By Alysha Webb, Editor and Publisher
Toyota Motor Co. today announced it was pulling the plug on its struggling Scion brand. While the income of the dealerships representing the youth-oriented brand may take a hit from writing off the value of the Scion assets, the value of dealerships themselves will remain high because they are also Toyota stores, experts tell Automotive Buy Sell Report.
“Toyota is going to continue to be one of the more desirable brands,” says Adam Lawyer, a partner with DHG Dealerships, a top 20 certified public accounting firm serving automotive dealerships. “That is not going to change.”
Scion dealerships will need to write off the assets at their stores devoted to Scion. That will cause additional expense and reduce the asset value of the dealerships, he says.
But, “we expect that the loss of Scion will not have a significant impact on blue sky for the majority of Toyota dealerships because many of the models will be re-branded as Toyota.”
The Scion brand was launched in 2003 aimed specifically at youth customers. Sales peaked in 2006 at around 173,000 units then dwindled to fewer than 60,000 by 2015.
Toyota attributes the decline to a change in the youth market, which now gravitates toward Toyota-brand vehicles just as much as older customers do. The brand likely also suffers from offering small cars at a time when the market is moving towards crossover and sports-utility vehicles in ever larger numbers.
Most Scion MY2017 models will be re-badged as Toyota beginning in August 2016. That includes the FR-S sports car, iA sedan and iM 5-door hatchback. Only one model, the tC sports coupe, will be discontinued. The C-HR which debuted at this year’s LA Auto Show will be rebadged Toyota, as well.
All of the 1,004 Scion dealerships in the United States are also Toyota dealerships. Toyota will work with them on the transition, Scion communications manager Nancy Hubbell tells Automotive Buy Sell Report.
The dealerships will need to repurpose the area devoted to Scion, which will require changing out the dealer kit, she says.
“We are in the process of developing a plan and sharing that with the dealers,” says Hubbell. “We appreciate the investment they have made and we will work with them on a reimbursement policy.”
Since all the dealerships are also Toyota stores and most Scion models will continue to be sold as Toyota models, the overall sales impact should be minimal, Karl Brauer, senior analyst at Kelley Blue Book, tells Automotive Buy Sell Report.
Dealerships will also continue to service the vehicles, so that side of the business shouldn’t take a hit.
“The consumer experience will also be seamless with service continuing uninterrupted from the same dealer group Scion owners were already using,” says Brauer.
The bottom line: Toyota dealerships will still be in big demand.
“Scion was to Toyota as Saturn was to GM….sort of a wart on the side of progress. Its departure will not, in my opinion, impact the value or salability of the Toyota franchise either now or in the long run,” says Nancy Phillips at buy/sell advisory Nancy Phillips Associates Inc. “Toyota is Toyota – it normally sells for more than it is worth, no matter what.”