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Scion weighs a move to entry-lux

Posted on April 1, 2013 | in news | by

Scion weighs a move to entry-lux

Untitled Scion weighs a move to entry lux

Scion’s tC sports coupe at the New York auto show: Is the brand moving upscale?

Toyota is weighing a major shift in positioning for its struggling Scion brand: moving upscale to target entry-level luxury models coming from European makes.

The new lower-luxury niche includes Mini, the front-wheel-drive Mercedes-Benz CLA arriving this fall and Audi’s compact A3 sedan shown last week on the eve of the New York auto show. Scion has gone after young entry-level buyers since its inception 10 years ago but has lost its early momentum.

“Everybody is looking at what direction Scion should go,” said Jim Lentz, CEO of Toyota’s North America Region. “We have to take a real hard look at what the future of the industry looks like strategically, and where we want Scion to play.”

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.”

No decision has been made about Scion’s future, but Scion Vice President Doug Murtha says: “If we stand still, we’re going to be in trouble.”

Lentz, who was Scion’s first boss, said that when Toyota executives discussed strategy at the brand’s birth they split on whether it should be a Korea-fighter or an entry-luxury brand.

“We were torn at what direction to go,” he said. “We could go any of those directions.”

Lentz cautioned that the idea of Scion moving upscale “is not a widely held view in the company.” For one thing, the overall size of the segment for entry-luxury cars starting between $25,000 and $30,000 has not been demonstrated.

But Scion could move up the price ladder because it’s already part of the way there. When the brand launched, entry-level cars were in the $13,000 range.

“Today it’s hard to find much value below $18,000 to $20,000,” Lentz said. “There’s going to be a big need in the $25,000 range for a fun-to-drive, nice-looking, value-oriented product.”

Scion also could compete against the German luxury brands that insist true luxury means rear-wheel-drive but also have developed less expensive fwd platforms for the entry-luxury segment. The Scion FR-S is rwd, and Toyota executives have said the platform is flexible and could spawn variants.

“As we look at Europeans coming downmarket, the FR-S fits into that position,” Lentz said.

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