Tiny cars leaving Japan?

Anyone who’s visited Japan in recent years probably took note of the tiny automobiles peppering the roads. Particularly, the “kei”, which looked like a toy with Lilliputian wheels and a kid-sized engine has for years been a beloved Japanese favorite. It’s the go-to choice for family cars, delivery drivers and farmers who make weekly treks to the market to sell their goods. Couple their impressive storage capacity with the high gas prices in Japan, and it’s no wonder that tiny cars are the country’s prized possession.

The fuel economy of a Kei is on par with that of a Prius, and Japan’s tax system rewards drivers who opt for the little machines. Even better, you can buy a brand new Kei for half the price of a Prius. In fact, they’re so in demand that in 2013, 40% of all brand new cars sold were Keis. However, not everyone is happy about the monopoly, with the government worrying that Japanese automakers won’t stand a fighting chance if the Keis aren’t stopped.

An economic puzzle

Japanese automakers are still a foundation of the country’s economy, but they’re being defeated in a David vs. Goliath smackdown. In an effort to level the playing field, the government enacted some incredibly high sales taxes as well as gas taxes aimed at Kei drivers. In fact, the Kei car tax was upped 50%, making the final price on par with “regular” cars. According to Yoshitaka Shindo, minister for internal affairs and communications, “We need to rebalance our priorities.”

Consider that some big names come out of Japan such as Suzuki, Nissan, Toyota’s Daihatsu and Honda, and it’s easy to see why Kei has to be stopped. If you haven’t heard of this little competitor before, it’s because it’s not fit for export and is only in Japan. The tiny size and subpar safety equipment means it was only ever designed for domestic use. With engines at only 0.66 liters, on a par with a motorcycle, there’s nothing like a Kei anywhere in America.

Wasted R&D

Since the Kei is restricted to Japan, all of the research and development it requires is basically a waste, say government officials. Pursuing economies of scale is impossible as long as Keis are popular, and that’s become a big concern as Japan strives to remain competitive around the globe. Previously, the tax breaks for Keis were designed to encourage postwar Japan to ditch the motorcycles and rickshaws for cars, but it’s gone above and beyond what was expected.

Keis are popular around the country, but are especially beloved in more rural regions where incomes are lower, public transportation is poor, and Keis are truly the only affordable and relatively safe option. In these regions, about 75% of people have Keis, and some people (such as Suzuki Chairman Osamu Suzuki) say that forcing higher taxes is akin to bullying the poor. Stuck between a rock and a hard place, it’s too soon to tell if the Kei will be forced off the Japanese roads for good or if the little fighter has what it takes for another championship.

Author Infomation

Larry Alton
Larry Alton
Larry Alton is an independent business consultant specializing in social media trends, business, and entrepreneurship. Follow him on Twitter and LinkedIn.
  • 4

    SamuraiBlue

    Larry Alton

    Get you info straight before writing a opinion piece. Kei cars had been exported to Europe and SE Asia like the Daihatsu Copen and Mitsubishi i. On the other hand Smart fortwo is about the same size as Kei cars and had been marketed all around the world.

  • 2

    Todd Topolski

    When politicians decide they need to Do something in a free market like stop the purchase of these cars people want to protect some other companies cars people don't want, it's time to fire the politicians. If Toyota and group wants to keep market share, they should come out with a better product. That's how economies always work. Well economies which are free to operate with minimal government interference

  • 1

    SamuraiBlue

    Overall safety of Kei cars is not really the issue. Here is a link to Euro NCAP rating on Mitsubishi i-MiEV an electric motor version of Mitsubishi i.

    http://www.euroncap.com/results/mitsubishi/imiev/2011/422.aspx

    As you can see it gained a 4 star rating out of five which is not bad, considered to many larger cars that couldn't gain two stars.

    The biggest obstacle in exporting kei cars is the position of handle issue in which there is no room for them to switch the right side handle to the left side without redoing the entire engine room design from scratch. Mitsubishi iMiEV which is sold around the world was possible since they needed to redo the engine room anyways to accommodate an electric motor replacing the internal combustion engine and it's exhaust manifolds.

