in his career, had been the first general manager of the youth-oriented brand. “Scion has allowed us to fast track ideas that would have been challenging to test through the Toyota network.”

This isn’t the first time a carmaker has tried — and failed — to create a brand aimed at youthful buyers. General Motors launched the Saturn a quarter-century ago with a handful of inexpensive subcompact models. It was a smash hit, at least initially. But declining demand led the maker to kill off Saturn, along with three other brands, when it emerged from bankruptcy in 2009.

An even more direct comparison can be made to another failed attempt by GM. Like Scion, Geo was a brand-within-a-brand. Instead of creating standalone showrooms, it was sold out of Chevrolet stores. (Scion products were sold through regular Toyota dealerships.)

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Geo also offered a range of small, inexpensive models developed for GM by several Japanese affiliates. That included the Metro minicar, made by Suzuki, and the slightly larger Prizm supplied by Isuzu. Demand soared — at least for the first few years after Geo’s launch in 1989. But the bubble quickly burst, and Geo was gone by 1997.

Toyota, it seems, made many of the same mistakes GM did with Geo, according to analyst Stephanie Brinley, of IHS Automotive.

For one thing, it went back on its original mission plan. Scion’s idea was to introduce a string of youthful products that wouldn’t normally be expected in Toyota showrooms. And they weren’t supposed to last long, constantly being replaced by other new models.

But buoyed by the success of its original box-mobile, Scion decided to produce a second-generation xB. It went through too many focus groups, suggested analyst Brinley, and the new version was a dud.

“It failed because it wasn’t supported the way it should have been,” said Brinley. “It needed constant product and attention to keep moving,” but it just didn’t get that. And Toyota did little in the way of creative marketing and advertising to help the Scion establish a clear and distinct identity in the marketplace.

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Timing wasn't on Toyota's side, either. Scion’s sales peaked just before the auto industry went into a deep recession that bankrupted Chrysler and GM — the latter killing off not only Saturn but Hummer, Saab and Pontiac, as well.

Millennials were especially hard hit by the Great Recession. With unemployment rates substantially higher than for older peers, they were more likely to remain living with parents or to share city apartments, data show. And they were far less able to afford new cars.

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Nor, apparently, did they want them. A study released last week by the University of Michigan Transportation Research Institute found that fewer young adults are getting drivers licenses than at any time in the last three decades. Among those aged 20 to 24, just three in four were licensed as of 2014, down from more than 90 percent of that age bracket back in 1983.

Other factors appear to have played into Scion’s demise. The brand may have worked for Gen-Xers, but it failed to connect with Millennials, who are less interested in finding vehicles that might almost be considered anti-establishment, suggested Michelle Krebs, an analyst with Kelley Blue Book.

While Scion will soon be gone, some of its products will live on. The new iA sedan and the iM hatchback will carry Toyota badges for the 2017 model-year, as will the little FR-S sports car developed as part of a joint venture with Subaru.

It’s an expensive and energy-consuming proposition to start a new brand and keep it viable, said analyst Brinley. She expects the Japanese maker will do a better job of connecting with Millennials by working within the well-established Toyota brand.