Toyota Predicts Scion Sales to Fall in 2007

PALISADES, NY – Despite two new product introductions, Scion sales will drop just over 10% in 2007, says Steve Haag, corporate manager for Toyota Motor Corp.’s entry-level brand.

Haag forecasts Scion will finish the year with sales of about 150,000 units vs. 170,000 in 2006, attributing the decline to the xA’s production halt at the end of December.

About 1,500 xA units remain in inventory, he reveals. But with the recent introduction of a second-generation xB, and the all-new xD arriving in showrooms in August, Haag predicts Scion sales will bounce back to 170,000 units in 2008.

The ’08 xB went on sale in early May. The manual version has a base price of $15,650, not including destination charges. The automatic model is about $1,000 more.

But Haag notes the average Scion customer spends about $1,000 on options. There will be 40 accessories available at launch.

Haag forecasts that the average transaction price of the xB will be about $17,500-$18,000 and says all Scions sell near the asking price.

The xB had a strong order bank before it went on sale, the Scion sales chief says. But he predicts that only 3,000 xBs will be sold in May because it was available only for three weeks of the month.

Scion to sell 5,000 units of its redesigned xB each month through 2007.

He forecasts sales will average about 5,000 units per month during the remainder of the year.

Job 1 for the xD will occur during the last week of June at Toyota’s plant in Takaoka, Japan, which also builds the Yaris, the auto maker’s core-brand entry-level subcompact.

The xD will not be available in Japan, but Haag says Toyota is mulling sales of the model in Europe. “It’s possible,” he says.

The first xDs will arrive here in mid-July. Sales will begin in August. “We will do a soft launch,” Haag says.

The production schedule provides for prioritizing East Coast units to offset travel times. He expects each Scion dealer to have one or two vehicles on the showroom floor when sales commence.

Only 950 of the 1,225 Toyota dealers are franchised Scion outlets. He says the Toyota dealers who passed up the opportunity to sell Scion probably didn’t want the overhead of separate showrooms that are required for the brand.

Haag admits he would like to have fewer Scion dealers but can’t bar Toyota franchisees that want the additional brand.

Scion showrooms are required to be in a separate space from where Toyota models are displayed.

Haag says Scion enjoys a high customer loyalty rate. About 45% of Scion customers return to the brand.

About 80% of Scion customers are new to Toyota showrooms. Up to now very few Scion buyers have moved up to Toyota models, but Haag expects that percentage to grow.

Only 1% of Scion customers have moved up to Lexus.

Slightly fewer than half of Scion buyers are women, he says, predicting 58% of xB buyers will be male.

Scion targets the young urban buyer who would not otherwise shop for a Toyota. “Viral marketing” is required to reach these buyers because they do not usually watch conventional TV broadcasts.

“TV doesn’t work well for us,” Haag says.

That’s why Scion is reducing its spending on TV advertising and shifting more money to the Internet and other promotion schemes.

“We’ll continue to do some national TV, but it’s not a big part of our budget,” Haag says.

He says Scion will sell about 80,000 tC models this year, 40,000 xBs and 20,000 xDs. When it bounces back to 2006 sales levels in 2008, Haag expects tC sales to be about 75,000 units annually, with 60,000 xB sales and 40,000 xD sales.

Haag predicts that Scion sales won’t grow significantly by the end of the decade. “We would need additional products to break the 200,000-unit mark,” he says.

There has been a lot of speculation about future Scion models. There is no pickup in the works or even a small car, he says.

“We want to look at unique products to fill a small niche,” Haag adds.