Toyota to Drop Scion iQ as Smallest Car Fails to Win U.S. Buyers

Scion iQ
The Toyota Motor Corp. Scion iQ vehicle sits on display after its debut during a media preview in New York, U.S. Photographer: Rick Maiman/Bloomberg

Toyota Motor Corp. plans to drop its smallest model, the Scion iQ, after the car’s size, price and fuel economy failed to attract U.S. consumers.

U.S. sales of the iQ fell 50 percent to 2,040 last year after Toyota gave dealers more leeway on submitting orders based on demand, said Doug Murtha, Scion’s brand chief. Production of the xD ended in July, leaving Scion with four models.

The iQ won’t be “staying in the lineup too much longer,” Murtha said in an interview this week at the North American International Auto Show in Detroit. “The rest of the products will carry on with us.”

Toyota plans to introduce three Scion models in the next three years, including two in 2015’s second half, to revive the brand founded more than a decade ago to appeal to younger consumers. Scion sales slid 15 percent last year to 58,009. That total is fewer than sales of 12 of the company’s individual models in the U.S., including the Toyota Avalon and Lexus ES sedans.

The iQ was a “healthy experiment” that taught Toyota important lessons about U.S. buyers’ tastes, Murtha said. Even though the Toyota City, Japan-based company gave the iQ 11 air bags and engineered it to achieve a four-star crash rating, consumers couldn’t get comfortable with its dimensions.

“Physics are physics, and they’re nervous about driving a vehicle that size,” he said. The iQ is about 120 inches (305 centimeters) long and 66 inches wide, according to Scion’s website. That’s 14 inches longer and about 5 inches wider than Daimler AG’s Smart fortwo.

Too Rich

U.S. buyers also associate size with price and aren’t as interested as Europeans in the idea of a premium small car, Murtha said. Scion sells the iQ, which has a starting price of $16,435, at a small discount to the Scion xD and about $1,600 more than the Toyota Yaris, according to the brands’ websites.

At 37 miles (60 kilometers) per gallon in city and highway driving, iQ also achieved the best combined fuel economy rating of any non-hybrid in the U.S. But Americans look at a car the iQ’s size and think it ought to get 60 mpg, Murtha said.

“We’ve learned lessons on all of those fronts and that’s going to influence how we approach vehicle development going forward,” he said.

Scion showed an iM concept car in November at the Los Angeles auto show. The brand will introduce a production version of the iM as well as a new sedan model in April at the New York auto show, and both will join the lineup in 2015’s second half, Murtha said.

Toyota needs to sell at least 100,000 Scion vehicles a year for the brand to be sustainable and keep its dealers engaged, Murtha said. The company has committed to plans for new products that will help Scion reach that threshold, which was last achieved in 2008, he said.

“There are some dealers who felt like we made some promises to them about the refresh rate of the product and the level of investment and they don’t feel like we’ve lived up to that,” Murtha said. “We have three brands in the market and we need to support all three of those brands.”

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