The Changing Definition of 'Niche Vehicles'

Scion was sold as an experiment to bring younger consumers into the Toyota fold while learning about their wants and desires. However, by placing three vehicles into a segment in which most OEMs would only put one, producing limited edition models, and encouraging aftermarket companies to supply unique items, Toyota also is learning lessons it can apply to the fragmenting mainstream market.

According to John Waraniak of SEMA, the successful OEM of the future will be the one that has “designed its vehicles for customization and engineered them to be accessorized.” Market fragmentation, he believes, will cause OEMs to lean more heavily on the aftermarket to meet consumer demands as low-volume production increasingly becomes the norm.

Unlike most aftermarket entrepreneurs, Michael Chetcuti’s background includes producing prototypes and low-volume parts for OEMs. He suggests it’s impossible for any OEM to make a vehicle that can accept everything the aftermarket can throw at it, or for most in the aftermarket to produce parts to OEM standards. (Jon Muresan photo)

Lotus took the lessons learned from its earlier variable architecture to create a low-volume version that can support multiple layouts, including front-engine/rear drive and mid-engine, as well as electric vehicles. Though it will first be used for the Lotus Evora, a number of major OEMs are negotiating to have Lotus develop and build niche vehicles—including hybrids and full electrics—on this architecture.

Magna Steyr’s MILA SUV and sports car concepts are based around an adjustable mid-engined platform powered by a CNG-fueled 4-cylinder engine. Like the Lotus chassis, it can support numerous variants, including an electric vehicle, which OEMs can use to lower their CO2 and fuel consump-tion levels to within legislated targets.

The Brute was designed in 2002 by American Expedition Vehicles as a pickup conversion for the TJ-series Jeep Wrangler. Not only did it win a DaimlerChrysler Design Excellence award, the Brute was brought back to Chrysler HQ to see if it could be put into production. It couldn’t, and eventually the vehicle succumbed to the internal politics surrounding Jeep’s Gladiator pickup concept that also never made it to production. “When it became obvious that the Brute wasn’t going to be built as a complete vehicle,” says AEV principal Mike Chetcuti, “AEV founder Dave Harrington and I stripped it out and figured out how to do it as a kit.” Unlike some other conversions, Brute buyers get everything they need, including the wiring harness, frame extensions, fuel and brake lines, glass, and a pair of frame rail jigs. Based on lessons learned from Quality Metal Craft, the jigs are multi-purpose and ensure that each kit is built to the same specifications. Thus, slots accurately demark the frame rail cut points, tooling holes guarantee the frame is spread to the proper length, and locators ensure that the 25-in. extensions are correctly oriented. The one caveat is that while handy DIY types can do most of the work themselves, it takes a certified welder to correctly seam-weld the extensions and finish plate in place. “The only things you have left from the donor Jeep are the grille, cowl, A-pillars, the bottom of the rockers and the doors,” says Chetcuti. “All the rest is ours.” The word “ours” includes QMC, which supplies all of the steel parts for the Brute. That means all of the pieces are stamped from two-sided electro-galvanized steel (14-gauge for the pickup bed) and have an e-coat primer. Cost for the complete kit? Under $9,000.

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The definition of what constitutes a "niche vehicle" has changed markedly over the years. As mass production pushed smaller manufacturers out of the picture, a niche vehicle usually was one built by a specialist maker in low volumes. And even these vehicles often were rebodied by design houses to create one-offs for wealthy patrons. Occasionally, a mainstream automaker would introduce a halo vehicle to improve its image-exemplified by cars like the De Tomaso Pantera, Ford GT, the Dodge Viper, and even the obscure Hudson Italia-before going on to more profitable, and higher volume, pursuits.

A changing industry, however, is bringing the niche vehicle back into prominence as automakers severely reduce the number of platforms while increasing the number of distinct models in their lineups. Though some of these vehicles have low production numbers in historical terms, they fall short of the original definition of a niche vehicle as one that fills a specialized slot in an OEM's lineup. But there is another type of niche vehicle-call it the "Scionization" example-that uses mainstream platforms and components to support a unique design aimed at a particular segment of the market. Easily modified and somewhat polarizing in its styling and amenities, it is a vehicle of which Toyota's Scion brand offers the best example.

These same industry constraints also have affected low-volume producers by encouraging the creation of specialized platforms that can be built profitably in extremely low volumes. Companies like Lotus and Magna Steyr have engineered chassis capable of extreme flexibility in terms of styling, layout, and powertrain to support everything from halo vehicles to electric cars. And changing CO2 and fuel efficiency regulations have caused a number of OEMs to turn to these bespoke models in order to free up engineering resources and to keep from burdening their production facilities with vehicles that wouldn't be produced at high volumes or with conventional assembly methods.

The "Scionization" Example
"The definition of what comprises a niche, or low-volume, vehicle depends on the audience," says John Waraniak, v.p., Vehicle Technology, Specialty Equipment Marketing Association (SEMA). "The perfect example," he says, "is Scion. It was supposed to be a low-volume brand, and yet last year Toyota sold about 140,000 of them." Scion, a sub-brand of Toyota, has become the heartthrob of the tuner set, a cohort known for running away from anything that smacks of mass marketing or hype. Yet part of Scion's draw is the very fact that its vehicles are built by Toyota, so they are reliable and provide value for money, yet they appeal to the new generation of car buyers because of their funkiness and authenticity. It is an authenticity that piggybacks off the JDM (Japanese Domestic Market) subculture undergirding the sport compact craze, and is highlighted by kids who modify their vehicles in steps ranging from mild to merciless. In its own way an offshoot of America's hot rod culture of the post-war era, the sport compact scene has its own measures of street cred and venerates companies like HKS and Hotchkiss much as an earlier generation genuflected before Isky cams and Holley carburetors. It is into this fold that Toyota stepped with vehicles with the unlikely names of xA, xB, xD, and tC-vehicles that placed customized top hats over commoditized platforms-and captured a generation's imagination at a time when Honda-the previous champion of the sport compact set-had taken its eye off the ball and was ignoring the desires of these buyers.

