With Gen Y on board, Toyota's square ride moves into other circles

April 1, 2005

By TERRY BOX / The Dallas Morning News

From some angles – maybe most – the Scion xB looks like the shipping crate a real car came in. NATALIE CAUDILL / DMN

Scott Hartford's xB sports more than $20,000 worth of modifications.

But the first time that Zeb Campbell saw one, he pronounced it "extremely cool" – and his opinion counts with Toyota.

"It takes a certain laid-back, be-different attitude to drive a Scion," said Mr. Campbell, who at 23 is a member of the huge Gen Y group Toyota is aiming for with Scion.

The new division enters its second year with momentum. Last year, Scion – pronounced sigh-on –had sales of 99,259 vehicles, about 30 percent more than Toyota expected.

In addition, Scion says it's reaching young buyers. That's a significant accomplishment in the auto industry, which is dominated by baby boomers who keep the average age of buyers for most vehicles above 40.

Scion customers are among the youngest in the industry, with the average age ranging from 26 to 38 on the three models of vehicles the division sells, said Jim Farley, vice president of the Scion division at Toyota Motor Sales USA. Moreover, 85 percent of the buyers are new to Toyota, with most coming from Honda.

Those successes are important to Toyota, but the company is also learning something that may be more important: how to sell cars to finicky Gen Y. Over the next decade, the 63 million members of Generation Y – people born after 1980 – will replace their baby boomer parents as the largest and most influential population group in the United States.

"These are people who customize their lives," Mr. Farley said. "They grew up with the Internet and high technology, and going to Best Buy and using liberal return policies. They are impervious to mass media."

Mr. Farley calls Scion a laboratory for understanding their quirks and demands. All three models – the amorphous xA four-door hatchback, the intriguingly odd xB four-door hatchback and the stylish, more mainstream tC coupe – cost less than $18,000. All are compacts that weigh less than 3,000 pounds and are powered by economical four-cylinder engines.

A big part of Scion's allure is the dealer accessories. There are dozens of ways to customize – from spoilers and LED interior lights to custom graphics, leather interiors, engine-performance parts and custom wheels.

About 80 percent of Scion buyers purchase at least one accessory, dealers say.

'The Beast'

Hank Aguilar proudly fits the profile. He bought a gray xB last February, trading a Chevy Silverado pickup for the radical little box. After he got married in July, his wife bought a white xB.

"My wife's is white, lowered, [custom] wheels, purple and silver flames, and all the accent pieces in the interior have been painted lavender," said Mr. Aguilar, 32, who works at Texstars Inc. in Grand Prairie. "Mine's done 'rat-rod' with flat black scallops and red outlines and full Moon [wheel] covers. Everyone calls it the Beast."

Since Mr. Aguilar and his wife bought xBs, her father, brother and his sister have, too. "We all kind of hope Scion's around for a while," he said.

Scion buyers like to stick together – Toyota has a page for owners' clubs on its Web site, and independent groups have sprung up all over the country, including an Austin club called Scioneyed.

Seeing success

On Thursday at the New York Auto Show, Scion introduced a concept vehicle that some industry observers think could become a fourth model in the lineup or replace one of the current cars. The t2B (Tall Two-Box) combines the iconoclastic shape of the xB with a more powerful 2.4-liter four-cylinder engine from the tC, and is steeped heavily inside and out in Scion offbeat.

THE SCION

Gen Y buyers like to customize their cars, and most Scion customers indulge in accessories. Some popular options:

Rear spoiler: $385 -- Sport grille: $325 -- Custom graphics: $595 -- Custom pin-striping: $30 -- Fog lights: $270 -- Springs to make car sit low: $189 -- Custom leather interior: $1,395 -- LED interior lights: $280 -- Bazooka subwoofer: $359 -- Custom 18-inch wheels: $1,707

Todd Turner, president of industry consultant Car Concepts in Thousand Oaks, Calif., said he thinks that Scion's first year has been a "complete success."

"They have expanded Toyota's overall sales, and they have attracted a whole new group of buyers," Mr. Turner said. "It was the best approach for Toyota to get young buyers."

The challenge for Scion will be evolving as its core Gen Y consumer group ages, other observers noted. Toyota expects Scion buyers to ultimately come over to Toyota.

"The hope within the company is once Gen Y has outgrown the Scion, they will look at a Corolla or a Camry," said Don Chaikin, auto editor for Popular Mechanics. "But that may be a stretch. Gen Y is not brand loyal."

Roughly 850 of Toyota's 1,200 dealers nationwide set aside space at their Toyota stores for Scion. The cars are sold under a "pure-price" approach, meaning all carry non-negotiable prices: $13,915 for an xA equipped with an automatic, $15,115 for a similarly equipped xB and $17,385 for the tC.

In the five-state Southwest region that includes Texas, Scion sold nearly 9,500 vehicles last year – the third-highest volume in the nation behind California and Florida. Dallas-Fort Worth was the top sales area in the five-state region, accounting for more than a fourth of sales.

"We see even more opportunity in the region," said Jim Flint, marketing manager for Gulf States Toyota, the automaker's distributor in the five-state area. "We see big things with Scion that may help us with Toyota."

The average customer at Scion of Dallas, for example, opts for about $1,500 in custom accessories. At John Eagle Sport City Scion in Dallas, the dealership has a four-page list of accessories that are available for the cars. It also regularly hosts Scion club events.

"I've been with Toyota for 11 years, and this has brought the passion back to the business," said Jeffrey Jones, director of Scion sales at the dealership. "It's not just a car. It's a community."

Older get on board

Both dealerships have noticed a growing trend with Scion. While their core buyers are still young, the cars are attracting increasing numbers of middle-aged and older buyers – many of them drawn to the vehicles' value and utility.

In late January 2004, 54-year-old Frank Segars bought the first Scion sold by Sport City – a "thundercloud metallic" xB that sports red and black graphics, a spoiler and alloy wheels. Mr. Segars, who traded a Subaru WRX for the Scion, is also a charter member of the StyleWagons, an area Scion club.

"I blew the [age] curve right off the bat," Mr. Segars, who helps run a family real-estate auction business, said happily.

Like Mr. Segars, 6-foot-4-inch Scott Hartford was attracted by the looks of the xB but came to really appreciate the little vehicle's interior space. His trophy-winning xB has become a functional show car, sporting more than $20,000 worth of modifications.

"The first time I saw it, it was kind of Mack truck meets school bus," said Mr. Hartford, 41, a master diagnostic technician at a Toyota dealership. "But I really can't think of a more useful car for my needs."

Honda and Nissan are already developing vehicles to compete with Scion, noted Joe DeMatio, senior editor at Automobile magazine. Both may have been surprised at how quickly Toyota's new division established itself.

"Toyota's success with baby boomers is kind of what put them in need of younger buyers," Mr. DeMatio said. "I think we were skeptical at first about Scion, but it's been something to witness and watch Toyota evolve the brand. They have kind of proven that the concept works."

Shannon Love  Professional Auto Consultant -- Call (206) 251-6428

e-mail -- Sales@ShannonLove.com