Scion Has Toyoda’s Support, Sees Improving Youth Buying Power

LOS ANGELES – Long suffering from a dearth of new product, Scion says it has won a commitment of resources from the very top of Toyota.

“To be honest, we forced that discussion (of needed resources) up to the highest levels of Toyota, to Mr. (Akio) Toyoda himself,” Doug Murtha, senior vice president-Scion, tells WardsAuto here in an interview.

Murtha says Scion laid out its needs to Toyoda, company president, and he said “very clearly, ‘We’re going to continue to support this brand. We understand you’ve been left out in the cold a little bit.’”

Murtha says it was an important message for Scion’s middle managers to hear, as they too had been concerned about the brand’s future.

Scion began as an experiment by Toyota in 2003 to draw in a younger buyer the Toyota brand was failing to capture in the U.S.

With products such as the first-generation tC coupe and xB box, Scion initially saw rousing success. U.S. sales reached their pinnacle in 2006 with 173,034 deliveries, WardsAuto data shows.

But the global economic downturn and Toyota’s own woes, including a large-scale recall and natural disasters in Japan and Thailand, delayed or outright canceled many Scion product programs, as product-development engineers were reassigned to quality-reinforcement activities, says Murtha.

A double-whammy, in the form of high student-loan debt and unemployment among the younger buyers Scion targets, tempered sales of existing products.

Despite statistics showing student-loan debt at historic levels, Toyota North America CEO Jim Lentz is hopeful the younger demographic has turned the corner.

“I think if they are hampered at all today about purchasing, it’s ability, not desire, and that’s a good thing because I think ability will change over time,” Lentz tells WardsAuto in a separate interview in Newport Beach, CA. “At some point in time the economy will get stronger. At some point in time those of us older boomers will start retiring and we will be making room for these younger Gen Y buyers to come on and have higher-paying jobs.

“Lifestyles will change and life stages will change and they will be buying more and more cars,” Lentz continues. “So I think (car purchases have) just been delayed. I’m not concerned about that long-term.”

Lentz says statistics show buyers under the age of 35 are one of the fastest-growing demographic groups in the auto industry, with the volume of under-35s set to account for a quarter of all sales in the next couple years, and 40%-50% of new-car purchases by 2020.

“So I think they did hit that wall (in terms of financial wherewithal)…but despite that, in about a 6-year time period, (under-35 buyers are) going to move almost 14 percentage points in the (share) of new-car sales.”

To help younger, cash-strapped and credit-poor buyers get into a new Scion, Murtha says the brand continues to offer discounts to college students and has extended its Tier 1+ APR financing rates to those with poorer credit ratings.

“We take our APR rate and extend it from Tier 1+ all the way through Tier 3, so we’re hopefully capturing 85% of the market with that offer,” Murtha says.

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