  • -1

    almxxx

    So much for the "Free Enterprise System".I agree with Todd....come on big timers; compete. Isn't the way to business success to find what they want, and then make it at a fair price?

  • 2

    T_rexmaxytime

    R u kidding me? Kei cars are selling like hotcakes. It will never leave the market. Only people who think they are, are people who wants to sell oversized foreign cars. LOL

  • -3

    ReformedBasher

    Particularly, the “kei”, which looked like a toy with Lilliputian wheels and a kid-sized engine has for years been a beloved Japanese favorite.

    So that's what you think of sensibly sized cars that are also environmentally friendlier than larger automobiles. How nice.

    In fact, they’re so in demand that in 2013, 40% of all brand new cars sold were Keis.

    I predict major riots if kei cars look like they will be banned. Not, protests, riots.

    And they would be well deserved. Wanna see what the public here are like when they really get annoyed? I don't.

    Consider that some big names come out of Japan such as Suzuki, Nissan, Toyota’s Daihatsu and Honda, and it’s easy to see why Kei has to be stopped.

    Off the top of my have-better-things-to-do-with-my-life-than-become-a-car-freak head, at least 3 of these companies produce and market kei cars.

  • 1

    Ah_so

    I really do not understand the article. Is Larry Alton saying that they should be stopped or is he reporting the news that they are being stopped? He also writes as though kei's are a direct competitor of the big manufacturers, rather than being manufactured by them.

    I love driving kei's, especially the turbo-boosted ones with the motorcycle-like acceleration. I have never quite understood why they are not exported in great numbers to Europe. I can understand why not to the US, where cars are generally bigger, but no reason to state that the, 'the Kei is restricted to Japan'. Need not be. I can see them fitting in perfectly as runabouts in Europe.

  • 0

    sillygirl

    Keis are here to stay.

  • -1

    Thunderbird2

    Samurai Blue... Kei cars could be sold in the UK, Aus and NZ without any alterations to the steering, etc. If they are safe enough to drive on roads, and have passed the relevant safety tests then I see no reason for Kei's not to be scudding around other parts of the world.

    I can't understand why the government want to eliminate them from Japan... very strange.

  • 2

    SamuraiBlue

    Thunderbird2

    It's not could, it's were. The Daihatsu Copen were sold in GB as well as the Mitsubishi i. Unfortunately the small 660 cc engines+turbo were not able to clear emission regulations so the Copen were powered by a 1.1 liter engine.

  • 1

    sangetsu03

    Samurai Blue... Kei cars could be sold in the UK, Aus and NZ without any alterations to the steering, etc. If they are safe enough to drive on roads, and have passed the relevant safety tests then I see no reason for Kei's not to be scudding around other parts of the world.

    Unfortunately, Kei cars do not meet even even the most basic American safety requirments, and America still remains the largest car market. Kei cars cannot pass single-vehicle crash tests, and do even more poorly in multi-vehicle tests, in which they are likley to be hit by cars weighing twice or more as much. Lastly, Kei cars are not powerful enough to keep up on American highways, where speeds are 100kph and up.

    The only Kei car sold in America was the Suzuki Samurai of the late 80's, which had an engine twice the size of the Japanese domestic version, the Jimney, but was still considered "pitifully underpowered" by American standards.

    The government has no business interfering with production of Kei cars. If the people want to buy them, then companies have nothing to lose by making them. The government's excuses about limiting innovation is nonsense, many Japanese cars are in fact designed in overseas design studios, where they compete head-to-head with local manufacturers. Two of my friends are designers for large Japanese car manufacturers, both are working in sunny Southern California.

    It looks like the government wants to limit the number of Kei cars in order to increase revenues from vehicle registrations and road taxes, which are much higher for larger vehicles.