What is Scion's secret weapon? "The fact that it is a blank canvas," says Waraniak. Not only can each Scion owner make their ride unique, Toyota makes it easy for them to add what they want by, as Waraniak states, "designing these vehicles for customization and engineering them to be accessorized." Without this, Waraniak believes, these buyers would go elsewhere to find a vehicle that readily-and economically-accepts modification. There's only one problem with scenario: No OEM can prepare its vehicle to accept everything the aftermarket can throw at it. Says Michael Chetcuti, "The stuff that is talked about internationally regarding 'design for customization' is way more smoke and mirrors than reality." Chetcuti is familiar with low-volume designs and production methods. His family founded Quality Metal Craft (Livonia, MI; www.qualitymetalcraft.com) which has specialized in low-volume flexible production and assembly methods since its start in 1964. He's also the principal of Streetcar USA, a Royal Oak, MI-based company dedicated to acquiring, manufacturing, and marketing aftermarket and specialty vehicle concepts. Its properties include American Expedition Vehicles (Missoula, MT; www.aev-conversions.com), a company dedicated to building custom Jeep conversions and aftermarket parts. 

More often than not, the closest aftermarket companies come to an OEM deal is when they team up with a car dealer to offer products that dress up the vehicles on the showroom floor and are installed by dealership personnel. This brings in a little extra revenue for both parties and sidesteps the whole question of testing and validating parts to OEM standards. Occasionally, however, a licensing deal is struck with an OEM to provide fully validated parts they can offer through selected dealers. Inevitably, says Chetcuti, "the OEM quickly discovers much of the aftermarket's limitations in terms of production, durability, and testing while the aftermarket supplier struggles to retain his profit margin." Often this leads to the OEM creating an in-house design caught in a paradigm built around high-volume production and quality processes. "What OEMs have to realize," he says "is that validated parts can come out of a flexible process where they are hand-qualified by highly skilled technicians. But they also have to remember that as the investment goes down, the piece price goes up. There is no magic."

This brings us back to Scion. Rather than assume it knew what Gen Y buyers wanted and building a single model at high volume, Toyota filled the gap with three vehicles built at lower volumes. Each targets a different slice of the market and appeals to different buyers. And it's a good thing, as Toyota insiders admit that many in the company not only expected the diminutive five-door xA to outsell the defiantly boxy xB (it didn't as was replaced by the xD), no one was certain how popular the tC coupe would be or for how long. But Toyota's research didn't stop there. The addition of Release Series vehicles-numbered like software releases (i.e. 1.0, 2.0, 3.0, etc.)-that come pre-packaged with special features, colors, and accessories not only create a buzz for the vehicle and the brand, they allow Toyota marketers to learn how to profitably satisfy a target demographic. This information is valuable, not only for Scion, but for Toyota as individual model volumes decline and the desire for low-volume vehicles grows. It is learning how best to meet those future needs through its low-volume channel.

The Specialist Niche
Companies like Magna Steyr (Graz, Austria; www.magnasteyr.com) traditionally have taken up the slack when OEMs can't cope with the needs of niche production. "In the past, the vehicle we built for the OEM was either a vehicle that wasn't part of the original product plan, or an addition that would disturb the OEM's production process," says Johann Ecker, v.p. Marketing and Sales, Magna Steyr. Today, however, the OEMs can do many of these programs internally, though Magna sees the North American market as a potential growth market. "There are opportunities for everything from niche vehicles for domestic OEMs to bundling together low-volume production for Indian or Chinese automakers eager to enter the U.S. market," he says. However, a third possibility exists that could see Magna Steyr create a unique platform to support OEMs as they struggle to meet coming CO2 and fuel economy legislation.

"Vehicles like this are so out of character for some OEMs," says Ecker, "that they either don't know how to do them at all or how to do them in a way that meets their brand promise." He's talking about the MILA ("Magna Innovation Lightweight Auto"). Ecker says the modular mid-engined design could support variants-including electric vehicles-beyond the current single-seat sports car and 3+1-seat small SUV concepts that would free up OEM engineering and production resources. It is an idea very familiar to Richard Rackham, Vehicle Architect, Lotus Engineering (Hethel, UK; www.grouplotus.com/engineering). "In the electric vehicle arena especially," he says, "OEMs can't commit to massive volume because the change in technology is so rapid, but they need to be there to show they are doing something and to get maximum exposure. That's almost a textbook definition of a 'niche vehicle'."

Rackham is perhaps best known for the extruded aluminum chassis he created for the Lotus Elise. He also engineered the Variable Vehicle Architecture (VVA) commissioned by an OEM to support three vehicles-an SUV, a mid-size sport sedan, and a mid-engined super car-around common high-pressure die-cast corner nodes. The cancellation of that program and its 30,000- to 50,000-unit volume requirements led to the creation of a low-volume version of the VVA idea (dubbed "LVVA") that could support low-volume Lotus vehicles like the mid-engined Evora sports car as well as variants for main-stream OEMs, including electric vehicles.