With Scion Dealers, Less May Be More, Toyota Says

FARMINGTON, PA – With a robust 1,000 U.S. dealers in the U.S., only 200 less than big brother Toyota, Scion is thinking fewer showrooms may be better.

Scion’s dealer tally “might actually go down a little bit,” Bill Fay, U.S. group vice president-Toyota Div., tells WardsAuto here.

Toyota now is asking itself, “Do we have too many (stores), do we have the right amount?” Fay says, conceding Scion “probably has a few too many at this point.”

The executive, who oversees both Toyota and Scion brands, says he and his team will “continue to look at (store viability) on an individual basis with Scion dealers, their long-term plans and whether they want to continue to represent us with the franchise.”

A decade ago, with Scion just beginning its coastal rollout before expanding nationally in 2004, management spoke of wanting a small dealer footprint, with the desire to focus stores on hip, urban areas in order to draw the younger buyers targeted by its xA subcompact, xB box and tC coupe.

But Scion locations quickly spread across the country, as Toyota dealers saw a money-making opportunity when demand for the brand’s vehicles skyrocketed in the middle of the last decade.

In a January 2005 interview with WardsAuto, then-Scion Vice President Jim Farley said the brand’s retail outlets had more than doubled from the previous summer to about 800.

In 2006, Scion sold 173,034 units, far above the niche-level volume the brand projected, and that number hasn’t been topped since. Deliveries through July were down 1.8% to 41,261.

Dave Sullivan, analyst for AutoPacific, says Scion has many more dealers than brands with similar volumes.

“Mini has about 115 (stores), Volvo has about 300, Lincoln wants about 325, Infiniti has about 200, so I would probably expect Scion to have between 350-500 but placed in more strategic locations,” he says.

Scion’s shrunken volumes mean dealers are not being rewarded for the amount of money they are spending on floorplanning, Sullivan says.

With the FR-S rear-wheel-drive sports car the only bright spot, Fay says Toyota continues to study what’s next for the Scion brand.

That could include a reported plan to go small-premium, but Fay says it’s only “on the consideration list. I wouldn’t say that’s final.”

He doesn’t see the success of the FR-S, which sold 11,635 units through July, up from 4,419 year-ago, driving the brand toward a more enthusiast-oriented focus, however.

Fay is hopeful the refreshed tC, on sale now, will boost Scion volume in second-half 2013.

“We’re looking real closely at the whole brand and the products and the cadence and where we go from that,” he says. “I think we’re in a good position with what (the) FR-S is doing, and tC, and we’ve got some work to do to finalize and finish the products that will be coming in the second half of this decade to keep the brand where we want to be.”

Fay isn’t concerned a lack of young drivers and car buyers will hurt Scion’s growth potential.

American youth are shunning cars to an extent, he concedes, but not to the cautionary levels touted in some feature stories or to the extent experienced in Japan in the prior decade.

“Never say never, but I don’t think we’re going to quite get to where Japan did, (because) if you look around the Los Angeles area, young people – if they’re going to work – they’re almost going to have to get a car,” he says. “There’s not the public transportation system there is in some other cities or other countries.

“To some degree, it’s always going to be a necessity to have some kind of vehicle.”

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