  • 1

    SamuraiBlue

    sangetsu03

    As I have posted above the Mitsubishi i-MiEV, an electric motor kei car gained a 4 star rating at Euro NCAP which is similar to the US crash safety standards and is sold in the US of A.

    http://www.mitsubishicars.com/imiev

  • 1

    electric2004

    I thought Nissan's Kei cars are actually OEM products from another company (Mitsubishi / Suzuki) with a new sticker.

    Like Nissan Moco = Suzuki MR Wagon.

    Actually some of the K-cars exist also in a slightly enlarged version with bigger engine and then sold in Europe.

    For Example Suzuki Waggon R is not only available as K-car but also as normal sized car with an engine size in the order of 1.2 Liter. Now this design is evolved to the Suzuki Splash which is made together with Opel (as Opel Agila) in Hungary. This car sells quite well in Europe.

    There are other co-operations between Japanese and European car makers, where the design of a K-car is the basis of a compact car for the European market.

    Like Peugeot 108 equal Citroen C1 equal Toyota Aygo.

    This tells us that the author of the original article should have done more research.

  • 0

    sangetsu03

    As I have posted above the Mitsubishi i-As I have posted above the Mitsubishi i-MiEV, an electric motor kei car gained a 4 star rating at Euro NCAP which is similar to the US crash safety standards and is sold in the US of A., an electric motor kei car gained a 4 star rating at Euro NCAP which is similar to the US crash safety standards and is sold in the US of A.

    This Japan-market cars are different than those built for foreign markets. If you read the details, you will see the export models are larger and heavier. Even fullsize JDM cars do not meet many minimum safety requirments in other developed countries, and must be modified for export markets.

  • 1

    SamuraiBlue

    Here are the specifications;

    Length 3,395 mm (133.7 in) 3,680 mm (144.9 in)(US) Width 1,475 mm (58.1 in) 1,585 mm (62.4 in)(US) (excluding side-mirrors) Height 1,600 mm (63.0 in) 1,615 mm (63.6 in)(US) Curb weight 1,080 kg (2,380 lb)

    The size are different but the weight is the same and only for the US market to meet larger human size I imagine. The size exported to Europe is the same as Japan.

  • 0

    Steve Fabricant

    The 50% increase in the road tax is a major shafting of people who bought a Kei expecting that they could save money over the life of the car by giving up some performance and luxury. The size and performance restrictions were intended precisely so they did not compete directly with larger cars, just as motorcycles do not compete with cars for market share. So to reduce the cost savings in order to make them less competitive is really backasswards policy.

  • 0

    presto345

    forcing higher taxes is akin to bullying the poor

    It's more serious than that: it is criminal. I remember reading about the tax issue. US automakers complained about the 'unfair tax advantage' of the Kei in the Japanese market. Apparently they were pushing for an easier inroad for small US automobiles. Whose priorities is the Japanese government adjusting to exactly, I wonder. People who need their small cars for their daily lives should not be pushed to the limit. There will never be a fair taxation system, but look at the tax rates for trucks, the ones that do the most damage to public roads, the breaks they are getting, now that seems out of proportion.

  • 0

    SwissToni

    Keis can be sold abroad. The real problem is that when they're fitted with all the necessary safety kit, they become more or less as expensive as any other small car.

  • -1

    JeffLee

    Kei cars are made according to a set of unique Japanese technical standards. In other words, they have no right to exist if Japan seriously wants to be a member of the TPP and other free trade agreements.

  • 0

    SamuraiBlue

    JeffLee

    unique Japanese technical standards

    Could you elaborate those so called "Unique Technical Standards" ?

    The Kei cars are confined to a certain envelope such as size and maximum engine displacement but those are not in anyway self discriminating against international standards so what "Unique Standards" are you talking about.

  • 2

    presto345

    they have no right to exist if Japan seriously wants to be a member of the TPP and other free trade agreements.

    'they' meaning Kei cars. I don't see free trade agreements can dictate domestic production and marketing policies of Japan or any other countries. I am also curious about 'Unique Technical Standards' creating conflicts for TPP agreements.

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