Toyota to Transform Scion into Small-Premium Brand?

Lexus Scion FR-S Premium Brand

Toyota North America CEO Jim Lentz believes that Scion should become a small-premium brand, according to an interview with Wards Auto:

“I still personally believe small-premium is the direction we should be going,” he tells WardsAuto in a recent interview here during a Toyota press event. “I think that (the) Toyota channel, itself, with vehicles like Yaris and other small, B-platform cars, can handle the lower end of the market. I think that C-platform premium small cars are probably the best place for Scion to be.”

The positioning also makes sense as Toyota’s Lexus luxury brand has said it won’t sell a model below $30,000, bucking the trend of other premium automakers offering models below that price point (Mercedes-Benz CLA, Audi A3).

This has been an ongoing campaign for Lentz, who also discussed “Scion as a premium brand” last year with Automotive News:

Scion, not Lexus, may be the way Toyota meets the new premium competition typified by the CLA, which will start at under $30,000, not including shipping. The Toyota brand, which has 18 nameplates, may be too product-heavy to compete in the mass market and join the entry-luxury fight as well.

And Lexus has refused to drop below the $30,000 price point.
“There’s a cost to provide that outstanding Lexus customer service,” Lentz said. “We don’t want to lose that, and we don’t want to cheapen our cars.”

This has been a very clear point over the last couple years — Lexus will not be introducing any new vehicles below the $30k CT hatckback, and will not directly compete with the lower-tier offerings from BMW, Mercedes & Audi.

By sticking to strategy instead of chasing volume, Lexus is taking a calculated risk that these cheaper models will devalue the German brands, and in turn increase the prestige of the Lexus brand.

This position leaves a large gap in the Toyota family — bringing Scion upmarket may be the ultimate solution, but it won’t be easy. The brand currently exists in North America only, and any premium brand will require a worldwide presence to gain any traction.

This type of transformation comes at an enormous cost, and may not even succeed — should Toyota take the risk? Should Lexus just abandon its current under-$30k strategy? Why not just sell these premium models under the Toyota brand?

It all makes for an interesting puzzle, and one that will be fun to watch over the next few years.

[Source: Wards Auto]